AINS 101 EXAM WITH COMPLETE QUESTIONS AND CORRECT VERIFIED ANSWERS - GRADED A+ 100% GUARANTEED TO PASS - LATEST!!

AINS 101 EXAM WITH COMPLETE QUESTIONS AND CORRECT VERIFIED ANSWERS - GRADED A+ 100% GUARANTEED TO PASS - LATEST!! As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However, her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash flows. Which one of the following examples best illustrates Mehmet's point? A. Ciara needs her car to get to her job, and she needs her job to make car payments and pay for her car insurance. B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it. C. When her car's transmission goes out a month after the warranty expires, Ciara is faced with a $1,100 repair bill. D. Ciara finds it difficult to come up with a $787 auto insurance premium every six months. - Correct Answer When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it." "Reggie, Harper, Kimmie, and Stefan work in the claims department of North Insurance Company (NIC). Which one of the following is true regarding the various types of claims personnel employed at NIC? A. Harper is a specialized claims representative who works for a small local insurance organization. B. Stefan, a claims supervisor, reviews files and helps determine staff development strategies. C. Kimmie enjoys her role as a telephone claims representative whose specialty is in-person meetings. D. Reggie, a field claims representative, works in NIC's main office and likes having an indoor desk job. - Correct Answer Stefan, a claims supervisor, reviews files and helps determine staff development strategies. (Stefan, a claims supervisor, reviews files and helps determine staff development strategies.)" "Willis, a claims representative, is collaborating with his colleague Suzanna from his insurance company's risk control department. How will Suzanna help Willis? A. Provide claims experience information to help the risk control department. B. Provide laboratory analysis when Willis is investigating a claim. C. Provide inventory values and contractors' equipment lists as needed by Willis. D. Provide information so Willis can appropriately price loss exposures. - Correct Answer Provide laboratory analysis when Willis is investigating a claim. (Suzanna from risk control will help Willis by providing laboratory analysis when Willis is investigating a claim. A is incorrect as that is what Willis would do to help Suzanna. C is incorrect as these are activities the premium auditing department might do to help Willis. D is incorrect as Willis does not price loss exposures (this is done by underwriting).)" "Jerome Wilder is a claims representative with Hermani Insurance. Which group of activities listed below would best exemplify Jerome's actions, in the order they are given, as he systematically handles a new loss in his role? A. Acknowledging the claim - identifying the policy - contacting the insured B. Determining the cause of loss - investigating and documenting the claim - identifying the policy C. Determining the cause of loss and loss amount - identifying the policy - acknowledging the claim D. Investigating and documenting the claim - contacting the insured - concluding the claim - Correct Answer Acknowledging the claim - identifying the policy - contacting the insured (Of the choices given, Jerome's actions as he systematically adjusts the loss, in the order given, would be acknowledging the claim - identifying the policy - contacting the insured.)" "Which one of the following statements is correct regarding the benefits provided by insurance? A. Insurance reduces the financial consequences of loss exposures but not the related uncertainty. B. The primary role of insurance is to meet mandatory insurance requirements. C. The reduction in losses paid by insurers due to risk control measures benefits individual insureds but not society as a whole. D. Insurance helps reduce the financial burden to society by compensating accident victims. - Correct Answer Insurance helps reduce the financial burden to society by compensating accident victims." "Henry is a new claims representative with Able Insurers. Which one of the following will Henry find is true as he gains more experience with his company's claims handling process? A. Henry sits in the cubicle next to another claims representative, Marty, who assigns claims to Henry. B. Henry will determine the type of loss - such as property damage or liability - for each claim he handles. C. Henry learns that all claims, no matter the circumstances or parties involved, could involve subrogation. D. Henry learns that policy denials do not need to be routinely reflected or included in the claims file. - Correct Answer Henry will determine the type of loss - such as property damage or liability - for each claim he handles." "Bill's three-year-old stereo was completely destroyed in a covered loss. Its expected useful life was ten years. Its replacement cost is $600. Its actual cash value (ACV) is A. $ 60. B. $180. C. $420. D. $600. - Correct Answer $420. (The stereo's Depreciation is 3/10 x $600 = $180. The ACV is $600 - $180 = $420.)" "Shelton Industries experienced a fire in its manufacturing plant. Several employees suffered burns and smoke inhalation injuries as they tried to escape the building. Which one of Shelton Industries' commercial property-casualty policies would pay for the employees' injuries and illnesses? - Correct Answer Workers compensation insurance" "A homeowners policy is a type of - Correct Answer Personal property-casualty insurance policy." "Which one of the following correctly describes a reason for government involvement in property-casualty insurance? A. Selling insurance provides the government with a non-tax source of revenues and profits. B. Government programs can meet legitimate public demands unmet by private insurers. C. Competition from government plans keeps private insurer's premiums competitive. D. Preventing high-risk individuals or activities from being insured is in the public interest. - Correct Answer Government programs can meet legitimate public demands unmet by private insurers." "Insurance Company wrote a commercial liability policy for a manufacturer of off-road motorcycles. The potential costs of the insured's loss exposure exceed Insurance Company's capacity. Insurance Company could consider which one of the following types of contractual transferring agreement to meet its needs? - Correct Answer Reinsurance" "In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance Company decided to automate most of its personal lines underwriting function. The company now uses standardized application forms that are submitted electronically to one of the company's regional offices. At each regional office, a computer with a scanner reads the applications. The computer has been programmed with acceptable answers to the questions. If the answers on the application are all acceptable, the policy is automatically issued. Rejected applications are automatically forwarded to a human underwriter who reviews them. The use of this technology has reduced the company's expense ratio by two and a half percent, and reduced the time it takes to issue a policy. ABC Insurance Company's use of computers to evaluate applications electronically is an application of A. Radiant sensors. B. Artificial intelligence. C. - Correct Answer Artificial intelligence." "Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the bank that held the mortgage. He is hoping to do some renovation and repair work on the house, and then sell it for a quick profit. What type of risk is this? - Correct Answer Speculative Risk" "Which one of the following best describes the concept of pooling? A. The financial consequences of unanticipated losses are transferred to an insurer. B. Risk management is concerned with positive and negative risks. C. Insureds share the cost of each other's losses. D. Insurance benefits society as a whole. - Correct Answer Insureds share the cost of each other's losses." "Which one of the following represents uncertainty about outcomes that can be negative or positive? A. Loss exposure B. Transfer C. Risk D. Pooling - Correct Answer Risk" "Coverage for money and other business property from various causes of loss such as burglary, robbery, theft, and employee dishonesty typically is provided by - Correct Answer Commercial crime insurance." "The insurance agent suggested that Sally's Snack Shop buy a policy that combines property, crime, and liability coverages into one policy. This is referred to as a(n) - Correct Answer Commercial Package Policy (CCP)" "Which one of the following describes the characteristics of a mutual insurance company? A. A corporation owned by policyholders that provides insurance to its policyholders. B. An unincorporated association that provides reciprocal coverage to subscribers. C. An unincorporated association that earns profits for its individual investors. D. A corporation owned by stockholders that earns profits for the stockholders. - Correct Answer A corporation owned by policyholders that provides insurance to its policyholders." "A reinsurance company A. Assumes loss exposures from a primary insurer. B. Provides primary insurance for loss exposures that private insurers are unwilling to provide. C. Is formed to write all or part of the insurance for a parent company. D. Transfers losses to a primary insurer. - Correct Answer Assumes loss exposures from a primary insurer." "Autonomous Vehicle Applications (AVA) is a start-up company that develops safety technologies that can be sold to companies that are producing autonomous vehicles. One technology AVA is developing allows an autonomous vehicle to detect, extract, and analyze images; and then to respond to the images. For example, the technology would detect a presence in a crosswalk, extract the image, and a computer would analyze the image. When the image was determined to be a human being, the vehicle would slow down or stop until the crosswalk was clear. This technology, which is designed to capture and analyze images, and to act on the recognition of the image; is called - Correct Answer Computer Vision" "Mutual Fund Company (MFC) offers a wide array of mutual fund options to investors. Each mutual fund has a different fund objective and set of investment guidelines that apply to the fund. While MFC gives considerable freedom to its fund portfolio managers, they are required to abide by the fund's investment guidelines. To monitor compliance, MFC developed a computer algorithm. The computer algorithm continuously monitors each fund's compliance with investment guidelines. If a fund manager violates the investment guidelines, the computer immediately notifies MFC's internal control director, and corrective action is taken. MFC's use of the computer algorithm to monitor investment compliance and to provide notification when corrective action is necessary illustrates use of - Correct Answer Artificial Intelligence" "The primary role of insurance is to - Correct Answer Indemnify individuals and organizations for covered losses" "Which one of the following best describes the concept of pooling? A. Insureds share the cost of each other's losses. B. Risk management is concerned with positive and negative risks. C. The financial consequences of unanticipated losses are transferred to an insurer. D. Insurance benefits society as a whole. - Correct Answer Insureds share the cost of each other's losses." "A type of insurer that is owned by policyholders and may pay dividends to policyholders as a return of a portion of premiums paid is a - Correct Answer Mutual insurer." "The state of Maryland operates a residual auto plan (the Maryland Auto Insurance Fund—MAIF) that provides coverage for drivers who are unable to obtain coverage from private insurers. Which one of the following is the best rationale for the MAIF program? A. Private insurers face limited competition, and the state increases competitive pressures by operating this type of plan. B. Auto insurance is compulsory, and the program makes it possible for all drivers to have reasonably priced insurance. C. Private insurers overcharge for auto insurance, and the state provides a low-cost alternative. D. Auto insurance for high-risk drivers is profitable, and the program enables the state to share in the profits. - Correct Answer Auto insurance is compulsory, and the program makes it possible for all drivers to have reasonably priced insurance." "ABC Company experienced a dramatic ideological shift in corporate policies after a national election. This is an example of which one of the following quadrants of risk? A. Operational risk B. Financial risk C. Strategic risk D. Hazard risk - Correct Answer Strategic Risk" "Renegade Insurance prides itself on its upstanding reputation through its commitment to small communities' homeowners coverage needs over the past twenty years. Which one of Renegade's actions over this time would best illustrate its continued commitment to maintaining its solvency? A. Renegade emphasizes that its insurance is readily available and accessible to customers in its service area that need it. B. Renegade's producers know policy language well so that they can easily and understandably answer policyholders' questions. C. Renegade keeps enough cash assets on hand to cover claims on policies long after it collected the premiums from customers. D. Renegade is committed to branching out in the near future to include more coverages for specialized small businesses. - Correct Answer Renegade keeps enough cash assets on hand to cover claims on policies long after it collected the premiums from customers." "What term refers to the ability of an insurer to meet its obligations as they become due? - Correct Answer Solvency" "Carlos is new to the insurance business and is learning about insurance regulation and what he, now working with Grady Insurance, will need to be aware of regarding the subject of compliance. Which one of the following will Carlos find is accurate as he better understands why insurance is regulated? A. Insurance regulation protects customers by guaranteeing insurance is available and accessible to everyone who needs it. B. The U.S. insurance industry is governed by federal laws that protect citizens by leveling the playing field for insurers and policyholders. C. Insurance regulation speaks to the types of risks insurers may cover, but does not play a part in how they invest their profits. D. Insurance regulation prevents insurers from covering catastrophic occurrences so insurers can remain solvent. - Correct Answer Insurance regulation protects customers by guaranteeing insurance is available and accessible to everyone who needs it." "All of the following appear on an insurer's balance sheet, EXCEPT: A. Liabilities B. Assets C. Net income D. Policyholders' surplus - Correct Answer Net income" "An insurer's balance sheet can best be described as a A. Relationship between revenue and liabilities. B. Snapshot of its financial position. C. Relationship between assets and expenses. D. Summary of premiums written. - Correct Answer Snapshot of its financial position" "All of the following are categories of liabilities found on an insurer's balance sheet, EXCEPT: A. Loss and loss expense reserves B. Policyholders' surplus C. Unearned premium reserves D. Other liabilities - Correct Answer Policyholders' surplus (The major categories of liabilities found on an insurer's financial statements are loss and loss expense reserves, unearned premium reserves, and other liabilities. Policyholders' surplus is not a liability category.)" "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 expenses $2,000,000 What was the Hometown Insurer's combined ratio? - Correct Answer (3/4) + (2/5) = .115 (115%)" "How do you get combined ratio? - Correct Answer Loss Ratio + Expense Ratio = (Incurred Losses/Earned Premiums) + (Incurred Underwriting Expenses/Written Premiums)" "The financial report for LMN Insurance contains the following information: Earned premiums $8,000,000 Written premiums $10,000,000 Incurred losses $6,000,000 Incurred underwriting expenses $4,000,000 What is LMN Insurance's expense ratio? - Correct Answer 4/10 = .4 (40%)" "How do you get expense ratio? - Correct Answer Incurred underwriting expenses / Written premiums" "How do you get loss ratio? - Correct Answer Incurred Losses / Earned Premiums" "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? A. No matter what it selects, Anchoy must use a producer to effectively sell its products. B. Anchoy can use group marketing to target large numbers of recent local college graduates. C. Using call centers will take away its need for customer service representatives or chatbots. D. It will market through banks and financial services when utilizing the exclusive agency distribution channel. - Correct Answer Anchoy can use group marketing to target large numbers of recent local college graduates." "Spencer Insurance Associates is an independent agency selling primarily homeowners policies. This agency A. Is free to work with as many different insurers as it wants. B. Generally represents its customers rather than insurance companies. C. Can use the policyholder expiration lists, but they are owned by insurers. D. Cannot commit an insurer to write a policy, unlike a broker, who usually can. - Correct Answer Is free to work with as many different insurers as it wants." "The key to the direct writer marketing system is that A. Customers purchase insurance through call centers. B. An agency is contracted to sell insurance for one insurer or group of insurers. C. The insurer is using its own employees as producers. D. Customers can get quotes for coverage through web-based portals. - Correct Answer The insurer is using its own employees as producers." "One of the reasons for insurance regulation is to prevent destructive competition. In which one of the following scenarios would destructive competition be exhibited? A. North Insurance is trying to break into a specialized type of insurance market that is generally out of range for most customers; North decides to price its coverages commensurate with other insurers offering similar policies. B. South Insurance purposely writes its policies with hard-to-understand terminology that only its agents can explain, so that its insureds will purchase its products without asking a lot of questions. C. West Insurance has had three straight years of record-setting low claims and has accumulated more than expected profits; it plans on the trend continuing and overspends on new long-term investments. D. East Insurance comes up with a new rate structure allowing "preferred customers" discounted policies when they continually re - Correct Answer East Insurance comes up with a new rate structure allowing "preferred customers" discounted policies when they continually renew year after year; East eventually loses needed revenue but is rewarded by its competitors leaving the market." "What type of financial statement shows the financial position of an insurance company at any particular point in time? - Correct Answer Balance sheet" "Which one of the following is shown on the balance sheet of an insurer? A. Acquisition expenses B. Incurred losses C. Net investment income D. Cash and short-term investments - Correct Answer Cash and short-term investments" "Which one of the following is a nonadmitted asset? A. Real estate B. Stocks C. Bonds D. Office equipment - Correct Answer Office equipment" "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? - Correct Answer 2/5 = .4 (40%)" "The key to the direct writer marketing system is that A. Customers can get quotes for coverage through web-based portals. B. An agency is contracted to sell insurance for one insurer or group of insurers. C. Customers purchase insurance through call centers. D. The insurer is using its own employees as producers. - Correct 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 A. Adverse selection. B. Unprofitable business. C. Policyholders' surplus. D. Capacity. - Correct 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 A. Adequate policyholders' surplus. B. A significant bonus. C. A collaborative relationship with her producers. D. Adverse selection. - Correct Answer Adequate policyholders' surplus." "Which one of the following statements is correct regarding the interaction between risk control and other insurer functions? A. Risk control representatives are responsible for compiling all the information required for a premium audit. B. Risk control personnel can assist underwriters in modifying a new applicant's loss exposures to meet eligibility requirements. C. By making marginal accounts acceptable, risk control helps the Claims Department settle losses. D. Risk control personnel are responsible for answering any complex questions that insureds have about premium audits. - Correct Answer Risk control personnel can assist underwriters in modifying a new applicant's loss exposures to meet eligibility requirements." "Brian works in the Underwriting department for DGH Insurance. In addition to carefully selecting insureds, he works with producers and premium auditors to ensure accurate classification and pricing. Brian is a A. Staff underwriter B. Corporate underwriter C. Field underwriter D. Account manager - Correct Answer Field underwriter" "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? A. Field Underwriter B. Underwriting Technician C. Corporate Underwriter D. Line Underwriter - Correct Answer Corporate Underwriter (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.)" "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? A. Misclassifying exposures B. Recommending the applicant implement risk control measures C. Using predictive models D. Adjusting policy terms and conditions - Correct Answer Misclassifying exposures (Misclassification of exposures can produce insufficient premium to cover losses or pricing that isn't competitive.)" "Which one of the following is a temporary agreement providing insurance coverage until the formal policy is issued? A. Binder B. Rating classification C. Book of business D. Submission - Correct Answer Binder (A binder is a temporary agreement providing insurance coverage until the formal policy is issued.)" "The size of an employer's loss exposure for workers compensation insurance is based on A. The number of its employees. B. The final premium audit. C. The extent of its operations. D. The amount of its payroll. - Correct Answer The amount of its payroll. (The size of an employer's loss exposure for workers compensation insurance is based on the amount of its payroll.)" "Which one of the following is the fundamental measure of loss exposure used in insurance rating? A. Premium B. Exposure unit C. Risk D. Rate - Correct Answer Exposure unit. (The exposure unit is the fundamental measure of loss exposure used in insurance rating.)" "Which one of the following statements is correct regarding the interaction between risk control and other insurer functions? A. A risk control evaluation can make the difference between the applicant's being rejected or accepted by the underwriter. B. Risk control representatives compile detailed data for the actuarial department to use in establishing rates. C. Risk control representatives are responsible for compiling all the information required for a premium audit. D. Risk control personnel are responsible for answering any complex questions that insureds have about premium audits. - Correct Answer A risk control evaluation can make the difference between the applicant's being rejected or accepted by the underwriter. (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? A. Manage a book of business B. Support producers C. Recommend coverage D. Revise underwriting guidelines - Correct Answer Revise underwriting guidelines (Revising underwriting guidelines is primarily a responsibility of staff underwriters.)" "Jill works in the field for Goshen Mutual as a line underwriter. Which one of the following is primarily a responsibility of line underwriters? A. Revise underwriting guidelines B. Select insureds C. Research the market D. Develop coverage forms - Correct Answer Select insureds (One of the primary responsibilities of line underwriters is to select insureds.)" "Which one of the following is the first step in the underwriting process? A. Develop underwriting alternatives B. Evaluate the submission C. Monitor the underwriting decision D. Determine an appropriate premium - Correct Answer Evaluate the submission (Evaluating the submission is the first step in the underwriting process.)" "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 than reject the application for SP Markets, Anna would like to suggest a coverage 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 coverage modification for Anna to suggest? A. Propose the general liability coverage at a lower premium level, but apply a small deductible. B. Offer a proposal with all lines of coverage except the general liability coverage. C. Propose the general liability coverage, excluding the 2 locations that have - Correct Answer Propose the general liability coverage at a lower premium level, but apply a small deductible. (By proposing a small deductible for the general liability exposure, the application become acceptable to Anna. The lower premium level may be attractive to the insured, and the deductible may offer a motivation for the risk to put in controls to reduce the frequency of slips and falls. The options of excluding locations or coverage, or quoting an unjustified premium do not add value for the insured.)" "Produce, such as apples or grapes, may be priced by the unit or by the pound. In insurance, these measures are similar to A. Construction cost index. B. Rates. C. Exposure units. D. Premiums. - Correct Answer Exposure units. (Units, pounds, and exposure units are all multiplied by the rate to arrive at the cost (premium).)" "Bob is shopping for auto insurance. Insurance Company A's rating system determines that Bob should be charged $800 per auto. If Bob is looking to insure four autos, what premium will he be charged by Insurance Company A? - Correct Answer $3200" "Stephanie works for Waynesgood Insurance. She appreciates the help she receives from Clem in the company's claims department who provides her with recent statistics and comments on Waynesgood's customer satisfaction levels. Stephanie works in which one of the following departments? A. Marketing B. Underwriting C. Premium auditing D. Risk control - Correct Answer Marketing" "Johann is an insurance company employee who investigates the scene of a loss and meets with insureds, claimants, lawyers, Johann is most accurately called A. A claims supervisor. B. An adjusting agent. C. An independent adjuster. D. A field claims representative. - Correct Answer A field claims representative" "Work on a new claim begins for claim representative Anita upon receipt of a claim notice. Anita gathers initial information and verifies coverage. From the list of activities below, the next step Anita would take in the process is A. Assign the claim to defense counsel. B. Set a loss reserve. C. Make an offer to settle the claim. D. Retain causation experts. - Correct Answer Set a loss reserve. (After the claim representative receives notice of a loss, obtains initial information, and verifies coverage, a loss reserve for that claim should be established.)" "Understanding the steps in the claims handling process is important to new claims reps. Which one of the following steps generally comes after investigating and documenting the claim and before concluding the claim? A. Acknowledging a claim B. Determining cause of loss and loss amount C. Identifying the policy D. Contacting the insured - Correct Answer Determining cause of loss and loss amount. (Between the two steps of investigating and documenting the claim and concluding the claim is the step of determining cause of loss and loss amount.)" "A person or entity that would suffer a financial loss if property were damaged has A. A contractual interest. B. A discretionary interest. C. An insurable interest. D. A renewable interest. - Correct Answer An insurable interest. (A person or entity that would suffer a financial loss if property were damaged has an insurable interest.)" "Subrogation is the insurer's right to A. Estimate the value of the damaged property. B. Transfer coverage to a third party. C. Drop a claim in exchange for an agreed amount of money. D. Recover its claim payment from the responsible party. - Correct Answer Recover its claim payment from the responsible party. (Subrogation is the insurer's right to recover its claim payment from the responsible party.)" "Compensatory damages represent A. Out-of-pocket expenses. B. Damages to deter others from committing wrongful acts. C. Actual harm suffered. D. Non-economic loss. - Correct Answer Actual harm suffered. (Compensatory damages represent actual harm suffered.)" "Damages for disfigurement are a form of A. General damages. B. Punitive damages. C. Out-of-pocket damages. D. Special damages. - Correct Answer General damages. (Damages for disfigurement are a form of general damages.)" "After Marvin's car was stolen, and he was reimbursed for the loss by Greatson Insurance, the police found and returned the vehicle, which was dented and spray-painted, but still had parts that could be usable. Greatson's rights to recover and sell or otherwise dispose of insured property on which it has paid a total loss are called A. Constructive rights. B. Catastrophe rights. C. Fiduciary rights. D. Salvage rights. - Correct Answer Salvage rights. (Salvage rights allow the insurer to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss.)" "Damages for pain and suffering are a form of A. Punitive damages. B. Out-of-pocket damages. C. General damages. D. Special damages. - Correct Answer General damages. (General damages include pain and suffering.)" "A liability adjuster must be concerned with specific, out-of-pocket expenses when evaluating the damages being claimed. The technical term for such expenses is A. Measurable damages. B. Special damages. C. General damages. D. Punitive damages. - Correct Answer Special damages. (The technical term for such expenses is special damages.)" "Actual cash value (ACV) is A. Agreed value minus depreciation. B. Replacement cost plus depreciation. C. Replacement cost minus agreed value. D. Replacement cost minus depreciation. - Correct Answer Replacement cost minus depreciation." "Wayne, an insured, submits a claim for a seven-year-old refrigerator that was damaged due to lightning. Claims representative Guillaume will probably factor in an allowance for wear and tear. This is called A. Replacement cost. B. Stated amount. C. Depreciation. D. Agreed amount. - Correct Answer Depreciation." "A liability loss has the following damages: Medical expenses: $10,000 Damages for disfigurement: $50,000 Damages for pain and suffering: $100,000 What is the amount of general damages? A. $ 60,000 B. $110,000 C. $150,000 D. $160,000 - Correct Answer $150,000 (The amount of general damages is $150,000. General damages are for losses that do not have a specific economic value.)" "Adjuster Toni is evaluating damages in a bodily injury liability claim where she has determined that the insured is completely at fault for the accident. The claimant suffered a sprain and strain injury to his neck. His special damages total $1,500. He was out of work for a week, was disabled and prevented from performing some regular activities for a month, and attended physical therapy for six weeks. In assessing general damages, Toni should A. Multiply $1,500, the amount of special damages, by six, the number of weeks of physical therapy, and pay $9,000. B. Use past cases which are similar as a guide. C. Consider what she would want to be paid if she were in claimant's shoes. D. Multiply the amount of special damages of $1,500 by three as a rule of thumb, and pay $4,500. - Correct Answer Use past cases which are similar as a guide. (In assessing general damages, Toni should use past cases which are similar as a guide.)" "Producer Gerald Hilker is one of the most successful producers at the Westfield Agency, which represents several different insurers. Because of this, which one of the following is most likely true? A. Gerald makes most of his income from commissions from customer sales. B. Gerald usually presents a proposal for coverage soon after meeting prospective insureds. C. Gerald's interactions with customers usually end after he issues them their policies. D. Gerald, due to his success at the agency, is more accurately an "agent" than a "producer". - Correct Answer Gerald makes most of his income from commissions from customer sales. (Gerald makes most of his income from commissions from customer sales. B and C are both incorrect as a long term relationship with customers is more beneficial than a one time or hurried sale. D is incorrect as the two terms are synonymous for anyone selling insurance for one or more insurers.)" "Which one of the following lists provides the optimum order of responsibilities that a producer may engage with any customer on a continual basis? A. Meeting a prospective customer, giving advice, issuing the policy, adjusting a claim B. Meeting a prospective customer, doing a needs and activities analysis, preparing a coverage proposal, closing the sale C. Meeting a prospective customer, issuing the policy, collecting premiums, adjusting a claim. D. Meeting a prospective customer, reviewing a loss run, issuing a policy, receiving a commission - Correct Answer Meeting a prospective customer, doing a needs and activities analysis, preparing a coverage proposal, closing the sale" "Lacey is a customer service representative (CSR) who has been employed by Greeley Insurance for five years. She worked in Greeley's call center for just a year when she was moved to a busy insurance office staffed primarily with claims representatives and producers. As she continues her exemplary service to Greeley and its customers, which one of the following best describes how she supports her fellow insurance professionals in her role as a CSR? A. Lacey is not permitted to show empathy or take information related to a new loss that just occurred. B. Lacey performs all the roles of a claims professional and a producer but with a different title. C. Lacey has been trained to replicate many of the activities performed by producers. D. Lacey is not permitted to give advice on how a customer may meet specific coverage needs. - Correct Answer Lacey has been trained to replicate many of the activities performed by producers. (Lacey has been trained to replicate many of the activities performed by producers.)" "Which one of the following accurately describes activities related to customer service representatives? A. It costs more in advertising to keep an existing customer than to attract a new one. B. It takes longer to renew an existing account than it does to write a piece of new business. C. Profitability in the insurance business is directly linked to customer retention. D. Excellent service builds strong relationships but not necessarily customer loyalty. - Correct Answer Profitability in the insurance business is directly linked to customer retention." "Robin, a producer from Grantley Insurance, is always alert to changes in her clients' loss exposures. Why is this so important? A. Implemented risk management techniques may prove to be ineffective or become obsolete. B. Knowledge of such changes will inform their efforts to create a list of experts that can be called to assist. C. Producers have expertise about risk financing through insurance. D. Producers can aid clients in developing risk management cost allocation plans. - Correct Answer Implemented risk management techniques may prove to be ineffective or become obsolete. (Correct. Producers should be alert to changes in clients' loss exposures because implemented risk management techniques may prove to be ineffective or become obsolete." "Leadon Transportation is using the expertise of its producer Carmen to help the organization understand how to correct substandard performance as well as evaluate exceeded standards. One measurement she will use is the cost of risk which is best described as A. The terms of insurance or other risk-financing mechanisms. B. The total cost of all aspects of the organization that relate to managing risk. C. Substandard performance and/or risk management standards. D. The allocation of risk management costs. - Correct Answer The total cost of all aspects of the organization that relate to managing risk. (Cost of risk involves the total cost of all aspects of the organization that relate to managing risk.)" "Tony is a producer working with several different insurers. Which one of the following most accurately describes Tony's activities for reaching and serving customers? A. Tony will generally need to spend less time insuring a family's activities than a business' services and liabilities. B. Tony's job of selling is usually confined to the one type of insurance coverage the customer initially requests from him. C. A loss run will be most helpful to Tony in helping his personal customers with their risk management concerns. D. Policy issuance is a more important function of Tony's work than making sales or claims handling. - Correct Answer Tony will generally need to spend less time insuring a family's activities than a business' services and liabilities." "Alicia works for the Drewman Agency, Sandi at insurer Greenway Insurance, and Rosa at Grossman Brokers, all as customer service representatives. Which one of the following is true regarding their work? A. Alicia can process policy endorsements and explain coverage to her customers. B. Sandi, Alicia, and Rosa are not involved in the generation of new business. C. Rosa can provide superior service but is not generally involved in attracting new customers. D. Sandi is the only one who can replicate the activities of a producer. - Correct Answer Alicia can process policy endorsements and explain coverage to her customers." "Producer Josh never tires in encouraging insureds to adopt and sustain a robust and measurable risk management program. As part of this effort, which one of the following will Josh find is true? A. The second step occurs when the producer and the business agree on what success looks like for the risk management program. B. Risk management goals should be attainable to the organization, but they should also pose a challenge. C. Results-based standards are always more important than activity standards to the overall success of an organization. D. The first - and most important of all steps in the process - is to establish standards of acceptable performance. - Correct Answer Risk management goals should be attainable to the organization, but they should also pose a challenge." "Waycroft Industries is working with their insurance producer Graydon Murphy. Graydon and the risk managers at Waycroft have already completed the first step of the risk consultation process. The second step of the process is A. Determining the standards of acceptable performance to be used. B. Revising the standards or correcting any substandard performance. C. Comparing an organization's results with established performance standards. D. Doing an evaluation of any substantially exceeded standards. - Correct Answer Comparing an organization's results with established performance standards. (The second step of the risk consultation process is comparing an organization's results with established performance standards.)" "Ideally insurable loss exposures are subject to losses that A. Are immeasurable in terms of frequency or severity. B. Occur gradually over long periods of time. C. Are definite in time, cause, and location. D. Result from unidentifiable causes. - Correct Answer Are definite in time, cause, and location. (Ideally insurable loss exposures are subject to losses that are definite in time, cause, and location.)" "Private insurers are reluctant to provide windstorm insurance on coastal properties. This is because the loss exposures fail to meet the criterion that ideally insurable exposures must be A. Independent and not catastrophic. B. Fortuitous. C. Definite and measurable. D. A large number of similar exposure units. - Correct Answer Independent and not catastrophic. (Because many properties can be damaged in the same hurricane or tropical storm, coastal properties are not independent, and potential losses are catastrophic.)" "An insurance policy is considered a contract of adhesion when it is drafted by the A. Third party. B. Insured. C. Insurance commissioner. D. Insurer. - Correct Answer Insurer. (Insurance is considered a contract of adhesion when one party, the insured, must adhere to the contract as written by the other party (the insurer). The insurer determines the wording of the policy, and the insured has little choice but to take it or leave it.)" "Insurance policies are written in such a way that the parties have to perform only under certain conditions, because an insurance contract is a A. Contract of adhesion. B. Conditional contract. C. Contract of utmost good faith. D. Contract of indemnity. - Correct Answer Conditional contract. (An insurance policy is a conditional contract because the parties have to perform only under certain conditions. An insurer pays a claim only when a covered loss occurs. The insured must fulfill certain duties before a claim is paid, such as giving the insurer prompt notice of a loss.)" "When preprinted forms do not provide the terms of coverage needed by a particular insured or small group of insureds, the insurer may A. Ask the customer to resubmit an application. B. Draft a manuscript form to meet the customer's needs. C. Work with an advisory organization to develop a form. D. Incorporate statutes into a policy. - Correct Answer Draft a manuscript form to meet the customer's needs. (When preprinted forms do not provide the terms of coverage needed by a particular insured or small group of insureds, the insurer may draft a manuscript form to meet the customer's needs.)" "The Insurance Services Office, Inc. (ISO) commercial package policy is an example of a A. Modular policy. B. Manuscript form. C. Self-contained policy. D. Single insurance document. - Correct Answer Modular policy. (ISO commercial package policy is an example of a modular policy; it combines different coverage parts related to different lines of business.)" "Which one of the following most accurately describes one of the policy provisions in an insurance policy? A. The declarations state the insurer's promise to the insured. B. The definitions contain a list of forms included in the policy. C. The conditions state what the insurer specifically will not cover. D. The exclusions are in place to reduce duplicate coverage. - Correct Answer The exclusions are in place to reduce duplicate coverage. (The exclusions are in place to reduce duplicate coverage. A is incorrect as the insuring agreement, not the declarations, state the insurer's promise to the insured. B is incorrect as the declarations, not the definitions, contain a list of forms included in the policy. And C is incorrect as the exclusions, not the conditions, state what the insurer specifically will not cover.)" "The big differences between property and liability policies are found in their A. Insuring Agreements B. Conditions C. Exclusions D. Definitions - Correct Answer Insuring Agreements (The big differences between property and liability policies are found in their insuring agreements.)" "Insurance deals primarily with loss exposures that are fortuitous. Which one of the following statements best characterizes fortuitous losses? A. Fortuitous loss exposures are expected. B. Fortuitous losses are beyond the insured's control. C. Fortuitous loss exposures are generally predictable. D. Fortuitous losses are intentional. - Correct Answer Fortuitous losses are beyond the insured's control." "Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help assure that A. The losses associated with it typically involve small amounts. B. The insurer is able to predict the amount and timing of each future loss. C. The insurer can charge a high premium for the coverage. D. The insurer is able to charge a premium that the insured can afford to pay. - Correct Answer The insurer is able to charge a premium that the insured can afford to pay. (Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help assure that the insurer is able to charge a premium that the insured can afford to pay.)" "Ling has noticed that her neighbor has recovered money for two homeowners property claims and an auto damage claim he has filed in recent years. Ling has been paying insurance premiums for many years and has never suffered a loss or made a claim. She feels that her insurance contracts over the years have been worthless to her. What Ling does not understand is that she has been paying premiums for a contract A. That is nontransferable. B. Of unequal amounts. C. Of adhesion. D. Of utmost good faith. - Correct Answer Of unequal amounts." "An insurer has decided to take an extremely narrow interpretation of a property insurance policy provision to limit the number of loss payments it will need to make. It realizes that its interpretation is probably wrong, but it knows that individual insured's loss amounts will be small, such that most insureds will not take the trouble to file lawsuits against it. The insurer may be violating the principle that an insurance policy is A. A conditional contract. B. A contract of utmost good faith. C. A contract of adhesion. D. A contract of indemnity. - Correct Answer A contract of utmost good faith. (An insurance policy is a contract of utmost good faith and both parties to it, the insurer and the insured, are expected to be ethical in their dealings with each other.)" "New homeowner and small business owner Sallie learns that an insurance policy may contain other documents than its insurance forms. Accordingly, which one of the following will Sallie find is true regarding her new insurance purchases? A. As Sallie's policy coverages are relatively common, she will simply require a manuscript policy. B. Sallie's application may contain endorsements which modify the basic policy form. C. Sallie learned all policies, personal and commercial, contain relevant statutory terms for clarity. D. Sallie's application for insurance was returned to her as it was no longer useful after receiving her policy. - Correct Answer Sallie's application may contain endorsements which modify the basic policy form." "Claims supervisor Charlotte is reviewing the incoming claims for the day to decide which ones to assign to various claims reps. Of those claims, which one of the following descriptions will Charlotte find is an example of a fortuitous loss? A. The value of an insured's home decreases due to a lack of maintenance. B. Insureds intentionally set a fire and burn their house down. C. An unknown vandal spray-paints graffiti on the insured's garage. D. An insured demolishes a deck that has been allowed to rot. - Correct Answer An unknown vandal spray-paints graffiti on the insured's garage." "An insurer will make a loss payment if an insured loss occurs and if the insured performs certain duties. This illustrates that an insurance policy is a A. Conditional contract. B. Contract of indemnity. C. Personal contract. D. Contract of adhesion. - Correct Answer Conditional contract." "Solvency - Correct Answer The ability of an insurer to meet its financial obligations as they become due, even those resulting from insured lossses that may be claimed several years in the future." "Income statement - Correct Answer The financial statement that reports an organization's profit or loss for a specific period by comparing the revenues generated with the expenses incurred to produce those revenues." "Earned premiums - Correct Answer The portion of the written premiums that apply to the part of the policy period that has already occurred" "Underwriting income - Correct Answer Income an insurer earns from premiums paid by policyholders minus incurred losses and underwriting expenses" "Balance sheet - Correct Answer The financial statement that reports the assets, liabilities, and owners' equity of an organization as of a specific date." "Policyholders surplus - Correct Answer An insurer's assets minus its liabilities, which represents its net worth." "Loss adjustment expenses - Correct Answer The expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy" "Assets - Correct Answer Types of property, both tangible and intangible, owned by an entity" "Liabilities - Correct Answer Financial obligations, or debts, owed by a company to another entity, usually the policyholder in the case of an insurer." "Investment income - Correct Answer Interest, dividends, and net capital gains received by an insurer from the insurer's financial assets, minus its investment expenses." "Loss reserve - Correct Answer An estimate of the amount of money the insurer expects to pay in the future for losses that have occurred." "Unerned premium reserve - Correct Answer An insurer liability representing the amount of premiums received from policyholders that are not yet earned." "Loss ratio - Correct Answer A ratio that measures losses an loss adjustment expenses against earned premiunms and that reflects the percentage of premiums being consumed by losses." "Expense ratio - Correct Answer An insurer's incurred underwriting expenses for a given period divided by its written premiums for the same period." "Combined ratio - Correct Answer A profitability ratio that indicates whether an insurer has made an underwriting loss or gain." "Independent agency - Correct Answer A business, operated for the benefit of its owner (or owners) that sells insurance, usually as a representative of several unrelated insurers." "Exclusive agency marketing system - Correct Answer An insurance marketing system under which agents contract to sell insurance exclusively for one insurer (or for an associated group of insurers)." "Direct writer marketing system - Correct Answer An insurance marketing system that uses sales agents (or sales representatives) who are direct employees of the insurer." "Distribution channel - Correct Answer The necessary people and physical facilities to support the sale of insurance products and services" "Producer - Correct Answer Any of several kinds of insurance personnel who place insurance and surety business with insurers and who represent either insurers or insureds, or both." "Agent - Correct Answer In the agency relationship, the party that is authorized by the principal to act on the principal's behalf." "Agency - Correct Answer A legal, consensual relationship that exists when one party, the agent, acts on behalf of another party, the principal." "Principal - Correct Answer The party in an agency relationship that authorizes the agent to act on that party's behalf." "Broker - Correct Answer An independent producer who represents insurance customers." "Agency expiration list - Correct Answer The record of an insurance agency's present policyholders and the dates their policies expire." "Certificate of insurance - Correct Answer A brief description of insurance coverage prepared by an insurer or its agent and commonly used by policyholders to provide evidence of insurance." "Predictive modeling - Correct Answer A process in which historical data based on behaviors and events are blended with multiple variables and used to construct models of anticipated future outcomes." "Catastrophe model - Correct Answer A type of computer program that estimates losses from future potential catastrophic events." "Policyholders' surplus - Correct Answer An insurer's assets minus its liabilities, which represents its net worth." "Underwriting - Correct Answer The process of selecting insureds, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decisions made." "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." "Rate manual - Correct Answer A resource for classifying accounts and developing premiums for given types of insurance; includes necessary rules, factors, and guidelines to apply those rates." "Telematics - Correct Answer The use of technological devices to transmit data via wireless communication and GPS tracking." "Capacity - Correct Answer The amount of business an insurer is able to write, usually based on a comparison of the insurer's written premiums to its policyholders' surplus." "Unerwriting guidelines (UW 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" "Exosure unit - Correct Answer The unit of measure (for example, area, gross receipts, payroll, or value insured) used to determine an insurance policy premium." "Rate - Correct Answer The price per exposure unit for insurance coverage" "Binder - Correct Answer A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued." "Adverse selection - Correct Answer 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" "Claim - Correct Answer A demand by a person or business seeking to recover from an insurer for a loss that may be covered by an insurance policy" "Claimant - Correct Answer A party that makes a claim and that can be either a first-party claimant or a third-party claimant" "Claims representative - Correct Answer A person responsible for investigating, evaluating, and settling claims." "Deductible - Correct Answer A portion of a covered loss that is not paid by the insurer" "Insurable interest - Correct Answer An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred." "Actual Cash Value (ACV) - Correct Answer The cost to replace property with new property of like kind and quality less depreciation" "Depreciation - Correct Answer The reduction in value caused by the physical wear and tear or technological or economic obsolescence of property." "Subrogation - Correct Answer The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss." "Salvage rights - Correct Answer The insurer's rights to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss or a constructive total loss." "Damages - Correct Answer Money claimed by, or a monetary award to, a party who has suffered bodily injury or property damage for which another party is legally responsible." "Compensatory damages - Correct Answer A payment awared by a court to reimburse a victim for actual harm" "Special damages - Correct Answer A form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages. (Specific, identifiable expenses)" "General damages - Correct Answer A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific measurable expenses." "Punitive damages - Correct Answer A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party's actual damages." "Loss exposure - Correct Answer Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs." "Loss run - Correct Answer A report detailing an insured's history of claims that have occurred over a specific period, valued as of a specific date." "Brokerage - Correct Answer Compensation in the form of a flat fee or a commission that is paid by the reinsurer to the reinsurance intermediary for services provided." "Risk management - Correct Answer The process of making and implementing decisions that will minimize the adverse effects of accidental losses on an organization" "Pure risk - Correct Answer A chance of loss or no loss, but no chance of gain." "Fortuious loss - Correct Answer A loss that is accidental and unexpected" "Independent exposures - Correct Answer Group of many persons purchasing insurance independently and not affected by the losses of others." "Contract of indemnity - Correct Answer A contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss." "Principle of indemnity - Correct Answer The principle that insurance policies should provide a benefit no greater than the loss suffered by an insured." "Utmost good faith - Correct Answer An obligation to act in complete honesty and to disclose all relevant facts." "Contract of adhesion - Correct Answer Any contract in which one party must either accept the agreement as written by the other party or reject it." "Conditional contract - Correct Answer A contract that one or more parties must perform only under certain conditions." "Declarations page - Correct Answer An insurance policy information page or pages providing specific details about the insured and the subject of the insurance." "Insuring agreement - Correct Answer A statement in an insurance policy that the insurer will, under described circumstances, make a loss payment or provide a service." "Condition - Correct Answer Any provision in an insurance policy that qualifies an otherwise enforceable promise of the insurer." "Exclusion - Correct Answer A policy provision that eliminates coverage for specified exposures." "Transferring - Correct Answer Transferring is the act of transferring the financial consequences of unanticipated events to an insurer" "Pooling - Correct Answer With pooling, all insureds share the costs of each other's losses. Insurer