AINS 21 SA A1 Exam UPDATEDACTUAL
QUESTIONS AND CORRECT ANSWERS
Which one of the following is an example of a legal requirement for individuals that could be
met through insurance?
- Contributing to the growth of the organization
- Obtaining personal auto insurance
- Paying for losses
- Providing a source of investment funds - CORRECT ANSWER Obtaining personal
auto insurance
Which one of the following is an operating cost of insurers?
Select one:
A. Increased property losses because people have insurance
B. Producers' commissions
C. An insured's funds that could be invested elsewhere if purchasing insurance were not
necessary
D. Increased liability loss payments because people have insurance - CORRECT
ANSWER B. Producers' commissions
Producers' commissions are among the operating costs of insurers.
Though premiums are an obvious cost of insurance, many insureds believe they are too high
because
Select one:
A. Insurers only use eighty cents from every premium dollar to pay losses.
B. Insureds do not deliberately cause losses.
C. Benefits are intangible until a loss occurs.
D. Premiums are not a regular cost of living. - CORRECT ANSWER C. Benefits are
intangible until a loss occurs.
Many insureds believe premiums are too high because benefits are intangible until a loss
occurs.
,Which one of the following is an opportunity cost of insurance?
Select one:
A. The payment of commissions to agents
B. An insured's funds that could be invested elsewhere if purchasing insurance were not
necessary
C. An insurer's loss on invested premiums
D. The cost of claims payments that would not have been necessary if insureds' carelessness
had not caused losses - CORRECT ANSWER B. An insured's funds that could be
invested elsewhere if purchasing insurance were not necessary
An insured's funds that could be invested elsewhere if purchasing insurance were not
necessary is an example of an opportunity cost of insurance.
One of the costs of insurance is said to be opportunity costs. This means that if capital and
labor were not being used in the insurance business, they could be used elsewhere and
making other productive contributions to
Select one:
A. Government.
B. The insurance industry.
C. Society.
D. The agency system. - CORRECT ANSWER C. Society.
If capital and labor were not being used in the insurance business, they could be used
elsewhere and making other productive contributions to society.
Which one of the following statements is correct regarding the benefits of insurance?
Select one:
A. Insurance policies typically cannot be used to provide evidence of financial resources.
B. Insurers generally do not provide incentives to organizations to implement risk control
measures.
C. One disadvantage of insurance is that it promotes inefficient use of policyholders' funds.
, D. Contractors must usually provide evidence of liability insurance before a construction
contract is granted. - CORRECT ANSWER D. Contractors must usually provide
evidence of liability insurance before a construction contract is granted.
In which one of the following insurance roles can an abundance of data be used to analyze an
insured's history and needs?
- Insurance as a risk management technique
- Insurance as a risk transfer system
- Insurance as a business
- Insurance as a contract - CORRECT ANSWER Insurance as a risk management
technique
From a risk management viewpoint, insurance is used to
Select one:
A. Reduce the cost of losses.
B. Transfer the cost of losses.
C. Isolate the cost of losses.
D. Prevent the cost of losses. - CORRECT ANSWER B. Transfer the cost of losses.
Insurance is used to transfer the cost of losses from the insured to the insurer.
Some loss exposures are not easy to retain, avoid, or control. Which one of the following risk
management techniques is frequently used to treat such exposures?
Select one:
A. Reunderwriting
B. Prevention
C. Transfer
D. Reinsurance - CORRECT ANSWER C. Transfer
The risk management technique of transfer is often used to treat loss exposures that are not
easily treated by retention, avoidance, or control.
QUESTIONS AND CORRECT ANSWERS
Which one of the following is an example of a legal requirement for individuals that could be
met through insurance?
- Contributing to the growth of the organization
- Obtaining personal auto insurance
- Paying for losses
- Providing a source of investment funds - CORRECT ANSWER Obtaining personal
auto insurance
Which one of the following is an operating cost of insurers?
Select one:
A. Increased property losses because people have insurance
B. Producers' commissions
C. An insured's funds that could be invested elsewhere if purchasing insurance were not
necessary
D. Increased liability loss payments because people have insurance - CORRECT
ANSWER B. Producers' commissions
Producers' commissions are among the operating costs of insurers.
Though premiums are an obvious cost of insurance, many insureds believe they are too high
because
Select one:
A. Insurers only use eighty cents from every premium dollar to pay losses.
B. Insureds do not deliberately cause losses.
C. Benefits are intangible until a loss occurs.
D. Premiums are not a regular cost of living. - CORRECT ANSWER C. Benefits are
intangible until a loss occurs.
Many insureds believe premiums are too high because benefits are intangible until a loss
occurs.
,Which one of the following is an opportunity cost of insurance?
Select one:
A. The payment of commissions to agents
B. An insured's funds that could be invested elsewhere if purchasing insurance were not
necessary
C. An insurer's loss on invested premiums
D. The cost of claims payments that would not have been necessary if insureds' carelessness
had not caused losses - CORRECT ANSWER B. An insured's funds that could be
invested elsewhere if purchasing insurance were not necessary
An insured's funds that could be invested elsewhere if purchasing insurance were not
necessary is an example of an opportunity cost of insurance.
One of the costs of insurance is said to be opportunity costs. This means that if capital and
labor were not being used in the insurance business, they could be used elsewhere and
making other productive contributions to
Select one:
A. Government.
B. The insurance industry.
C. Society.
D. The agency system. - CORRECT ANSWER C. Society.
If capital and labor were not being used in the insurance business, they could be used
elsewhere and making other productive contributions to society.
Which one of the following statements is correct regarding the benefits of insurance?
Select one:
A. Insurance policies typically cannot be used to provide evidence of financial resources.
B. Insurers generally do not provide incentives to organizations to implement risk control
measures.
C. One disadvantage of insurance is that it promotes inefficient use of policyholders' funds.
, D. Contractors must usually provide evidence of liability insurance before a construction
contract is granted. - CORRECT ANSWER D. Contractors must usually provide
evidence of liability insurance before a construction contract is granted.
In which one of the following insurance roles can an abundance of data be used to analyze an
insured's history and needs?
- Insurance as a risk management technique
- Insurance as a risk transfer system
- Insurance as a business
- Insurance as a contract - CORRECT ANSWER Insurance as a risk management
technique
From a risk management viewpoint, insurance is used to
Select one:
A. Reduce the cost of losses.
B. Transfer the cost of losses.
C. Isolate the cost of losses.
D. Prevent the cost of losses. - CORRECT ANSWER B. Transfer the cost of losses.
Insurance is used to transfer the cost of losses from the insured to the insurer.
Some loss exposures are not easy to retain, avoid, or control. Which one of the following risk
management techniques is frequently used to treat such exposures?
Select one:
A. Reunderwriting
B. Prevention
C. Transfer
D. Reinsurance - CORRECT ANSWER C. Transfer
The risk management technique of transfer is often used to treat loss exposures that are not
easily treated by retention, avoidance, or control.
