AINS 101 EXAM 2024 VERSION 2 WITH 240+
QUESTIONS & CORRECT ANSWERS GRADED A
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 lawsuits against it. The insurer may be violating the
principle that an insurance policy is - ANSWER-A contract of the utmost good
faith
When preprinted forms do not provide the terms of coverage needed by a particular
insured or small group of insureds, the insurer may - ANSWER-draft a manuscript
form to meet the customers needs.
The big differences between property and liability policies are found in their -
ANSWER-Insuring agreements
which of the following most accurately describes one of the policy provisions in an
insurance policy? - ANSWER-The exclusions are in place to reduce duplicate
coverage.
Which one of these is most directly associated with a satisfied customer? -
ANSWER-Leads and referrals that can be used to generate new business
,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 - ANSWER-Contract of utmost good faith
Margaret was severely injured and scarred due to a recent accident. Which one of
the following is an example of general damages Margaret received? - ANSWER-
Compensation for disfigurement
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? - ANSWER-
Harry can verify Jennie's address and other possible helpful information by
reviewing her policy which has her original application information attached.
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? - ANSWER-Moral Hazards
Earned premiums are the portion of written premiums that - ANSWER-Apply to
the part of the policy period that has already occurred.
Jessie is a new customer service representative (CSR) at the Winfield Agency.
Jessie usually engages in all the following activities, EXCEPT - ANSWER-
Determining coverage quotes
, Which one of the following is the correct formula for calculating an insurer's
combined ratio? - ANSWER-Loss ratio + expense ratio
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? - ANSWER-Alicia can process policy
endorsements and explain coverage to her customers
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? - ANSWER-Rachel finds the policy begins with a coverage overview
and then goes into more coverage details.
Which two of the four quadrants of risk are classified as pure risks? - ANSWER-
Hazard risks and operational risks
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? - ANSWER-$4,000,000
(insured value) / 100 (exposure unit size) x .50 rate per unit = $2,000
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? - ANSWER-ACV = replacement cost -
depreciation
800-450 = $350
QUESTIONS & CORRECT ANSWERS GRADED A
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 lawsuits against it. The insurer may be violating the
principle that an insurance policy is - ANSWER-A contract of the utmost good
faith
When preprinted forms do not provide the terms of coverage needed by a particular
insured or small group of insureds, the insurer may - ANSWER-draft a manuscript
form to meet the customers needs.
The big differences between property and liability policies are found in their -
ANSWER-Insuring agreements
which of the following most accurately describes one of the policy provisions in an
insurance policy? - ANSWER-The exclusions are in place to reduce duplicate
coverage.
Which one of these is most directly associated with a satisfied customer? -
ANSWER-Leads and referrals that can be used to generate new business
,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 - ANSWER-Contract of utmost good faith
Margaret was severely injured and scarred due to a recent accident. Which one of
the following is an example of general damages Margaret received? - ANSWER-
Compensation for disfigurement
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? - ANSWER-
Harry can verify Jennie's address and other possible helpful information by
reviewing her policy which has her original application information attached.
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? - ANSWER-Moral Hazards
Earned premiums are the portion of written premiums that - ANSWER-Apply to
the part of the policy period that has already occurred.
Jessie is a new customer service representative (CSR) at the Winfield Agency.
Jessie usually engages in all the following activities, EXCEPT - ANSWER-
Determining coverage quotes
, Which one of the following is the correct formula for calculating an insurer's
combined ratio? - ANSWER-Loss ratio + expense ratio
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? - ANSWER-Alicia can process policy
endorsements and explain coverage to her customers
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? - ANSWER-Rachel finds the policy begins with a coverage overview
and then goes into more coverage details.
Which two of the four quadrants of risk are classified as pure risks? - ANSWER-
Hazard risks and operational risks
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? - ANSWER-$4,000,000
(insured value) / 100 (exposure unit size) x .50 rate per unit = $2,000
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? - ANSWER-ACV = replacement cost -
depreciation
800-450 = $350
