AINS PRACTICE EXAM WITH CORRECT
ANSWERS 2025
One distinguishing feature between independent agency systems and
other marketing systems is the... ( correct answers ) agency expiration
list
Foreign Insurer ( correct answers ) An insurer licensed to operate in a
state but incorporated in another state
Domestic Insurer ( correct answers ) An insurer doing business in the
jurisdiction in which it was incorporated
Alien Insurer ( correct answers ) An insurer domiciled in a country other
than the US
Direct Response Marketing System ( correct answers ) Greatly
reduces compensation costs but has higher advertising costs
Agency Expiration List ( correct answers ) An agency's most valuable
asset (does not belong to insurer)
Important consideration when selecting distribution channels
( correct answers ) Does the channel capitalize on its core capabilities?
Knowledge acquired by the agent is presumed to be.. ( correct
answers ) knowledge acquired by the
insurer
Premium collection method used for personal insurance and small
commercial accounts ( correct answers ) Direct Bill
What specifies scope of authority of an agent? ( correct
answers ) Agency contract
Agency Bill ( correct answers ) Payment procedure in which a
producer sends premium bills to the insured, collects the premium, and
sends the premium to the insurer, less any commission
Item Basis ( correct answers ) Premium (less commission) is forwarded
to the insurer when the producer collects it or when it comes due. Least
complex method
Statement Basis ( correct answers ) Insurer sends statement to the
producer showing the premiums due. Producer is obligated to pay the
premiums as due.
, Account Current Basis ( correct answers ) Producer periodically prepares a
statement showing the premiums due to the insurer, after deducting
appropriate commissions, and transmits the amount to the insurer. The
agency contract will indicate how often the producer must submit the
account current statement (usually monthly).
Producer must pay when premium is due, even if policyholder hasn't paid.
Purposes of underwriting ( correct answers ) Develop
and maintain a book of business, guard against adverse selection, ensure
adequate policyholder's surplus and enforce underwriting guidelines
Experience Rating ( correct answers ) A rating plan that adjusts the
premium for the current policy period to recognize the loss experience of the
insured organization during past policy periods
Schedule Rating ( correct answers ) A rating plan that awards debits and
credits based specific categories, such as the care and condition of
premises of the training and selection of employees, to reflect a modified
premium that the class rate does not include
Retrospective Rating ( correct answers ) A ratemaking technique that
adjusts the insured's premium for the current policy period based on the
insured's loss experience during the current period; paid losses or incurred
losses may be used to determine loss experience
Class Rating ( correct answers ) A rating approach that uses rates
reflecting the average probability of loss for businesses within large
groups of similar risks; the predominant method for determining rate for
commercial properties
Law of large numbers( correct answers ) A mathematical principal that
state that as the number of similar but independent exposure units
increases, the relative accuracy about the future outcomes (losses) also
increases
If an insurance company wishes to increases its written premium volume,
it must... ( correct answers )
have adequate policyholder's surplus
During a catastrophe, an insurer should... ( correct answers ) use
abbreviated claims handling procedures, increase settlement authority of
producers, and settle all questions of valuation in the policyholder's favor
Many claims occurring from a single event is called a...
( correct answers ) catastrophe
In the claims valuation process, out-of-pocket expenses are
called...
( correct answers
) special damages
ANSWERS 2025
One distinguishing feature between independent agency systems and
other marketing systems is the... ( correct answers ) agency expiration
list
Foreign Insurer ( correct answers ) An insurer licensed to operate in a
state but incorporated in another state
Domestic Insurer ( correct answers ) An insurer doing business in the
jurisdiction in which it was incorporated
Alien Insurer ( correct answers ) An insurer domiciled in a country other
than the US
Direct Response Marketing System ( correct answers ) Greatly
reduces compensation costs but has higher advertising costs
Agency Expiration List ( correct answers ) An agency's most valuable
asset (does not belong to insurer)
Important consideration when selecting distribution channels
( correct answers ) Does the channel capitalize on its core capabilities?
Knowledge acquired by the agent is presumed to be.. ( correct
answers ) knowledge acquired by the
insurer
Premium collection method used for personal insurance and small
commercial accounts ( correct answers ) Direct Bill
What specifies scope of authority of an agent? ( correct
answers ) Agency contract
Agency Bill ( correct answers ) Payment procedure in which a
producer sends premium bills to the insured, collects the premium, and
sends the premium to the insurer, less any commission
Item Basis ( correct answers ) Premium (less commission) is forwarded
to the insurer when the producer collects it or when it comes due. Least
complex method
Statement Basis ( correct answers ) Insurer sends statement to the
producer showing the premiums due. Producer is obligated to pay the
premiums as due.
, Account Current Basis ( correct answers ) Producer periodically prepares a
statement showing the premiums due to the insurer, after deducting
appropriate commissions, and transmits the amount to the insurer. The
agency contract will indicate how often the producer must submit the
account current statement (usually monthly).
Producer must pay when premium is due, even if policyholder hasn't paid.
Purposes of underwriting ( correct answers ) Develop
and maintain a book of business, guard against adverse selection, ensure
adequate policyholder's surplus and enforce underwriting guidelines
Experience Rating ( correct answers ) A rating plan that adjusts the
premium for the current policy period to recognize the loss experience of the
insured organization during past policy periods
Schedule Rating ( correct answers ) A rating plan that awards debits and
credits based specific categories, such as the care and condition of
premises of the training and selection of employees, to reflect a modified
premium that the class rate does not include
Retrospective Rating ( correct answers ) A ratemaking technique that
adjusts the insured's premium for the current policy period based on the
insured's loss experience during the current period; paid losses or incurred
losses may be used to determine loss experience
Class Rating ( correct answers ) A rating approach that uses rates
reflecting the average probability of loss for businesses within large
groups of similar risks; the predominant method for determining rate for
commercial properties
Law of large numbers( correct answers ) A mathematical principal that
state that as the number of similar but independent exposure units
increases, the relative accuracy about the future outcomes (losses) also
increases
If an insurance company wishes to increases its written premium volume,
it must... ( correct answers )
have adequate policyholder's surplus
During a catastrophe, an insurer should... ( correct answers ) use
abbreviated claims handling procedures, increase settlement authority of
producers, and settle all questions of valuation in the policyholder's favor
Many claims occurring from a single event is called a...
( correct answers ) catastrophe
In the claims valuation process, out-of-pocket expenses are
called...
( correct answers
) special damages
