AINS 101 PRACTICE QUESTIONS EXAM
QUESTIONS WITH VERIFIED ANSWERS
Which one of the following is part of written premiums? - ANSWER-Unearned premiums
An insurer's balance sheet can best be described as a - ANSWER-Snapshot of its
financial position.
The financial report for Hometown Insurer contains the following information:
- Earned premiums $4,000,000
- Written premiums $5,000,000
- Net investment income $1,000,000
- Incurred Losses $3,000,000
- Incurred underwriting expense $2,000,000
What is Hometown Insurer's expense ratio? - ANSWER-40%
The financial report for LMN Insurance contains the following information:
Earned premiums $8,000,000Written premiums $10,000,000Incurred losses
$6,000,000Incurred underwriting expenses $4,000,000
What is LMN Insurance's expense ratio? - ANSWER-40%
Expense Ratio = Incurred underwriting expenses ÷ Written premiums: $4 million ÷ $10
million = .40 (40%)
Spencer Insurance Associates is an independent agency selling primarily homeowners
policies. This agency - ANSWER-Is free to work with as many different insurers as it
wants.
As it continues to grow, Anchoy Insurance is examining other distribution channels to
more effectively market its products. Through this experience, which of one the
following will Anchoy most likely learn? - ANSWER-Anchoy can use group marketing to
target large numbers of recent local college graduates.
The key to the direct writer marketing system is that - ANSWER-The insurer is using its
own employees as producers.
Insuring individuals with a high probability of loss at a cost lower than the insurer would
normally charge for that risk because it wasn't aware of the actual risk involved is known
as - ANSWER-Adverse selection.
Clare is a commercial lines underwriter. She always tries to follow underwriting
guidelines, effectively evaluate loss exposures, and charge adequate premiums. By
doing these things, Clare's goal is to ensure - ANSWER-Adequate policyholders'
surplus.
, Which one of the following statements is correct regarding the interaction between risk
control and other insurer functions? - ANSWER-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?
- ANSWER-Revise underwriting guidelines
Aimee recently accepted a job in the Underwriting department at Noble Insurance
Company. Her responsibilities will include developing coverage forms, arranging
reinsurance agreements, and conducting underwriting audits. Which one of the
following is the title of Aimee's new job? - ANSWER-Corporate underwriters, sometimes
referred to as staff underwriters, perform duties including: developing coverage forms,
arranging reinsurance, conducting underwriting audits, researching the market, and
revising underwriting guidelines.
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 that reject the application for SP
Markets, Anna would like to make suggest a 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 modification for Anna to suggest? - ANSWER-Propose the
general liability coverage at a lower premium level, but apply a small deductible.
As an experienced underwriter, Rick has learned to make every effort to avoid a
mistake that can produce insufficient premium to cover losses, or pricing that isn't
competitive. Which one of the following underwriting mistakes can often cause these
issues? - ANSWER-Misclassifying exposures
Shelton manufacturing has $1 million in annual sales, its liability insurance is priced per
1,000 of sales, and the per-unit rate is $0.50. What is Shelton Manufacturing's liability
insurance premium? - ANSWER-Calculated at 1,000 units ($1 million sales ÷ price per
$1,000) × $0.50 rate = $500
The size of an employer's loss exposure for workers compensation insurance is based
on - ANSWER-The amount of its payroll.
Johann is an insurance company employee who investigates the scene of a loss and
meets with insureds, claimants, lawyers, Johann is most accurately called - ANSWER-A
claims supervisor.
Willis, a claims representative, is collaborating with his colleague Suzanna from his
insurance company's risk control department. How will Suzanna help Willis? -
ANSWER-Provide laboratory analysis when Willis is investigating a claim.
QUESTIONS WITH VERIFIED ANSWERS
Which one of the following is part of written premiums? - ANSWER-Unearned premiums
An insurer's balance sheet can best be described as a - ANSWER-Snapshot of its
financial position.
The financial report for Hometown Insurer contains the following information:
- Earned premiums $4,000,000
- Written premiums $5,000,000
- Net investment income $1,000,000
- Incurred Losses $3,000,000
- Incurred underwriting expense $2,000,000
What is Hometown Insurer's expense ratio? - ANSWER-40%
The financial report for LMN Insurance contains the following information:
Earned premiums $8,000,000Written premiums $10,000,000Incurred losses
$6,000,000Incurred underwriting expenses $4,000,000
What is LMN Insurance's expense ratio? - ANSWER-40%
Expense Ratio = Incurred underwriting expenses ÷ Written premiums: $4 million ÷ $10
million = .40 (40%)
Spencer Insurance Associates is an independent agency selling primarily homeowners
policies. This agency - ANSWER-Is free to work with as many different insurers as it
wants.
As it continues to grow, Anchoy Insurance is examining other distribution channels to
more effectively market its products. Through this experience, which of one the
following will Anchoy most likely learn? - ANSWER-Anchoy can use group marketing to
target large numbers of recent local college graduates.
The key to the direct writer marketing system is that - ANSWER-The insurer is using its
own employees as producers.
Insuring individuals with a high probability of loss at a cost lower than the insurer would
normally charge for that risk because it wasn't aware of the actual risk involved is known
as - ANSWER-Adverse selection.
Clare is a commercial lines underwriter. She always tries to follow underwriting
guidelines, effectively evaluate loss exposures, and charge adequate premiums. By
doing these things, Clare's goal is to ensure - ANSWER-Adequate policyholders'
surplus.
, Which one of the following statements is correct regarding the interaction between risk
control and other insurer functions? - ANSWER-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?
- ANSWER-Revise underwriting guidelines
Aimee recently accepted a job in the Underwriting department at Noble Insurance
Company. Her responsibilities will include developing coverage forms, arranging
reinsurance agreements, and conducting underwriting audits. Which one of the
following is the title of Aimee's new job? - ANSWER-Corporate underwriters, sometimes
referred to as staff underwriters, perform duties including: developing coverage forms,
arranging reinsurance, conducting underwriting audits, researching the market, and
revising underwriting guidelines.
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 that reject the application for SP
Markets, Anna would like to make suggest a 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 modification for Anna to suggest? - ANSWER-Propose the
general liability coverage at a lower premium level, but apply a small deductible.
As an experienced underwriter, Rick has learned to make every effort to avoid a
mistake that can produce insufficient premium to cover losses, or pricing that isn't
competitive. Which one of the following underwriting mistakes can often cause these
issues? - ANSWER-Misclassifying exposures
Shelton manufacturing has $1 million in annual sales, its liability insurance is priced per
1,000 of sales, and the per-unit rate is $0.50. What is Shelton Manufacturing's liability
insurance premium? - ANSWER-Calculated at 1,000 units ($1 million sales ÷ price per
$1,000) × $0.50 rate = $500
The size of an employer's loss exposure for workers compensation insurance is based
on - ANSWER-The amount of its payroll.
Johann is an insurance company employee who investigates the scene of a loss and
meets with insureds, claimants, lawyers, Johann is most accurately called - ANSWER-A
claims supervisor.
Willis, a claims representative, is collaborating with his colleague Suzanna from his
insurance company's risk control department. How will Suzanna help Willis? -
ANSWER-Provide laboratory analysis when Willis is investigating a claim.
