AINS 101 SIMULATED EXAM QUESTIONS AND
ANSWERS
Exclusive agency is contracted to sell insurance for one insurer or group of insurers -
Answers -The difference between an independent agency and an exclusive agency is
that an
Insurance shortages - Answers -Destructive competition in the insurance industry could
result in
Veronica directly contacts Maria for guidance on how to report a stolen car, Maria
provides that, and claims rep Sean takes over after an introduction from Maria -
Answers -Maria is a new producer who wears many hats when forming relationships
and then serving her established customers. In this capacity, which one of the following
scenarios most accurately describes her ongoing work wearing the hat of "claims
handler"?
$350 Replacement cost - Depreciation - Answers -John's two-year-old bicycle was
stolen. The bicycle's purchase price was $700, its current replacement cost is $800, and
depreciation was estimated at $450. What was the bicycle's actual cash value?
Underwriting authority reports - Answers -All of the following are sources of underwriting
information to evaluate an insurance submission, EXCEPT:
Implemented risk management techniques may prove to be ineffective or become
obsolete - Answers -Which one of the following best explains why producers should be
alert to changes in clients' loss exposures?
Field Underwriter - Answers -James works very closely with producers on a daily basis.
In addition to evaluating the applicants that the producers submit, James is involved in
presenting policy quotations, processing policy endorsements, helping to explain
coverages, and making coverage recommendations. James works as a
Balance sheet - Answers -Rachel is considering investing in the stock of an insurance
company. Which one of the following is likely to provide the best indication of the
insurer's financial position at this point in time?
Support producers and insureds - Answers -At Greenfield Insurance Company,
Bernadette and Rachel are corporate underwriters, and Tomas and Jose are field
underwriters. All of the following are underwriting activities typically performed by
corporate (or staff) underwriters like Bernadette and Rachel, EXCEPT:
Large number of similar exposure units - Answers -Oscar's custom-built vehicle looks
like a sausage sandwich on wheels. He plans to drive it to special events at schools
around the country where it will serve as a mobile billboard to promote his product.
, Oscar is surprised to learn that insurers are reluctant to insure his vehicle because it
fails to meet one of the ideal characteristics of an insurable risk. Which characteristic is
Oscar's vehicle least likely to meet?
Capacity - Answers -Which one of the following is the amount of business an insurer
can write based on regulatory guidelines, usually a comparsion of the insurer's written
premiums to the policyholders' surplus?
Mutual insurer - Answers -Joe is the owner of JG Auto Repair. He is always frustrated
with the amount of commercial insurance premium he pays every year, even though he
has not had a single claim in over 10 years. Joe is looking to partner with an insurance
company that will share its profits and maybe return a portion of his premium if the
results are good. Which one of the following types of insurer is the right fit for Joe?
Transfer - Answers -When the Smiths purchased their first home, they were required to
purchase a homeowners insurance policy in order to get a mortgage. Because they did
not have a lot of extra money in their budget, they wanted to buy as little insurance
coverage as possible. The Smiths' insurance agent advised them that if they purchase
an insurance policy that adequately covers damage to their home and personal
property, they only have to budget for the insurance premium, rather than the full cost of
rebuilding the house and replacing its contents. Which one of the following key
components of insurance is the insurance agent explaining to the Smiths?
Providing laboratory analyses - Answers -Risk control can assist the claims department
by
Loss ratio + expense ratio - Answers -Which one of the following is the correct formula
for calculating an insurer's combined ratio?
Property-casualty insurance and life-health insurance - Answers -The two main sectors
of the insurance industry are
Moral hazards - Answers -Joel is the underwriter for Stanton Industries. He received a
notice from the premium auditor on the account. After a recent visit to the insured's
location, the auditor wanted to make Joel aware of a decline in the business and some
questionable business practices. Which one of the following types of hazards is the
auditor identifying?
Risk management review - Answers -Donna is an insurance producer. She makes an
appointment with potential policyholder Sandie to review her loss exposures. She asks
Sandie to complete a questionnaire to assist her in this effort. Donna is conducting a
Underwriting - Answers -Martina, a premium auditor for Cintriell Insurance Company is
conducting a premium audit for Carolina's Cookies. Carolina mentioned to Martina that
she is opening a coffee shop at another location. By sharing this information, Martina
would provide a contribution to which one of the following insurer functions?
ANSWERS
Exclusive agency is contracted to sell insurance for one insurer or group of insurers -
Answers -The difference between an independent agency and an exclusive agency is
that an
Insurance shortages - Answers -Destructive competition in the insurance industry could
result in
Veronica directly contacts Maria for guidance on how to report a stolen car, Maria
provides that, and claims rep Sean takes over after an introduction from Maria -
Answers -Maria is a new producer who wears many hats when forming relationships
and then serving her established customers. In this capacity, which one of the following
scenarios most accurately describes her ongoing work wearing the hat of "claims
handler"?
$350 Replacement cost - Depreciation - Answers -John's two-year-old bicycle was
stolen. The bicycle's purchase price was $700, its current replacement cost is $800, and
depreciation was estimated at $450. What was the bicycle's actual cash value?
Underwriting authority reports - Answers -All of the following are sources of underwriting
information to evaluate an insurance submission, EXCEPT:
Implemented risk management techniques may prove to be ineffective or become
obsolete - Answers -Which one of the following best explains why producers should be
alert to changes in clients' loss exposures?
Field Underwriter - Answers -James works very closely with producers on a daily basis.
In addition to evaluating the applicants that the producers submit, James is involved in
presenting policy quotations, processing policy endorsements, helping to explain
coverages, and making coverage recommendations. James works as a
Balance sheet - Answers -Rachel is considering investing in the stock of an insurance
company. Which one of the following is likely to provide the best indication of the
insurer's financial position at this point in time?
Support producers and insureds - Answers -At Greenfield Insurance Company,
Bernadette and Rachel are corporate underwriters, and Tomas and Jose are field
underwriters. All of the following are underwriting activities typically performed by
corporate (or staff) underwriters like Bernadette and Rachel, EXCEPT:
Large number of similar exposure units - Answers -Oscar's custom-built vehicle looks
like a sausage sandwich on wheels. He plans to drive it to special events at schools
around the country where it will serve as a mobile billboard to promote his product.
, Oscar is surprised to learn that insurers are reluctant to insure his vehicle because it
fails to meet one of the ideal characteristics of an insurable risk. Which characteristic is
Oscar's vehicle least likely to meet?
Capacity - Answers -Which one of the following is the amount of business an insurer
can write based on regulatory guidelines, usually a comparsion of the insurer's written
premiums to the policyholders' surplus?
Mutual insurer - Answers -Joe is the owner of JG Auto Repair. He is always frustrated
with the amount of commercial insurance premium he pays every year, even though he
has not had a single claim in over 10 years. Joe is looking to partner with an insurance
company that will share its profits and maybe return a portion of his premium if the
results are good. Which one of the following types of insurer is the right fit for Joe?
Transfer - Answers -When the Smiths purchased their first home, they were required to
purchase a homeowners insurance policy in order to get a mortgage. Because they did
not have a lot of extra money in their budget, they wanted to buy as little insurance
coverage as possible. The Smiths' insurance agent advised them that if they purchase
an insurance policy that adequately covers damage to their home and personal
property, they only have to budget for the insurance premium, rather than the full cost of
rebuilding the house and replacing its contents. Which one of the following key
components of insurance is the insurance agent explaining to the Smiths?
Providing laboratory analyses - Answers -Risk control can assist the claims department
by
Loss ratio + expense ratio - Answers -Which one of the following is the correct formula
for calculating an insurer's combined ratio?
Property-casualty insurance and life-health insurance - Answers -The two main sectors
of the insurance industry are
Moral hazards - Answers -Joel is the underwriter for Stanton Industries. He received a
notice from the premium auditor on the account. After a recent visit to the insured's
location, the auditor wanted to make Joel aware of a decline in the business and some
questionable business practices. Which one of the following types of hazards is the
auditor identifying?
Risk management review - Answers -Donna is an insurance producer. She makes an
appointment with potential policyholder Sandie to review her loss exposures. She asks
Sandie to complete a questionnaire to assist her in this effort. Donna is conducting a
Underwriting - Answers -Martina, a premium auditor for Cintriell Insurance Company is
conducting a premium audit for Carolina's Cookies. Carolina mentioned to Martina that
she is opening a coffee shop at another location. By sharing this information, Martina
would provide a contribution to which one of the following insurer functions?
