AINS 101 FINAL 2027 ANSWERS AND QUESTIONS
SET A+
✔✔Insurer's Balance Sheet - ✔✔Includes Assets, Liabilities, and Policyholder's surplus.
✔✔Policyholder's surplus - ✔✔Assets minus Liabilities
✔✔Combined Ratio Use - ✔✔Indicates whether an insurer is making an underwriting
loss or gain. Loss Ratio = how much of the premium dollar pays for losses and
adjustments. Expense Ratio = How much of the premium dollar is used to pay the
insurer's expenses.
✔✔Combined Ratio Formula - ✔✔Combined Ratio = Loss Ratio + Expense Ratio
✔✔How to interpret the combined ratio - ✔✔A combined ratio less than 100 means the
insurer is making a UW profit. More than 100 means the insurer is not making a UW
profit. Ex. A combined ratio of 85 means it is earning 15 cents profit from UW on every
dollar of premium.
✔✔Independent Agents and Brokers - ✔✔Both sell insurance products to individuals
and businesses. The broker represents the customer, the agent represents one or more
insurers. Typically not employees of an insurer and are usually free to work with as
many insurers as they want. Own their own expiration lists.
✔✔Expiration List - ✔✔Lists that contain policyholder information and policy expiration
dates
✔✔Exclusive Agency - ✔✔An agency contracted to sell insurance for one insurer or
group of insurers. Are not employees of the insurer, but cannot sell policies from
another insurer due to a contract. Do not own policy expiration lists. Leave expiration
lists behind when contracting with another insurer.
, ✔✔Direct Writer System - ✔✔Insurer uses its own employees as producers. Similar to
exclusive agents because they are restricted in representing only one insurer, which
owns the expiration lists.
✔✔Relevance of Distribution Channels - ✔✔As technology changes customer
expectations, insurance is increasingly sold in ways other than through a producer
✔✔5 Types of Distribution Channels - ✔✔1. Digital: apps and websites
2. Call centers: Customer service representatives or chatbots
3. Direct response: Social media, email blasts, website ads, and direct mail
4. Group Marketing: Marketing to members of the same personal or professional group
5. Financial Institutions: Marketing through banks and financial services
✔✔Underwriting - ✔✔The process of evaluating risks, selecting who can be insured,
pricing that insurance coverage, determining policy terms and conditions, an monitoring
those decisions
✔✔Primary Purpose of Underwriting - ✔✔To help an insurer develop and maintain a
growing, profitable book of business
✔✔Key activities performed by Underwriters - ✔✔1. Minimize adverse selection
2. Ensure adequate policyholder's surplus
3. Enforcing underwriting guidelines
✔✔Two types of Underwriters - ✔✔1. Field Underwriters
2. Corporate Underwriters
✔✔Field/Line Underwriters - ✔✔Work primarily in the field by interacting directly with
producers and applicants. They select insureds (new+renewal), ensure accuracy,
recommend coverage, manage a BoB, support producers and insureds, and support
marketing objectives
✔✔Corporate/Staff Underwriters - ✔✔Work primarily in the insurer's corporate office
and help establish and maintain the insurer's overarching underwriting policy. They
research the market, formulate policy, revise UW guidelines, develop coverage forms,
review rates, educate and train, arrange reinsurance, assist with complex accounts, and
conduct UW audits
✔✔Steps in the Undewriting Process - ✔✔A. Evaluate Application
B. Develop Underwriting Alternatives
C. Select an Underwriting Alternative
D. Implement the Underwriting Decision
E. Monitor the Underwriting Decision
✔✔What is the process for determining the premium of a policy called? - ✔✔Rating
SET A+
✔✔Insurer's Balance Sheet - ✔✔Includes Assets, Liabilities, and Policyholder's surplus.
✔✔Policyholder's surplus - ✔✔Assets minus Liabilities
✔✔Combined Ratio Use - ✔✔Indicates whether an insurer is making an underwriting
loss or gain. Loss Ratio = how much of the premium dollar pays for losses and
adjustments. Expense Ratio = How much of the premium dollar is used to pay the
insurer's expenses.
✔✔Combined Ratio Formula - ✔✔Combined Ratio = Loss Ratio + Expense Ratio
✔✔How to interpret the combined ratio - ✔✔A combined ratio less than 100 means the
insurer is making a UW profit. More than 100 means the insurer is not making a UW
profit. Ex. A combined ratio of 85 means it is earning 15 cents profit from UW on every
dollar of premium.
✔✔Independent Agents and Brokers - ✔✔Both sell insurance products to individuals
and businesses. The broker represents the customer, the agent represents one or more
insurers. Typically not employees of an insurer and are usually free to work with as
many insurers as they want. Own their own expiration lists.
✔✔Expiration List - ✔✔Lists that contain policyholder information and policy expiration
dates
✔✔Exclusive Agency - ✔✔An agency contracted to sell insurance for one insurer or
group of insurers. Are not employees of the insurer, but cannot sell policies from
another insurer due to a contract. Do not own policy expiration lists. Leave expiration
lists behind when contracting with another insurer.
, ✔✔Direct Writer System - ✔✔Insurer uses its own employees as producers. Similar to
exclusive agents because they are restricted in representing only one insurer, which
owns the expiration lists.
✔✔Relevance of Distribution Channels - ✔✔As technology changes customer
expectations, insurance is increasingly sold in ways other than through a producer
✔✔5 Types of Distribution Channels - ✔✔1. Digital: apps and websites
2. Call centers: Customer service representatives or chatbots
3. Direct response: Social media, email blasts, website ads, and direct mail
4. Group Marketing: Marketing to members of the same personal or professional group
5. Financial Institutions: Marketing through banks and financial services
✔✔Underwriting - ✔✔The process of evaluating risks, selecting who can be insured,
pricing that insurance coverage, determining policy terms and conditions, an monitoring
those decisions
✔✔Primary Purpose of Underwriting - ✔✔To help an insurer develop and maintain a
growing, profitable book of business
✔✔Key activities performed by Underwriters - ✔✔1. Minimize adverse selection
2. Ensure adequate policyholder's surplus
3. Enforcing underwriting guidelines
✔✔Two types of Underwriters - ✔✔1. Field Underwriters
2. Corporate Underwriters
✔✔Field/Line Underwriters - ✔✔Work primarily in the field by interacting directly with
producers and applicants. They select insureds (new+renewal), ensure accuracy,
recommend coverage, manage a BoB, support producers and insureds, and support
marketing objectives
✔✔Corporate/Staff Underwriters - ✔✔Work primarily in the insurer's corporate office
and help establish and maintain the insurer's overarching underwriting policy. They
research the market, formulate policy, revise UW guidelines, develop coverage forms,
review rates, educate and train, arrange reinsurance, assist with complex accounts, and
conduct UW audits
✔✔Steps in the Undewriting Process - ✔✔A. Evaluate Application
B. Develop Underwriting Alternatives
C. Select an Underwriting Alternative
D. Implement the Underwriting Decision
E. Monitor the Underwriting Decision
✔✔What is the process for determining the premium of a policy called? - ✔✔Rating
