AINS 101 Exam Prep Study Guide Solutions

AINS 101 Exam Prep Study Guide Solutions Loss exposure - ANSWER-any condition or situation that presents a possibility of loss, whether or not an actual loss occurs Premium - ANSWER-the price of the insurance coverage provided for a specified period Indemnify - ANSWER-to restore a party who has sustained a loss to the same financial position that party held before the loss occurred Insured - ANSWER-any person or organization who is insured under an insurance policy Property-casualty insurance - ANSWER-one of the two main sectors of the insurance industry encompassing numerous types of insurance, most of which cover the financial consequences of damage to one's own property or legal liability to others Life-health insurance - ANSWER-one of the two main sectors of the insurance industry encompassing numerous types of insurance that cover the financial Stock insurer - ANSWER-an insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 2/20 Mutual insurer - ANSWER-an insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them Surplus-lines insurer - ANSWER-a non-admitted insurer that is eligible to insure risks that have been exported by a surplus lines licensee in accordance with a surplus lines law Reinsurance - ANSWER-the transfer of insurance risk from one insurer to another through a contractual agreement under which one insurer (the reinsurer) agrees, in return for a reinsurance premium, to indemnify another insurer (the primary insurer) for some or all of the financial consequences of certain loss exposures covered by the primary's insurance policies Pure risk - ANSWER-a chance of loss or no loss, but no chance of gain Speculative risk - ANSWER-a chance of loss, no loss, or gain Solvency - ANSWER-the ability of an insurer to meet its financial obligations as they become due, even those resulting from insured losses that may be claimed several years in the future Income statement - 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 - ANSWER-the portion of the written premiums that apply to the part of the policy period that has already occurred ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 3/20 Underwriting income - ANSWER-income an insurer earns from premiums paid by policyholders minus incurred losses and underwriting expenses Balance sheet - ANSWER-the financial statement that reports the assets, liabilities, and owner's equity of an organization as of a specific date Policyholder's surplus - ANSWER-an insurer's assets minus its liabilities, which represents its net worth Loss adjustment expenses - ANSWER-the expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy Assets - ANSWER-types of property, both tangible and intangible, owned by an entity Liabilities - ANSWER-financial obligations, or debts, owned by a company to another entity usually the policyholder in the case of an insurer Investment income - ANSWER-interest, dividends, and net capital gains received by an insurer from the insurer's financial assets, minus its investment expenses Loss reserve - ANSWER-an estimate of the amount of money the insurer expects to pay in the future for losses that have occurred Unearned premium reserve - ANSWER-an insurer liability representing the amount of premiums received from policyholders that are not yet earned ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 4/20 Loss ratio - ANSWER-a ratio that measures losses and loss adjustment expenses against earned premiums and that reflects the percentage of premiums being consumed by losses Expense ratio - ANSWER-an insurer's incurred underwriting expenses for a given period divided by its written premiums for the same period Combined ratio - ANSWER-a profitability ratio that indicates whether an insurer has made an underwriting loss or gain Independent agency - ANSWER-a business, operated for the benefit of its owner that sells insurance, usually as a representative of several unrelated insurers Exclusive agency marketing system - ANSWER-an insurance marketing system under which agents contract to sell insurance exclusively for one insurer Direct writer marketing system - ANSWER-an insurance marketing system that uses sales agents who are direct employees of the insurer Distribution channel - ANSWER-the necessary people and physical facilities to support the sale of insurance products and services Agent - ANSWER-in the agency relationship, the party that is authorized by the principal to act on the principal's behalf ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 5/20 Agency - ANSWER-a legal, consensual relationship that exists when one party, the agent, acts on behalf of another party, the principal Principal - ANSWER-the party in an agency relationship that authorizes the agent to act on that party's behalf Agency expiration list - ANSWER-the record of an insurance agency's present policyholders and the dates their policies expire Underwriting guidelines - 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 Binder - ANSWER-a temporary written or oral agreement to provide insurance coverage until a formal written policy is issued Book of business - 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 Telematics - ANSWER-the use of technological devices to transmit data via wireless co