AINS 21 Chapter 5 Terms Exam
UPDATEDACTUAL QUESTIONS AND
CORRECT ANSWERS
Book of Business - CORRECT ANSWER A group of policies with a common
characteristic, such as territory or type of coverage, or all policies written by a particular
insurer or agency.
Adverse Selection - CORRECT ANSWER In general, the tendency for people with the
greatest probability of loss to be the ones most likely to purchase insurance.
Capacity - CORRECT ANSWER The amount of business an insurer in able to write,
usually based on a comparison of the insurer's written premiums to its policyholders' surplus.
Underwriting Authority - CORRECT ANSWER The scope of decisions that an
underwriter can make without receiving approval from someone at a higher level.
Underwriting Guidelines (underwriting guide) - CORRECT ANSWER A written
manual that communicates an insurer's underwriting policy and that specifies the attributes of
an account that an insurer is willing to insure.
Line Underwriter - CORRECT ANSWER Underwriter who is primarily responsible for
implementing the steps in the underwriting process
Staff Underwriter - CORRECT ANSWER Underwriter who is usually located in the
home office and who assists underwriting management with making and implementing
underwriting policy.
Underwriting Policy (underwriting philosophy) - CORRECT ANSWER A guide to
individual and aggregate policy selection that supports an insurer's mission statement.
, Advisory Organization - CORRECT ANSWER An independent organization that
works with and on behalf of insurers that purchase or subscribe to its services.
Prospective Loss Costs - CORRECT ANSWER Loss data that are modified by loss
development, trending, and credibility processes, but without considerations for profit and
expenses.
Trending - CORRECT ANSWER A statistical technique for analyzing environmental
changes and projecting such changes into the future.
Loss Development - CORRECT ANSWER The increase or decrease of incurred losses
over time.
Treaty Reinsurance - CORRECT ANSWER A reinsurance agreement that covers an
entire class or portfolio of loss exposures and provides that the primary insurer's individual
loss exposures that fall within the treaty are automatically reinsured.
Facultative Reinsurance - CORRECT ANSWER Reinsurance of individual loss
exposures in which the primary insurer chooses which loss exposures to submit to the
reinsurer, and the reinsurer can accept or reject any loss exposures submitted.
Underwriting Audit - CORRECT ANSWER A review of underwriting files to ensure
that individual underwriters are adhering to underwriting guidelines.
Expert Systems, or Knowledge-Based Systems. - CORRECT ANSWER Computer
software programs that supplement the underwriting decision making process. These systems
ask for the information necessary to make an underwriting decision, ensuring that no
information is overlooked.
Physical Hazard - CORRECT ANSWER A tangible characteristic of property, persons,
or operations that tends to increase the frequency or severity of loss.
UPDATEDACTUAL QUESTIONS AND
CORRECT ANSWERS
Book of Business - CORRECT ANSWER A group of policies with a common
characteristic, such as territory or type of coverage, or all policies written by a particular
insurer or agency.
Adverse Selection - CORRECT ANSWER In general, the tendency for people with the
greatest probability of loss to be the ones most likely to purchase insurance.
Capacity - CORRECT ANSWER The amount of business an insurer in able to write,
usually based on a comparison of the insurer's written premiums to its policyholders' surplus.
Underwriting Authority - CORRECT ANSWER The scope of decisions that an
underwriter can make without receiving approval from someone at a higher level.
Underwriting Guidelines (underwriting guide) - CORRECT ANSWER A written
manual that communicates an insurer's underwriting policy and that specifies the attributes of
an account that an insurer is willing to insure.
Line Underwriter - CORRECT ANSWER Underwriter who is primarily responsible for
implementing the steps in the underwriting process
Staff Underwriter - CORRECT ANSWER Underwriter who is usually located in the
home office and who assists underwriting management with making and implementing
underwriting policy.
Underwriting Policy (underwriting philosophy) - CORRECT ANSWER A guide to
individual and aggregate policy selection that supports an insurer's mission statement.
, Advisory Organization - CORRECT ANSWER An independent organization that
works with and on behalf of insurers that purchase or subscribe to its services.
Prospective Loss Costs - CORRECT ANSWER Loss data that are modified by loss
development, trending, and credibility processes, but without considerations for profit and
expenses.
Trending - CORRECT ANSWER A statistical technique for analyzing environmental
changes and projecting such changes into the future.
Loss Development - CORRECT ANSWER The increase or decrease of incurred losses
over time.
Treaty Reinsurance - CORRECT ANSWER A reinsurance agreement that covers an
entire class or portfolio of loss exposures and provides that the primary insurer's individual
loss exposures that fall within the treaty are automatically reinsured.
Facultative Reinsurance - CORRECT ANSWER Reinsurance of individual loss
exposures in which the primary insurer chooses which loss exposures to submit to the
reinsurer, and the reinsurer can accept or reject any loss exposures submitted.
Underwriting Audit - CORRECT ANSWER A review of underwriting files to ensure
that individual underwriters are adhering to underwriting guidelines.
Expert Systems, or Knowledge-Based Systems. - CORRECT ANSWER Computer
software programs that supplement the underwriting decision making process. These systems
ask for the information necessary to make an underwriting decision, ensuring that no
information is overlooked.
Physical Hazard - CORRECT ANSWER A tangible characteristic of property, persons,
or operations that tends to increase the frequency or severity of loss.
