AINS 101 EXAM QUESTIONS AND CORRECT ANSWERS (ALREADY GRADED A+)
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Course
AINS 101
Institution
AINS 101
AINS 101 EXAM QUESTIONS AND CORRECT ANSWERS (ALREADY GRADED A+)
Which one of the following is part of written premiums? - Answer- Unearned premiums
Which one of the following is shown on the balance sheet of an insurer? - Answer- Cash and short-term investments
Most of the income an insurer ...
AINS 101 EXAM QUESTIONS AND
CORRECT ANSWERS (ALREADY
GRADED A+)
Which one of the following is part of written premiums? - Answer- Unearned premiums
Which one of the following is shown on the balance sheet of an insurer? - Answer- Cash
and short-term investments
Most of the income an insurer receives is either from underwriting or - Answer-
Investments - 2 major sources of insurer income are the sale of insurance (underwriting)
and the investment of funds (investment income)
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 - Answer- Adequate policyholders' surplus.
Underwriters ensure adequate policyholders' surplus by followings underwriting
guidelines, effectively evaluating and selecting loss exposures, and charging adequate
premium.
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 - Answer- Adverse selection.
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 risk involved is known as
adverse selection.
Which one of the following statements is correct regarding the interaction between risk
control and other insurer functions? - Answer- A risk control evaluation can make the
difference between the applicant's being rejected or accepted by the underwriter.
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 - Answer- Field underwriter
A field underwriter's duties include selecting insureds, ensuring accurate classification
and pricing, managing a book of business, and supporting producers and insureds.
,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? - 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.
Which one of the following is the first step in the underwriting process? - Answer-
Evaluate the submission
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?
Select one: - 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.
Shelton manufacturing has $1 million in annual sales, its liability insurance is priced per
1,000 of sales, and the per-unit rate is $0.50. What is Shelton Manufacturing's liability
insurance premium? - Answer- $500
Calculated at 1,000 units ($1 million sales ÷ price per $1,000) × $0.50 rate = $500.
Produce, such as apples or grapes, may be priced by the unit or by the pound. In
insurance, these measures are similar to - Answer- Exposure units.
Units, pounds, and exposure units are all multiplied by the rate to arrive at the cost
(premium).
Which one of the following statements is correct regarding the interaction between risk
control and other insurer functions? - Answer- Risk control personnel can assist
underwriters in modifying a new applicant's loss exposures to meet eligibility
requirements.
, Jill works in the field for Goshen Mutual as a line underwriter. Which one of the following
is primarily a responsibility of line underwriters? - Answer- Select insureds
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?
- Answer- Revise underwriting guidelines
Which one of the following is a temporary agreement providing insurance coverage until
the formal policy is issued? - Answer- Binder
One of the reasons for insurance regulation is to prevent destructive competition. In
which one of the following scenarios would destructive competition be exhibited? -
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.
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 in exchange for -
Answer- Of unequal amount.
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 - 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.
Which of the following is the fundamental measure of loss exposure used in insurance
rating? - Answer- Exposure Unit
Which one of the following best explains why producers should be alert to changes in
clients' loss exposures? - Answer- Implemented risk management techniques may
prove to be ineffective or become obsolete
Adhering to the characteristics of an ideally insurable loss exposure in selling insurance
help assure that - Answer- The insurer is able to charge a premium that the insured can
afford to pay.
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
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