AINS 101 MAIN UPDATED EXAM SET QUESTIONS AND
ANSWERS SURE A+
✔✔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
A. Adverse selection.
B. Unprofitable business.
C. Policyholders' surplus.
D. Capacity. - ✔✔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
A. Adequate policyholders' surplus.
B. A significant bonus.
C. A collaborative relationship with her producers.
D. Adverse selection. - ✔✔Adequate policyholders' surplus.
✔✔Which one of the following statements is correct regarding the interaction between
risk control and other insurer functions?
A. Risk control representatives are responsible for compiling all the information required
for a premium audit.
B. Risk control personnel can assist underwriters in modifying a new applicant's loss
exposures to meet eligibility requirements.
C. By making marginal accounts acceptable, risk control helps the Claims Department
settle losses.
D. Risk control personnel are responsible for answering any complex questions that
insureds have about premium audits. - ✔✔Risk control personnel can assist
underwriters in modifying a new applicant's loss exposures to meet eligibility
requirements.
✔✔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
A. Staff underwriter
B. Corporate underwriter
C. Field underwriter
D. Account manager - ✔✔Field underwriter
,✔✔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?
A. Field Underwriter
B. Underwriting Technician
C. Corporate Underwriter
D. Line Underwriter - ✔✔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.)
✔✔As an experienced underwriter, Rick has learned to make every effort to avoid a
mistake that can produce insufficient premium to cover losses, or pricing that isn't
competitive. Which one of the following underwriting mistakes can often cause these
issues?
A. Misclassifying exposures
B. Recommending the applicant implement risk control measures
C. Using predictive models
D. Adjusting policy terms and conditions - ✔✔Misclassifying exposures
(Misclassification of exposures can produce insufficient premium to cover losses or
pricing that isn't competitive.)
✔✔Which one of the following is a temporary agreement providing insurance coverage
until the formal policy is issued?
A. Binder
B. Rating classification
C. Book of business
D. Submission - ✔✔Binder (A binder is a temporary agreement providing insurance
coverage until the formal policy is issued.)
✔✔The size of an employer's loss exposure for workers compensation insurance is
based on
A. The number of its employees.
B. The final premium audit.
C. The extent of its operations.
D. The amount of its payroll. - ✔✔The amount of its payroll. (The size of an employer's
loss exposure for workers compensation insurance is based on the amount of its
payroll.)
,✔✔Which one of the following is the fundamental measure of loss exposure used in
insurance rating?
A. Premium
B. Exposure unit
C. Risk
D. Rate - ✔✔Exposure unit. (The exposure unit is the fundamental measure of loss
exposure used in insurance rating.)
✔✔Which one of the following statements is correct regarding the interaction between
risk control and other insurer functions?
A. A risk control evaluation can make the difference between the applicant's being
rejected or accepted by the underwriter.
B. Risk control representatives compile detailed data for the actuarial department to use
in establishing rates.
C. Risk control representatives are responsible for compiling all the information required
for a premium audit.
D. Risk control personnel are responsible for answering any complex questions that
insureds have about premium audits. - ✔✔A risk control evaluation can make the
difference between the applicant's being rejected or accepted by the underwriter.
(A risk control evaluation can make the difference between the applicant's being
rejected or accepted by the underwriter.)
✔✔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?
A. Manage a book of business
B. Support producers
C. Recommend coverage
D. Revise underwriting guidelines - ✔✔Revise underwriting guidelines (Revising
underwriting guidelines is primarily a responsibility of staff underwriters.)
✔✔Jill works in the field for Goshen Mutual as a line underwriter. Which one of the
following is primarily a responsibility of line underwriters?
A. Revise underwriting guidelines
B. Select insureds
C. Research the market
D. Develop coverage forms - ✔✔Select insureds (One of the primary responsibilities of
line underwriters is to select insureds.)
✔✔Which one of the following is the first step in the underwriting process?
, A. Develop underwriting alternatives
B. Evaluate the submission
C. Monitor the underwriting decision
D. Determine an appropriate premium - ✔✔Evaluate the submission (Evaluating the
submission is the first step in the underwriting process.)
✔✔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?
A. Propose the general liability coverage at a lower premium level, but apply a small
deductible.
B. Offer a proposal with all lines of coverage except the general liability coverage.
C. Propose the general liability coverage, excluding the 2 locations that have -
✔✔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.)
✔✔Produce, such as apples or grapes, may be priced by the unit or by the pound. In
insurance, these measures are similar to
A. Construction cost index.
B. Rates.
C. Exposure units.
D. Premiums. - ✔✔Exposure units. (Units, pounds, and exposure units are all multiplied
by the rate to arrive at the cost (premium).)
✔✔Bob is shopping for auto insurance. Insurance Company A's rating system
determines that Bob should be charged $800 per auto. If Bob is looking to insure four
autos, what premium will he be charged by Insurance Company A? - ✔✔$3200
✔✔Stephanie works for Waynesgood Insurance. She appreciates the help she receives
from Clem in the company's claims department who provides her with recent statistics
and comments on Waynesgood's customer satisfaction levels. Stephanie works in
which one of the following departments?
A. Marketing
ANSWERS SURE A+
✔✔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
A. Adverse selection.
B. Unprofitable business.
C. Policyholders' surplus.
D. Capacity. - ✔✔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
A. Adequate policyholders' surplus.
B. A significant bonus.
C. A collaborative relationship with her producers.
D. Adverse selection. - ✔✔Adequate policyholders' surplus.
✔✔Which one of the following statements is correct regarding the interaction between
risk control and other insurer functions?
A. Risk control representatives are responsible for compiling all the information required
for a premium audit.
B. Risk control personnel can assist underwriters in modifying a new applicant's loss
exposures to meet eligibility requirements.
C. By making marginal accounts acceptable, risk control helps the Claims Department
settle losses.
D. Risk control personnel are responsible for answering any complex questions that
insureds have about premium audits. - ✔✔Risk control personnel can assist
underwriters in modifying a new applicant's loss exposures to meet eligibility
requirements.
✔✔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
A. Staff underwriter
B. Corporate underwriter
C. Field underwriter
D. Account manager - ✔✔Field underwriter
,✔✔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?
A. Field Underwriter
B. Underwriting Technician
C. Corporate Underwriter
D. Line Underwriter - ✔✔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.)
✔✔As an experienced underwriter, Rick has learned to make every effort to avoid a
mistake that can produce insufficient premium to cover losses, or pricing that isn't
competitive. Which one of the following underwriting mistakes can often cause these
issues?
A. Misclassifying exposures
B. Recommending the applicant implement risk control measures
C. Using predictive models
D. Adjusting policy terms and conditions - ✔✔Misclassifying exposures
(Misclassification of exposures can produce insufficient premium to cover losses or
pricing that isn't competitive.)
✔✔Which one of the following is a temporary agreement providing insurance coverage
until the formal policy is issued?
A. Binder
B. Rating classification
C. Book of business
D. Submission - ✔✔Binder (A binder is a temporary agreement providing insurance
coverage until the formal policy is issued.)
✔✔The size of an employer's loss exposure for workers compensation insurance is
based on
A. The number of its employees.
B. The final premium audit.
C. The extent of its operations.
D. The amount of its payroll. - ✔✔The amount of its payroll. (The size of an employer's
loss exposure for workers compensation insurance is based on the amount of its
payroll.)
,✔✔Which one of the following is the fundamental measure of loss exposure used in
insurance rating?
A. Premium
B. Exposure unit
C. Risk
D. Rate - ✔✔Exposure unit. (The exposure unit is the fundamental measure of loss
exposure used in insurance rating.)
✔✔Which one of the following statements is correct regarding the interaction between
risk control and other insurer functions?
A. A risk control evaluation can make the difference between the applicant's being
rejected or accepted by the underwriter.
B. Risk control representatives compile detailed data for the actuarial department to use
in establishing rates.
C. Risk control representatives are responsible for compiling all the information required
for a premium audit.
D. Risk control personnel are responsible for answering any complex questions that
insureds have about premium audits. - ✔✔A risk control evaluation can make the
difference between the applicant's being rejected or accepted by the underwriter.
(A risk control evaluation can make the difference between the applicant's being
rejected or accepted by the underwriter.)
✔✔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?
A. Manage a book of business
B. Support producers
C. Recommend coverage
D. Revise underwriting guidelines - ✔✔Revise underwriting guidelines (Revising
underwriting guidelines is primarily a responsibility of staff underwriters.)
✔✔Jill works in the field for Goshen Mutual as a line underwriter. Which one of the
following is primarily a responsibility of line underwriters?
A. Revise underwriting guidelines
B. Select insureds
C. Research the market
D. Develop coverage forms - ✔✔Select insureds (One of the primary responsibilities of
line underwriters is to select insureds.)
✔✔Which one of the following is the first step in the underwriting process?
, A. Develop underwriting alternatives
B. Evaluate the submission
C. Monitor the underwriting decision
D. Determine an appropriate premium - ✔✔Evaluate the submission (Evaluating the
submission is the first step in the underwriting process.)
✔✔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?
A. Propose the general liability coverage at a lower premium level, but apply a small
deductible.
B. Offer a proposal with all lines of coverage except the general liability coverage.
C. Propose the general liability coverage, excluding the 2 locations that have -
✔✔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.)
✔✔Produce, such as apples or grapes, may be priced by the unit or by the pound. In
insurance, these measures are similar to
A. Construction cost index.
B. Rates.
C. Exposure units.
D. Premiums. - ✔✔Exposure units. (Units, pounds, and exposure units are all multiplied
by the rate to arrive at the cost (premium).)
✔✔Bob is shopping for auto insurance. Insurance Company A's rating system
determines that Bob should be charged $800 per auto. If Bob is looking to insure four
autos, what premium will he be charged by Insurance Company A? - ✔✔$3200
✔✔Stephanie works for Waynesgood Insurance. She appreciates the help she receives
from Clem in the company's claims department who provides her with recent statistics
and comments on Waynesgood's customer satisfaction levels. Stephanie works in
which one of the following departments?
A. Marketing
