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AINS 101 | 112 Questions with 100 % correct answers
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Bill is an insurance producer for and employed by ABC Insurance Company (ABC). He represents only ABC when marketing insurance products, and uses an administrative staff also employed by ABC. Bill is a producer in the - ✔✔Direct writer marketing system Because the insurance company usually determines policy wording and the insured has little choice but to "take it or leave it," an insurance contract is a - ✔✔Contract of adhesion Which one of the following best explains why producers should be alert to changes in clients' loss exposures? - ✔✔Implemented risk management techniques may prove to be ineffective or become obsolete At Greenfield Insurance Company, Bernadette and Rachel are corporate underwriters, and Tomas and Jose are field underwriters. All of the following are underwriting activities typically performed by corporate (or staff) underwriters like Bernadette and Rachel, EXCEPT: - ✔✔Support producers and insureds Joel is the underwriter for Stanton Industries. He received a notice from the premium auditor on the account. After a recent visit to the insured's location, the auditor wanted to make Joel aware of a decline in the business and some questionable business practices. Which one of the following types of hazards is the auditor identifying? - ✔✔Moral hazards Moral hazards - ✔✔include questionable business practices or a failing business.
James West is a claims rep with Hatters Insurance. As he learns how to handle a claim from start to finish, which one of the following best describes the correct order for him to follow during this process? - ✔✔Identifying the policy, calculating a loss reserve, determining the cause of loss, preparing a loss statement Margaret was severely injured and scarred due to a recent accident. Which one of the following is an example of general damages Margaret received? - ✔✔Compensation for disfigurement Donna is an insurance producer. She makes an appointment with potential policyholder Sandie to review her loss exposures. She asks Sandie to complete a questionnaire to assist her in this effort. Donna is conducting a - ✔✔Risk management review Rachel is a new employee of Westley Insurance, and has been asked to review some existing policies to become familiar with the types of policies she will be working with. Which one of the following will Rachel find is true as she conducts her review? - ✔✔Rachel finds the policy begins with a coverage overview and then goes into more coverage details. Sports, Inc. is looking to obtain a commercial property policy on its building for $400,000. If their insurer decides to charge them a rate of $0.50 per $100 of building insurance, what premium must Sports, Inc. pay? - ✔✔$2, Destructive competition in the insurance industry could result in - ✔✔Insurance shortages The financial report for Hometown Insurer contains the following information:
The two main sectors of the insurance industry are - ✔✔Property-casualty insurance and life- health insurance The difference between an independent agency and an exclusive agency is that an - ✔✔Exclusive agency is contracted to sell insurance for one insurer or group of insurers A liability loss has the following damages: Medical expenses:$10,000Damages for disfigurement:$50,000Damages for pain and suffering:$100, What is the amount of special damages? - ✔✔$ 10, Special damages - ✔✔specific, identifiable expenses Sean was driving and caused an injury to a pedestrian named Wilbur. In the context of the resulting claim made to Sean's insurance company and assigned to Andrea in the claims department, Sean and Wilbur and Andrea are, respectively, - ✔✔Insured and claimant and claims representative Earned premiums are the portion of written premiums that - ✔✔Apply to the part of the policy period that has already occurred. Which one of these is most directly associated with a satisfied customer? - ✔✔Leads and referrals that can be used to generate new business
For a loss exposure to be ideally insurable it must be definite in - ✔✔Time, cause, and location. Because insurance contracts impose an obligation for ethical practices and behaviors on the parties while dealing with one another, an insurance contract is called a - ✔✔Contract of utmost good faith. Which two of the four quadrants of risk are classified as pure risks? - ✔✔Hazard risks and operational risks Pravalt Construction Company pays less than its competitors for workers compensation insurance because Pravalt has had substantially fewer employee injuries than other firms in its class. This illustrates which one of the following benefits of insurance? - ✔✔Promote risk control activity The processing of almost every claim involves which one of the following activities? - ✔✔Determining the amount of damages or extent of loss Erin has recently graduated from college and relocated to Chicago. She has purchased a car and rented an apartment and now needs to purchase insurance. She is comfortable buying from social media recommendations and recently was impressed with an insurer sending her coverage details online with a minimum of forms and salesperson interactions. Which one of the following is likely the best distribution channel to meet Erin's needs? - ✔✔Direct response direct response distribution channel - ✔✔using social media, email blasts, website ads, and direct mail would be the best
Mutual insurer - ✔✔owned by its policyholders and formed as a corporation for the purpose of providing insurance to them. To share profits, mutual insurers may pay dividends to policyholders as a return of a portion of premiums paid. Michael is a commercial lines underwriter. He received a risk control report on a new business that he had recently written with Laura, one of his producers. After reviewing the report, Michael contacted Laura to let her know that they needed to process a policy change request adding a new classification and some exposures to the general liability policy. These activities are occurring during which one of the following steps of the underwriting process? - ✔✔Monitor the underwriting decision Earned premiums are shown on an insurer's income statement because they are - ✔✔Revenues Windsor Insurance has sold more personal auto policies in the recent quarter than ever before in its history, thanks to new commission incentives for ambitious staff members. Even though Windsor is collecting more money upfront, it is actually making less per policy after remitting the higher commissions. Some claim payments are also now being delayed, resulting in many complaints against the company. Which one of the following objectives of insurance regulation is not being realized through this scenario? - ✔✔Maintaining insurer solvency If an insured wants to receive "new for old" in the event of a property loss, he or she would purchase - ✔✔Replacement cost Joe and Helene are married with two teenage children and two dogs. They own three cars and a large house with a swimming pool in the back yard. Their insurance agent advised them that the pool, teenage drivers, and dogs put them at risk for large liability losses. Which one of the
following personal property-casualty insurance policies would provide them with protection for their high potential for large liability losses? - ✔✔Personal umbrella Oscar's custom-built vehicle looks like a sausage sandwich on wheels. He plans to drive it to special events at schools around the country where it will serve as a mobile billboard to promote his product. Oscar is surprised to learn that insurers are reluctant to insure his vehicle because it fails to meet one of the ideal characteristics of an insurable risk. Which characteristic is Oscar's vehicle least likely to meet? - ✔✔Large number of similar exposure units Maria is a new producer who wears many hats when forming relationships and then serving her established customers. In this capacity, which one of the following scenarios most accurately describes her ongoing work wearing the hat of "claims handler"? - ✔✔Veronica directly contacts Maria for guidance on how to report a stolen car, Maria provides that, and claims rep Sean takes over after an introduction from Maria. Which one of the following is the correct formula for calculating an insurer's combined ratio? - ✔✔Loss ratio + expense ratio James works very closely with producers on a daily basis. In addition to evaluating the applicants that the producers submit, James is involved in presenting policy quotations, processing policy endorsements, helping to explain coverages, and making coverage recommendations. James works as a - ✔✔Field Underwriter Field Underwriter - ✔✔sometimes referred to as line underwriters, perform duties that include: selecting insureds, presenting policy quotations, processing policy endorsements, helping to explain coverages and making coverage recommendations.
agent advised them that if they purchase an insurance policy that adequately covers damage to their home and personal property, they only have to budget for the insurance premium, rather than the full cost of rebuilding the house and replacing its contents. Which one of the following key components of insurance is the insurance agent explaining to the Smiths? - ✔✔Transfer John's two-year-old bicycle was stolen. The bicycle's purchase price was $700, its current replacement cost is $800, and depreciation was estimated at $450. What was the bicycle's actual cash value? - ✔✔$ Jennie recently purchased a personal auto policy from Westcox Insurers. Three weeks later, Jennie reported her car was stolen from her driveway during the middle of the day. Upon further investigation, claims representative Harry finds out the home address he has on file for Jennie does not match the location where the theft occurred. In light of this scenario, which one of the following would be particularly helpful for Harry to pursue concerning Jenny's claim? - ✔✔Harry can verify Jennie's address and other possible helpful information by reviewing her policy which has her original application information attached. 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? - ✔✔When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it. Which one of the following represents uncertainty about outcomes that can be negative or positive? - ✔✔Risk
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 (CPP) 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 An insurer that was formed for the purpose of earning a profit for its stockholders is a - ✔✔Stock insurer 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 Mutual insurance - ✔✔provide insurance for their own policyholders Interinsurance - ✔✔another name for a reciprocal Reciprocal insurance - ✔✔provide insurance for their subscribers 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
What term refers to the ability of an insurer to meet its obligations as they become due? - ✔✔Solvency All of the following are categories of liabilities found on an insurer's balance sheet, EXCEPT: - ✔✔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. Most of the income an insurer receives is either from underwriting or - ✔✔Investments An insurer's financial statement shows a loss reserve and an unearned premium reserve. These reserves are part of the insurer's - ✔✔Total liabilities Expense Ratio = - ✔✔Incurred underwriting expenses ÷ Written premiums The key to the direct writer marketing system is that - ✔✔The insurer is using its own employees as producers 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? - ✔✔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 - ✔✔Is free to work with as many different insurers as it wants. Which one of the following statements is correct regarding the interaction between risk control and other insurer functions? - ✔✔A risk control evaluation can make the difference between the applicant's being rejected or accepted by the underwriter. 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 - ✔✔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 - ✔✔Adequate policyholders' surplus 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? - ✔✔Revise underwriting guidelines 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 - ✔✔Field underwriter
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 - ✔✔Set a loss reserve 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? - ✔✔Determining cause of loss and loss amount 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 - ✔✔Salvage rights Actual cash value (ACV) is - ✔✔Replacement cost minus depreciation Damages for disfigurement are a form of - ✔✔General damages Damages for pain and suffering are a form of - ✔✔General damages Which one of the following lists provides the optimum order of responsibilities that a producer may engage with any customer on a continual basis? - ✔✔Meeting a prospective customer, doing a needs and activities analysis, preparing a coverage proposal, closing the sale 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? - ✔✔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? - ✔✔Alicia can process policy endorsements and explain coverage to her customers Which one of the following accurately describes activities related to customer service representatives? - ✔✔Profitability in the insurance business is directly linked to customer retention 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 - ✔✔The total cost of all aspects of the organization that relate to managing risk 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 - ✔✔Comparing an organization's results with established performance standards Insurance deals primarily with loss exposures that are fortuitous. Which one of the following statements best characterizes fortuitous losses? - ✔✔Fortuitous losses are beyond the insured's control
