AINS 101 EVALUATION EXAM LATEST QUESTIONS AND
ANSWERS SURE A+
✔✔Determining Insurer's Profitability - ✔✔-Analyzing own insurance financial
statements over several quarters or years to get idea of how its training over time
-Comparing performances of multiple insurers to get accurate picture of how industry is
doing as a whole
-Making calculations to see potential effects of changing underwriting strategies or
expanding into new LOB
✔✔Combined Ratio < 100 - ✔✔Insurer making a profit from underwriting insurance
✔✔Combined Ratio > 100 - ✔✔Insurer not making underwriting profit
✔✔Ways Insurance is Marketed and Sold - ✔✔1. Independent Agents and Brokers
2. Exclusive Agency
3. Direct Writer
4. Distribution Channels
✔✔Independent Agents and Brokers (Producers) - ✔✔Sell insurance products to
individuals, businesses, and provide policy services
-BROKER represents CUSTOMER, AGENT represents one or more INSURERS
-BROKERS usually CAN'T commit an insurer to write a policy, unlike AGENTS who
generally CAN
-BOTH are NOT employees of an insurer, and usually free to work with as many
insurers
-BOTH own their expirations lists
*advantage = insurer doesn't have a right to independently solicit those policyholders
Free to work with as many different insurers as it wants
✔✔Expiration Lists - ✔✔Lists containing policy holder information and policy expiration
dates
✔✔Exclusive Agnecy - ✔✔Contract to sell insurance for one insurer or group of insurers
-AGENTS AREN'T employees of the insurer, but CANNOT sell policies from another
insurer, b/c contract prohibits that
-Insurer often handles administrative functions
-does NOT own policy exploration lists, the insurer does
-IF agent decides to contract with another insurer, CANNOT take policyholders along
✔✔Direct Writer - ✔✔Insurer uses its OWN EMPLOYEES as producers who market its
policies
-Same as Exclusive, b/c restricted to representing only ONE insurer, which owns
expiration lists
-Insurer's other staff does most of administrative work
, ✔✔Common Distribution Channels - ✔✔1. Digital - apps and websites
2. Call centers - Customer service representatives or chatbots
3. Direct response - Social media, email blasts, website ads
4. Group marketing - marketing to members of the same personal or professional group
5. Financial institutions - marketing through banks and financial services
✔✔Underwriting - ✔✔Process of evaluating risks, selecting who can be insured, pricing
that insurance coverage, determining policy terms and conditions, and monitoring those
decisions
-Primary purpose = help an insurer develop and maintain a growing profitable book of
business
✔✔Underwriters perform three key activites - ✔✔1. Minimize Adverse Selection
2. Ensure adequate policy holder's surplus
3. Enforce underwriting guidelines
✔✔Adverse Selection - ✔✔Generates unprofitable business by allowing an individual or
business with a high profitability of loss to obtain insurance at a lower cost than insurer
would normally charge b/c insurer wasn't fully aware of the actual risk involved
✔✔How is Adverse Selection achieved? - ✔✔By carefully selecting applicants with loss
exposures they are willing to ensure by monitoring applications and books of business
for unusual patterns of policy growth or losses
✔✔Ensure Adequate Policyholder's Surplus - ✔✔By following underwriting guidelines,
effectively evaluating, selecting loss exposures, and charging adequate premiums
-If insurer's underwriting practices generate policy premiums that exceed losses and
expenses, its PS will increase
-Protects insureds by making sure enough $ to pay claims and increases insurer's
capacity to write new business
✔✔Enforce Underwriting Guidelines - ✔✔Specify the attributes of an account that
underwriters should look for before offering coverage
-Also includes level of underwriting authority given to various underwriters, as well as to
agents and brokers
✔✔Examples of types of valuable information risk professionals and auditors provide to
underwriters: - ✔✔-Field inspection reports on premises and operations of new
insurance applicants and existing insureds renewing their policies
-Descriptions of operations that can help clarify loss exposures
-Technical info on the fire and health hazards of new building materials and production
processes
-Loss control measurers that could help an applicant meet underwriting guidelines
-New loss exposures at an insured's premium
ANSWERS SURE A+
✔✔Determining Insurer's Profitability - ✔✔-Analyzing own insurance financial
statements over several quarters or years to get idea of how its training over time
-Comparing performances of multiple insurers to get accurate picture of how industry is
doing as a whole
-Making calculations to see potential effects of changing underwriting strategies or
expanding into new LOB
✔✔Combined Ratio < 100 - ✔✔Insurer making a profit from underwriting insurance
✔✔Combined Ratio > 100 - ✔✔Insurer not making underwriting profit
✔✔Ways Insurance is Marketed and Sold - ✔✔1. Independent Agents and Brokers
2. Exclusive Agency
3. Direct Writer
4. Distribution Channels
✔✔Independent Agents and Brokers (Producers) - ✔✔Sell insurance products to
individuals, businesses, and provide policy services
-BROKER represents CUSTOMER, AGENT represents one or more INSURERS
-BROKERS usually CAN'T commit an insurer to write a policy, unlike AGENTS who
generally CAN
-BOTH are NOT employees of an insurer, and usually free to work with as many
insurers
-BOTH own their expirations lists
*advantage = insurer doesn't have a right to independently solicit those policyholders
Free to work with as many different insurers as it wants
✔✔Expiration Lists - ✔✔Lists containing policy holder information and policy expiration
dates
✔✔Exclusive Agnecy - ✔✔Contract to sell insurance for one insurer or group of insurers
-AGENTS AREN'T employees of the insurer, but CANNOT sell policies from another
insurer, b/c contract prohibits that
-Insurer often handles administrative functions
-does NOT own policy exploration lists, the insurer does
-IF agent decides to contract with another insurer, CANNOT take policyholders along
✔✔Direct Writer - ✔✔Insurer uses its OWN EMPLOYEES as producers who market its
policies
-Same as Exclusive, b/c restricted to representing only ONE insurer, which owns
expiration lists
-Insurer's other staff does most of administrative work
, ✔✔Common Distribution Channels - ✔✔1. Digital - apps and websites
2. Call centers - Customer service representatives or chatbots
3. Direct response - Social media, email blasts, website ads
4. Group marketing - marketing to members of the same personal or professional group
5. Financial institutions - marketing through banks and financial services
✔✔Underwriting - ✔✔Process of evaluating risks, selecting who can be insured, pricing
that insurance coverage, determining policy terms and conditions, and monitoring those
decisions
-Primary purpose = help an insurer develop and maintain a growing profitable book of
business
✔✔Underwriters perform three key activites - ✔✔1. Minimize Adverse Selection
2. Ensure adequate policy holder's surplus
3. Enforce underwriting guidelines
✔✔Adverse Selection - ✔✔Generates unprofitable business by allowing an individual or
business with a high profitability of loss to obtain insurance at a lower cost than insurer
would normally charge b/c insurer wasn't fully aware of the actual risk involved
✔✔How is Adverse Selection achieved? - ✔✔By carefully selecting applicants with loss
exposures they are willing to ensure by monitoring applications and books of business
for unusual patterns of policy growth or losses
✔✔Ensure Adequate Policyholder's Surplus - ✔✔By following underwriting guidelines,
effectively evaluating, selecting loss exposures, and charging adequate premiums
-If insurer's underwriting practices generate policy premiums that exceed losses and
expenses, its PS will increase
-Protects insureds by making sure enough $ to pay claims and increases insurer's
capacity to write new business
✔✔Enforce Underwriting Guidelines - ✔✔Specify the attributes of an account that
underwriters should look for before offering coverage
-Also includes level of underwriting authority given to various underwriters, as well as to
agents and brokers
✔✔Examples of types of valuable information risk professionals and auditors provide to
underwriters: - ✔✔-Field inspection reports on premises and operations of new
insurance applicants and existing insureds renewing their policies
-Descriptions of operations that can help clarify loss exposures
-Technical info on the fire and health hazards of new building materials and production
processes
-Loss control measurers that could help an applicant meet underwriting guidelines
-New loss exposures at an insured's premium
