AINS 21 CORRECT STUDY QUESTIONS AND
ANSWERS SET A+
✔✔reinsurer - ✔✔the insurer that assumes some or all of the potential costs of insured
loss exposures of the primary insurer in a reinsurance contractual agreement
✔✔monopolistic state fund - ✔✔a state workers' compensation insurance plan that is
the only source of workers' compensation insurance allowed in that state
✔✔competitive state fund - ✔✔a state workers' compensation insurance plan that
competes with private insurers to provide workers' compensation insurance
✔✔residual market plan (shared market plan) - ✔✔a program that makes workers'
compensation insurance available for those who cannot obtain voluntary coverage from
private insurers
✔✔guaranty fund - ✔✔a state fund that provides a system to pay the claims of insolvent
insurers, generally funded by assessments collected from all insurers licensed in the
state
✔✔National Association of Insurance Commissioners (NAIC) - ✔✔an association of the
commissioners of the insurance departments of each state, the District of Columbia,
and the U.S. territories and possessions, whose purpose is to coordinate insurance
regulation activities among the various state insurance departments
✔✔model law - ✔✔a document drafted by the NAIC, in a style similar to a state statute,
that reflects the NAIC's proposed solution to a given problem or issue and provides a
common basis to the states for drafting laws that affect the insurance industry
✔✔ratemaking - ✔✔the process insurers use to calculate the rates that determine the
premium to charge for insurance coverage
,✔✔rate - ✔✔the amount per exposure unit for insurance coverage, used to arrive at a
premium when multiplied by the number of exposure unites
✔✔premium - ✔✔the price of the insurance coverage provided for a specified period
✔✔actuary - ✔✔a person who uses complex mathematical methods and technology to
analyze loss data and other statistics and to develop systems for determining insurance
rates
✔✔actuarial equity - ✔✔a ratemaking concepts through which actuaries base rats on
calculated loss experience to place insureds with similar characteristics in the same
rating class
✔✔social equity - ✔✔a rating concept that holds that rate structures discriminate
unfairly if they impose a higher rate on an insured for factors beyond the insured's
control, such as age or gender
✔✔unfair discrimination - ✔✔applying different standards or methods of treatment to
insureds who have the same basic characteristics and loss potential, such as charging
higher-than-normal rates for an auto insurance applicant based solely on the applicant's
race, religion, or ethnic background
✔✔prior-approval law - ✔✔an insurance rating law that requires rates to be approved by
the state insurance department before they can be used
✔✔flex rating law - ✔✔an insurance rating law that requires prior approval only if the
new rates are a specified percentage above or below previously filed rates
✔✔file-and-use law - ✔✔an insurance rating law that requires insurers to file rates with
the state insurance department but does not require insurers to wait for approval before
using the rates
✔✔use-and-file law - ✔✔an insurance rating law that requires rates to be filed within a
specified period after they are first used in the state
✔✔open competition (no-file law) - ✔✔an insurance rating law that does not require
rates to be filed with the state
✔✔state-mandated rates - ✔✔an insurance rating law that requires all insurers to
adhere to rates established by the state insurance department for a particular type of
insurance
, ✔✔exempt commercial policyholders - ✔✔an organization with sufficient size and
sophistication to be permitted to buy property, liability, and automobile insurance using
rates and/or policy forms not filed with state insurance departments
✔✔non-filed inland marine - ✔✔classes of inland marine insurance that are exempt
from filing requirements
✔✔solvency - ✔✔the ability of an insurer to meet its financial obligations as they
become due, even those resulting from insured losses that may be claimed several
years in the future
✔✔solvency surveillance - ✔✔the process, conducted by state insurance regulators, of
verifying the solvency of insurers and determining whether their financial condition
enables them to meet their financial obligations and to remain in business
✔✔Insurance Regulatory Information Systems (IRIS) - ✔✔an information and early-
warning system established and operated by the NAIC to monitor the financial
soundness of insurers
✔✔licensed insurer (admitted insurer) - ✔✔an insurer authorized by the state insurance
department to sell insurance within that state
✔✔domestic insurer - ✔✔an insurer incorporated in the same state in which it is writing
insurance
✔✔foreign insurer - ✔✔an insurer licensed to operate in a state but incorporated in
another state
✔✔alien insurer - ✔✔an insurer licensed in a U.S. state but incorporated in another
country
✔✔market conduct regulation - ✔✔regulation of the practices of insurers in regard to
four areas of operation: sales, practices, underwriting practices, claim practices, and
bad-faith actions
✔✔standard market - ✔✔collectively, insurers who voluntarily offer insurance coverages
at rates designed from customers with average or better-than-average loss exposures
✔✔excess and surplus lines (E&S) insurance - ✔✔insurance coverages unavailable in
the standard market that are written by nonadmitted insurers
✔✔nonadmitted insurer (unlicensed insurer) - ✔✔an insurer that is not licensed in many
of the states in which it operates and that writes E&S insurance coverages
ANSWERS SET A+
✔✔reinsurer - ✔✔the insurer that assumes some or all of the potential costs of insured
loss exposures of the primary insurer in a reinsurance contractual agreement
✔✔monopolistic state fund - ✔✔a state workers' compensation insurance plan that is
the only source of workers' compensation insurance allowed in that state
✔✔competitive state fund - ✔✔a state workers' compensation insurance plan that
competes with private insurers to provide workers' compensation insurance
✔✔residual market plan (shared market plan) - ✔✔a program that makes workers'
compensation insurance available for those who cannot obtain voluntary coverage from
private insurers
✔✔guaranty fund - ✔✔a state fund that provides a system to pay the claims of insolvent
insurers, generally funded by assessments collected from all insurers licensed in the
state
✔✔National Association of Insurance Commissioners (NAIC) - ✔✔an association of the
commissioners of the insurance departments of each state, the District of Columbia,
and the U.S. territories and possessions, whose purpose is to coordinate insurance
regulation activities among the various state insurance departments
✔✔model law - ✔✔a document drafted by the NAIC, in a style similar to a state statute,
that reflects the NAIC's proposed solution to a given problem or issue and provides a
common basis to the states for drafting laws that affect the insurance industry
✔✔ratemaking - ✔✔the process insurers use to calculate the rates that determine the
premium to charge for insurance coverage
,✔✔rate - ✔✔the amount per exposure unit for insurance coverage, used to arrive at a
premium when multiplied by the number of exposure unites
✔✔premium - ✔✔the price of the insurance coverage provided for a specified period
✔✔actuary - ✔✔a person who uses complex mathematical methods and technology to
analyze loss data and other statistics and to develop systems for determining insurance
rates
✔✔actuarial equity - ✔✔a ratemaking concepts through which actuaries base rats on
calculated loss experience to place insureds with similar characteristics in the same
rating class
✔✔social equity - ✔✔a rating concept that holds that rate structures discriminate
unfairly if they impose a higher rate on an insured for factors beyond the insured's
control, such as age or gender
✔✔unfair discrimination - ✔✔applying different standards or methods of treatment to
insureds who have the same basic characteristics and loss potential, such as charging
higher-than-normal rates for an auto insurance applicant based solely on the applicant's
race, religion, or ethnic background
✔✔prior-approval law - ✔✔an insurance rating law that requires rates to be approved by
the state insurance department before they can be used
✔✔flex rating law - ✔✔an insurance rating law that requires prior approval only if the
new rates are a specified percentage above or below previously filed rates
✔✔file-and-use law - ✔✔an insurance rating law that requires insurers to file rates with
the state insurance department but does not require insurers to wait for approval before
using the rates
✔✔use-and-file law - ✔✔an insurance rating law that requires rates to be filed within a
specified period after they are first used in the state
✔✔open competition (no-file law) - ✔✔an insurance rating law that does not require
rates to be filed with the state
✔✔state-mandated rates - ✔✔an insurance rating law that requires all insurers to
adhere to rates established by the state insurance department for a particular type of
insurance
, ✔✔exempt commercial policyholders - ✔✔an organization with sufficient size and
sophistication to be permitted to buy property, liability, and automobile insurance using
rates and/or policy forms not filed with state insurance departments
✔✔non-filed inland marine - ✔✔classes of inland marine insurance that are exempt
from filing requirements
✔✔solvency - ✔✔the ability of an insurer to meet its financial obligations as they
become due, even those resulting from insured losses that may be claimed several
years in the future
✔✔solvency surveillance - ✔✔the process, conducted by state insurance regulators, of
verifying the solvency of insurers and determining whether their financial condition
enables them to meet their financial obligations and to remain in business
✔✔Insurance Regulatory Information Systems (IRIS) - ✔✔an information and early-
warning system established and operated by the NAIC to monitor the financial
soundness of insurers
✔✔licensed insurer (admitted insurer) - ✔✔an insurer authorized by the state insurance
department to sell insurance within that state
✔✔domestic insurer - ✔✔an insurer incorporated in the same state in which it is writing
insurance
✔✔foreign insurer - ✔✔an insurer licensed to operate in a state but incorporated in
another state
✔✔alien insurer - ✔✔an insurer licensed in a U.S. state but incorporated in another
country
✔✔market conduct regulation - ✔✔regulation of the practices of insurers in regard to
four areas of operation: sales, practices, underwriting practices, claim practices, and
bad-faith actions
✔✔standard market - ✔✔collectively, insurers who voluntarily offer insurance coverages
at rates designed from customers with average or better-than-average loss exposures
✔✔excess and surplus lines (E&S) insurance - ✔✔insurance coverages unavailable in
the standard market that are written by nonadmitted insurers
✔✔nonadmitted insurer (unlicensed insurer) - ✔✔an insurer that is not licensed in many
of the states in which it operates and that writes E&S insurance coverages
