AINS 101 EXAMS 2 ALL ANSWERS AND QUESTIONS
SET A+
✔✔The size of an employer's loss exposure for workers compensation insurance is
based on
A. The number of its employees.
B. The final premium audit.
C. The extent of its operations.
D. The amount of its payroll. - ✔✔The amount of its payroll. (The size of an employer's
loss exposure for workers compensation insurance is based on the amount of its
payroll.)
✔✔Which one of the following is the fundamental measure of loss exposure used in
insurance rating?
A. Premium
B. Exposure unit
C. Risk
D. Rate - ✔✔Exposure unit. (The exposure unit is the fundamental measure of loss
exposure used in insurance rating.)
✔✔Which one of the following statements is correct regarding the interaction between
risk control and other insurer functions?
A. A risk control evaluation can make the difference between the applicant's being
rejected or accepted by the underwriter.
B. Risk control representatives compile detailed data for the actuarial department to use
in establishing rates.
C. Risk control representatives are responsible for compiling all the information required
for a premium audit.
D. Risk control personnel are responsible for answering any complex questions that
insureds have about premium audits. - ✔✔A risk control evaluation can make the
difference between the applicant's being rejected or accepted by the underwriter.
,(A risk control evaluation can make the difference between the applicant's being
rejected or accepted by the underwriter.)
✔✔Tony now works at the corporate level for Newtown Insurance. He is considered a
staff underwriter. Which one of the following is primarily a responsibility of staff
underwriters?
A. Manage a book of business
B. Support producers
C. Recommend coverage
D. Revise underwriting guidelines - ✔✔Revise underwriting guidelines (Revising
underwriting guidelines is primarily a responsibility of staff underwriters.)
✔✔Jill works in the field for Goshen Mutual as a line underwriter. Which one of the
following is primarily a responsibility of line underwriters?
A. Revise underwriting guidelines
B. Select insureds
C. Research the market
D. Develop coverage forms - ✔✔Select insureds (One of the primary responsibilities of
line underwriters is to select insureds.)
✔✔Which one of the following is the first step in the underwriting process?
A. Develop underwriting alternatives
B. Evaluate the submission
C. Monitor the underwriting decision
D. Determine an appropriate premium - ✔✔Evaluate the submission (Evaluating the
submission is the first step in the underwriting process.)
✔✔Anna was reviewing an all-lines submission for SP Markets. SP Markets owns and
operates 5 small grocery stores located in the suburbs of Boston. The stores all seem to
be well maintained and clean. While the overall loss experience on the account is good
relative to the indicated premium, the loss runs show a frequency of small general
liability claims from customer slips and falls. Rather than reject the application for SP
Markets, Anna would like to suggest a coverage modification to the producer that could
make the application acceptable and possibly add value for the insured. Which one of
the following is a good coverage modification for Anna to suggest?
A. Propose the general liability coverage at a lower premium level, but apply a small
deductible.
B. Offer a proposal with all lines of coverage except the general liability coverage.
C. Propose the general liability coverage, excluding the 2 locations that have -
✔✔Propose the general liability coverage at a lower premium level, but apply a small
deductible. (By proposing a small deductible for the general liability exposure, the
,application become acceptable to Anna. The lower premium level may be attractive to
the insured, and the deductible may offer a motivation for the risk to put in controls to
reduce the frequency of slips and falls. The options of excluding locations or coverage,
or quoting an unjustified premium do not add value for the insured.)
✔✔Produce, such as apples or grapes, may be priced by the unit or by the pound. In
insurance, these measures are similar to
A. Construction cost index.
B. Rates.
C. Exposure units.
D. Premiums. - ✔✔Exposure units. (Units, pounds, and exposure units are all multiplied
by the rate to arrive at the cost (premium).)
✔✔Bob is shopping for auto insurance. Insurance Company A's rating system
determines that Bob should be charged $800 per auto. If Bob is looking to insure four
autos, what premium will he be charged by Insurance Company A? - ✔✔$3200
✔✔Stephanie works for Waynesgood Insurance. She appreciates the help she receives
from Clem in the company's claims department who provides her with recent statistics
and comments on Waynesgood's customer satisfaction levels. Stephanie works in
which one of the following departments?
A. Marketing
B. Underwriting
C. Premium auditing
D. Risk control - ✔✔Marketing
✔✔Johann is an insurance company employee who investigates the scene of a loss
and meets with insureds, claimants, lawyers, Johann is most accurately called
A. A claims supervisor.
B. An adjusting agent.
C. An independent adjuster.
D. A field claims representative. - ✔✔A field claims representative
✔✔Work on a new claim begins for claim representative Anita upon receipt of a claim
notice. Anita gathers initial information and verifies coverage. From the list of activities
below, the next step Anita would take in the process is
A. Assign the claim to defense counsel.
B. Set a loss reserve.
C. Make an offer to settle the claim.
, D. Retain causation experts. - ✔✔Set a loss reserve. (After the claim representative
receives notice of a loss, obtains initial information, and verifies coverage, a loss
reserve for that claim should be established.)
✔✔Understanding the steps in the claims handling process is important to new claims
reps. Which one of the following steps generally comes after investigating and
documenting the claim and before concluding the claim?
A. Acknowledging a claim
B. Determining cause of loss and loss amount
C. Identifying the policy
D. Contacting the insured - ✔✔Determining cause of loss and loss amount. (Between
the two steps of investigating and documenting the claim and concluding the claim is
the step of determining cause of loss and loss amount.)
✔✔A person or entity that would suffer a financial loss if property were damaged has
A. A contractual interest.
B. A discretionary interest.
C. An insurable interest.
D. A renewable interest. - ✔✔An insurable interest. (A person or entity that would suffer
a financial loss if property were damaged has an insurable interest.)
✔✔Subrogation is the insurer's right to
A. Estimate the value of the damaged property.
B. Transfer coverage to a third party.
C. Drop a claim in exchange for an agreed amount of money.
D. Recover its claim payment from the responsible party. - ✔✔Recover its claim
payment from the responsible party.
(Subrogation is the insurer's right to recover its claim payment from the responsible
party.)
✔✔Compensatory damages represent
A. Out-of-pocket expenses.
B. Damages to deter others from committing wrongful acts.
C. Actual harm suffered.
D. Non-economic loss. - ✔✔Actual harm suffered. (Compensatory damages represent
actual harm suffered.)
✔✔Damages for disfigurement are a form of
A. General damages.
B. Punitive damages.
SET A+
✔✔The size of an employer's loss exposure for workers compensation insurance is
based on
A. The number of its employees.
B. The final premium audit.
C. The extent of its operations.
D. The amount of its payroll. - ✔✔The amount of its payroll. (The size of an employer's
loss exposure for workers compensation insurance is based on the amount of its
payroll.)
✔✔Which one of the following is the fundamental measure of loss exposure used in
insurance rating?
A. Premium
B. Exposure unit
C. Risk
D. Rate - ✔✔Exposure unit. (The exposure unit is the fundamental measure of loss
exposure used in insurance rating.)
✔✔Which one of the following statements is correct regarding the interaction between
risk control and other insurer functions?
A. A risk control evaluation can make the difference between the applicant's being
rejected or accepted by the underwriter.
B. Risk control representatives compile detailed data for the actuarial department to use
in establishing rates.
C. Risk control representatives are responsible for compiling all the information required
for a premium audit.
D. Risk control personnel are responsible for answering any complex questions that
insureds have about premium audits. - ✔✔A risk control evaluation can make the
difference between the applicant's being rejected or accepted by the underwriter.
,(A risk control evaluation can make the difference between the applicant's being
rejected or accepted by the underwriter.)
✔✔Tony now works at the corporate level for Newtown Insurance. He is considered a
staff underwriter. Which one of the following is primarily a responsibility of staff
underwriters?
A. Manage a book of business
B. Support producers
C. Recommend coverage
D. Revise underwriting guidelines - ✔✔Revise underwriting guidelines (Revising
underwriting guidelines is primarily a responsibility of staff underwriters.)
✔✔Jill works in the field for Goshen Mutual as a line underwriter. Which one of the
following is primarily a responsibility of line underwriters?
A. Revise underwriting guidelines
B. Select insureds
C. Research the market
D. Develop coverage forms - ✔✔Select insureds (One of the primary responsibilities of
line underwriters is to select insureds.)
✔✔Which one of the following is the first step in the underwriting process?
A. Develop underwriting alternatives
B. Evaluate the submission
C. Monitor the underwriting decision
D. Determine an appropriate premium - ✔✔Evaluate the submission (Evaluating the
submission is the first step in the underwriting process.)
✔✔Anna was reviewing an all-lines submission for SP Markets. SP Markets owns and
operates 5 small grocery stores located in the suburbs of Boston. The stores all seem to
be well maintained and clean. While the overall loss experience on the account is good
relative to the indicated premium, the loss runs show a frequency of small general
liability claims from customer slips and falls. Rather than reject the application for SP
Markets, Anna would like to suggest a coverage modification to the producer that could
make the application acceptable and possibly add value for the insured. Which one of
the following is a good coverage modification for Anna to suggest?
A. Propose the general liability coverage at a lower premium level, but apply a small
deductible.
B. Offer a proposal with all lines of coverage except the general liability coverage.
C. Propose the general liability coverage, excluding the 2 locations that have -
✔✔Propose the general liability coverage at a lower premium level, but apply a small
deductible. (By proposing a small deductible for the general liability exposure, the
,application become acceptable to Anna. The lower premium level may be attractive to
the insured, and the deductible may offer a motivation for the risk to put in controls to
reduce the frequency of slips and falls. The options of excluding locations or coverage,
or quoting an unjustified premium do not add value for the insured.)
✔✔Produce, such as apples or grapes, may be priced by the unit or by the pound. In
insurance, these measures are similar to
A. Construction cost index.
B. Rates.
C. Exposure units.
D. Premiums. - ✔✔Exposure units. (Units, pounds, and exposure units are all multiplied
by the rate to arrive at the cost (premium).)
✔✔Bob is shopping for auto insurance. Insurance Company A's rating system
determines that Bob should be charged $800 per auto. If Bob is looking to insure four
autos, what premium will he be charged by Insurance Company A? - ✔✔$3200
✔✔Stephanie works for Waynesgood Insurance. She appreciates the help she receives
from Clem in the company's claims department who provides her with recent statistics
and comments on Waynesgood's customer satisfaction levels. Stephanie works in
which one of the following departments?
A. Marketing
B. Underwriting
C. Premium auditing
D. Risk control - ✔✔Marketing
✔✔Johann is an insurance company employee who investigates the scene of a loss
and meets with insureds, claimants, lawyers, Johann is most accurately called
A. A claims supervisor.
B. An adjusting agent.
C. An independent adjuster.
D. A field claims representative. - ✔✔A field claims representative
✔✔Work on a new claim begins for claim representative Anita upon receipt of a claim
notice. Anita gathers initial information and verifies coverage. From the list of activities
below, the next step Anita would take in the process is
A. Assign the claim to defense counsel.
B. Set a loss reserve.
C. Make an offer to settle the claim.
, D. Retain causation experts. - ✔✔Set a loss reserve. (After the claim representative
receives notice of a loss, obtains initial information, and verifies coverage, a loss
reserve for that claim should be established.)
✔✔Understanding the steps in the claims handling process is important to new claims
reps. Which one of the following steps generally comes after investigating and
documenting the claim and before concluding the claim?
A. Acknowledging a claim
B. Determining cause of loss and loss amount
C. Identifying the policy
D. Contacting the insured - ✔✔Determining cause of loss and loss amount. (Between
the two steps of investigating and documenting the claim and concluding the claim is
the step of determining cause of loss and loss amount.)
✔✔A person or entity that would suffer a financial loss if property were damaged has
A. A contractual interest.
B. A discretionary interest.
C. An insurable interest.
D. A renewable interest. - ✔✔An insurable interest. (A person or entity that would suffer
a financial loss if property were damaged has an insurable interest.)
✔✔Subrogation is the insurer's right to
A. Estimate the value of the damaged property.
B. Transfer coverage to a third party.
C. Drop a claim in exchange for an agreed amount of money.
D. Recover its claim payment from the responsible party. - ✔✔Recover its claim
payment from the responsible party.
(Subrogation is the insurer's right to recover its claim payment from the responsible
party.)
✔✔Compensatory damages represent
A. Out-of-pocket expenses.
B. Damages to deter others from committing wrongful acts.
C. Actual harm suffered.
D. Non-economic loss. - ✔✔Actual harm suffered. (Compensatory damages represent
actual harm suffered.)
✔✔Damages for disfigurement are a form of
A. General damages.
B. Punitive damages.
