AINS 101 | 112 Question with 100 %
correct answers | Verified 2024/2025
Which one of the following best describes the concept of pooling? - ANSWER>>>The concept of pooling
is that insureds share the cost of each other's losses
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? - ANSWER>>>When her car's windshield
breaks, Ciara has to pay only $100 of the $600 cost of replacing it
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? -
ANSWER>>>Workers compensation insurance
Coverage for money and other business property from various causes of loss such as burglary, robbery,
theft, and employee dishonesty typically is provided by - ANSWER>>>Commercial crime insurance
All of the following are types of private insurers, EXCEPT: - ANSWER>>>State workers compensation
funds
The state of Maryland operates a residual auto plan (the Maryland Auto Insurance Fund—MAIF) that
provides coverage for drivers who are unable to obtain coverage from private insurers. Which one of the
following is the best rationale for the MAIF program? - ANSWER>>>Auto insurance is compulsory, and
the program makes it possible for all drivers to have reasonably priced insurance
ABC Company experienced a dramatic ideological shift in corporate policies after a national election. This
is an example of which one of the following quadrants of risk? - ANSWER>>>Strategic risk
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. Which one of the following types of risk is this for Jimmy? - ANSWER>>>Speculative risk
Carlos is new to the insurance business and is learning about insurance regulation and what he, now
working with Grady Insurance, will need to be aware of regarding the subject of compliance. Which one
of the following will Carlos find is accurate as he better understands why insurance is regulated? -
ANSWER>>>Insurance regulation protects customers by guaranteeing insurance is available and
accessible to everyone who needs it.
What term refers to the ability of an insurer to meet its obligations as they become due? -
ANSWER>>>Solvency
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
All of the following are categories of liabilities found on an insurer's balance sheet, EXCEPT: -
ANSWER>>>Policyholders' surplus
Which one of the following is part of written premiums? - ANSWER>>>Unearned premiums
An insurer's balance sheet can best be described as a - ANSWER>>>Snapshot of its financial position.
The financial report for Hometown Insurer contains the following information:
- Earned premiums $4,000,000
- Written premiums $5,000,000
- Net investment income $1,000,000
- Incurred Losses $3,000,000
- Incurred underwriting expense $2,000,000
What is Hometown Insurer's expense ratio? - ANSWER>>>40%
The financial report for LMN Insurance contains the following information:
Earned premiums $8,000,000Written premiums $10,000,000Incurred losses $6,000,000Incurred
underwriting expenses $4,000,000
What is LMN Insurance's expense ratio? - ANSWER>>>40%
Expense Ratio = Incurred underwriting expenses ÷ Written premiums: $4 million ÷ $10 million = .40
(40%)
Spencer Insurance Associates is an independent agency selling primarily homeowners policies. This
agency - ANSWER>>>Is free to work with as many different insurers as it wants.
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? -
ANSWER>>>Anchoy can use group marketing to target large numbers of recent local college graduates.
The key to the direct writer marketing system is that - ANSWER>>>The insurer is using its own
employees as producers.
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.
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.
correct answers | Verified 2024/2025
Which one of the following best describes the concept of pooling? - ANSWER>>>The concept of pooling
is that insureds share the cost of each other's losses
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? - ANSWER>>>When her car's windshield
breaks, Ciara has to pay only $100 of the $600 cost of replacing it
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? -
ANSWER>>>Workers compensation insurance
Coverage for money and other business property from various causes of loss such as burglary, robbery,
theft, and employee dishonesty typically is provided by - ANSWER>>>Commercial crime insurance
All of the following are types of private insurers, EXCEPT: - ANSWER>>>State workers compensation
funds
The state of Maryland operates a residual auto plan (the Maryland Auto Insurance Fund—MAIF) that
provides coverage for drivers who are unable to obtain coverage from private insurers. Which one of the
following is the best rationale for the MAIF program? - ANSWER>>>Auto insurance is compulsory, and
the program makes it possible for all drivers to have reasonably priced insurance
ABC Company experienced a dramatic ideological shift in corporate policies after a national election. This
is an example of which one of the following quadrants of risk? - ANSWER>>>Strategic risk
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. Which one of the following types of risk is this for Jimmy? - ANSWER>>>Speculative risk
Carlos is new to the insurance business and is learning about insurance regulation and what he, now
working with Grady Insurance, will need to be aware of regarding the subject of compliance. Which one
of the following will Carlos find is accurate as he better understands why insurance is regulated? -
ANSWER>>>Insurance regulation protects customers by guaranteeing insurance is available and
accessible to everyone who needs it.
What term refers to the ability of an insurer to meet its obligations as they become due? -
ANSWER>>>Solvency
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
All of the following are categories of liabilities found on an insurer's balance sheet, EXCEPT: -
ANSWER>>>Policyholders' surplus
Which one of the following is part of written premiums? - ANSWER>>>Unearned premiums
An insurer's balance sheet can best be described as a - ANSWER>>>Snapshot of its financial position.
The financial report for Hometown Insurer contains the following information:
- Earned premiums $4,000,000
- Written premiums $5,000,000
- Net investment income $1,000,000
- Incurred Losses $3,000,000
- Incurred underwriting expense $2,000,000
What is Hometown Insurer's expense ratio? - ANSWER>>>40%
The financial report for LMN Insurance contains the following information:
Earned premiums $8,000,000Written premiums $10,000,000Incurred losses $6,000,000Incurred
underwriting expenses $4,000,000
What is LMN Insurance's expense ratio? - ANSWER>>>40%
Expense Ratio = Incurred underwriting expenses ÷ Written premiums: $4 million ÷ $10 million = .40
(40%)
Spencer Insurance Associates is an independent agency selling primarily homeowners policies. This
agency - ANSWER>>>Is free to work with as many different insurers as it wants.
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? -
ANSWER>>>Anchoy can use group marketing to target large numbers of recent local college graduates.
The key to the direct writer marketing system is that - ANSWER>>>The insurer is using its own
employees as producers.
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.
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.
