AINS 101 Exam Prep
1. 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.: When her car's windshield breaks, Ciara has to pay
only $100 of the $600 cost of replacing it.
2. 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 require-
ments.
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.: Insurance helps reduce the financial burden to
society by compensating accident victims.
3. 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?:
Workers compensation insurance
4. A homeowners policy is a type of: Personal property-casualty insurance
policy.
,5. 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
rev- enues and profits.
B. Government programs can meet legitimate public demands unmet by
pri-vate 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.: Government programs can meet legitimate public demands
unmet by private insurers.
6. 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?: Reinsurance
7. 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. Risk management information systems.
D. Actuator technology.: Artificial intelligence.
, AINS 101 Exam Prep
8. 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?: Speculative Risk
9. 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.: Insureds share the cost of each other's
losses.
10. Which one of the following represents uncertainty about outcomes that
can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling: Risk
11. Coverage for money and other business property from various causes
of loss such as burglary, robbery, theft, and employee dishonesty typically
is provided by: Commercial crime insurance.
12. 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): Commercial Package Policy (CCP)
13. Which one of the following describes the characteristics of a mutual
insurance company?
A. A corporation owned by policyholders that provides insurance to its
poli- cyholders.
B. An unincorporated association that provides reciprocal coverage to
sub- scribers.
C. An unincorporated association that earns profits for its individual in-
vestors.
, D. A corporation owned by stockholders that earns profits for the
stockhold-ers.: A corporation owned by policyholders that provides insurance to
its policyholders.
14. 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.: Assumes loss exposures from a
primary insurer.
15. 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: Computer Vision
16. 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: Artificial Intelligence
17. The primary role of insurance is to: Indemnify individuals and organizations
for covered losses
18. Which one of the following best describes the concept of pooling?
1. 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.: When her car's windshield breaks, Ciara has to pay
only $100 of the $600 cost of replacing it.
2. 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 require-
ments.
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.: Insurance helps reduce the financial burden to
society by compensating accident victims.
3. 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?:
Workers compensation insurance
4. A homeowners policy is a type of: Personal property-casualty insurance
policy.
,5. 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
rev- enues and profits.
B. Government programs can meet legitimate public demands unmet by
pri-vate 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.: Government programs can meet legitimate public demands
unmet by private insurers.
6. 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?: Reinsurance
7. 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. Risk management information systems.
D. Actuator technology.: Artificial intelligence.
, AINS 101 Exam Prep
8. 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?: Speculative Risk
9. 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.: Insureds share the cost of each other's
losses.
10. Which one of the following represents uncertainty about outcomes that
can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling: Risk
11. Coverage for money and other business property from various causes
of loss such as burglary, robbery, theft, and employee dishonesty typically
is provided by: Commercial crime insurance.
12. 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): Commercial Package Policy (CCP)
13. Which one of the following describes the characteristics of a mutual
insurance company?
A. A corporation owned by policyholders that provides insurance to its
poli- cyholders.
B. An unincorporated association that provides reciprocal coverage to
sub- scribers.
C. An unincorporated association that earns profits for its individual in-
vestors.
, D. A corporation owned by stockholders that earns profits for the
stockhold-ers.: A corporation owned by policyholders that provides insurance to
its policyholders.
14. 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.: Assumes loss exposures from a
primary insurer.
15. 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: Computer Vision
16. 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: Artificial Intelligence
17. The primary role of insurance is to: Indemnify individuals and organizations
for covered losses
18. Which one of the following best describes the concept of pooling?
