AINS 101 Exam Prep Questions With
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/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?
A. Ciara needs her car to get to her job, and she needs her job to make car payments
and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara is
faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months.
/.Which one of the following statements is correct regarding the benefits provided by
insurance?
A. Insurance reduces the financial consequences of loss exposures but not the related
uncertainty.
B. The primary role of insurance is to meet mandatory insurance requirements.
C. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by compensating accident
victims
/.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
/.A homeowners policy is a type of - Answer-Personal property-casualty insurance
policy.
/.Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues and
profits.
,B. Government programs can meet legitimate public demands unmet by private
insurers.
C. Competition from government plans keeps private insurer's premiums competitive.
D. Preventing high-risk individuals or activities from being insured is in the public
interest.
/.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? - Answer-Reinsurance
/.In an effort to reduce expenses, increase profitability, and reduce human errors; ABC
Insurance Company decided to automate most of its personal lines underwriting
function. The company now uses standardized application forms that are submitted
electronically to one of the company's regional offices. At each regional office, a
computer with a scanner reads the applications. The computer has been programmed
with acceptable answers to the questions. If the answers on the application are all
acceptable, the policy is automatically issued. Rejected applications are automatically
forwarded to a human underwriter who reviews them. The use of this technology has
reduced the company's expense ratio by two and a half percent, and reduced the time it
takes to issue a policy. ABC Insurance Company's use of computers to evaluate
applications electronically is an application of
A. Radiant sensors.
B. Artificial intelligence.
C.Artificial intelligence.
/.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. What type of risk is this? - Answer-Speculative
Risk
/.Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole
/.Which one of the following represents uncertainty about outcomes that can be
negative or positive?
A. Loss exposure
B. Transfer
,C. Risk
D. Pooling
/.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.
/.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) -
Answer-Commercial Package Policy (CCP)
/.Which one of the following describes the characteristics of a mutual insurance
company?
A. A corporation owned by policyholders that provides insurance to its policyholders.
B. An unincorporated association that provides reciprocal coverage to subscribers.
C. An unincorporated association that earns profits for its individual investors.
D. A corporation owned by stockholders that earns profits for the stockholders. -
/.A reinsurance company
A. Assumes loss exposures from a primary insurer.
B. Provides primary insurance for loss exposures that private insurers are unwilling to
provide.
C. Is formed to write all or part of the insurance for a parent company.
D. Transfers losses to a primary insurer
/.Autonomous Vehicle Applications (AVA) is a start-up company that develops safety
technologies that can be sold to companies that are producing autonomous vehicles.
One technology AVA is developing allows an autonomous vehicle to detect, extract, and
analyze images; and then to respond to the images. For example, the technology would
detect a presence in a crosswalk, extract the image, and a computer would analyze the
image. When the image was determined to be a human being, the vehicle would slow
down or stop until the crosswalk was clear. This technology, which is designed to
capture and analyze images, and to act on the recognition of the image; is called -
Answer-Computer Vision
/.Mutual Fund Company (MFC) offers a wide array of mutual fund options to investors.
Each mutual fund has a different fund objective and set of investment guidelines that
apply to the fund. While MFC gives considerable freedom to its fund portfolio managers,
they are required to abide by the fund's investment guidelines. To monitor compliance,
MFC developed a computer algorithm. The computer algorithm continuously monitors
each fund's compliance with investment guidelines. If a fund manager violates the
, investment guidelines, the computer immediately notifies MFC's internal control director,
and corrective action is taken. MFC's use of the computer algorithm to monitor
investment compliance and to provide notification when corrective action is necessary
illustrates use of - Answer-Artificial Intelligence
/.The primary role of insurance is to - Answer-Indemnify individuals and organizations
for covered losses
/.Which one of the following best describes the concept of pooling?
A. Insureds share the cost of each other's losses.
B. Risk management is concerned with positive and negative risks.
C. The financial consequences of unanticipated losses are transferred to an insurer.
D. Insurance benefits society as a whole
/.A type of insurer that is owned by policyholders and may pay dividends to
policyholders as a return of a portion of premiums paid is a - Answer-Mutual insurer.
/.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?
A. Private insurers face limited competition, and the state increases competitive
pressures by operating this type of plan.
B. Auto insurance is compulsory, and the program makes it possible for all drivers to
have reasonably priced insurance.
C. Private insurers overcharge for auto insurance, and the state provides a low-cost
alternative.
D. Auto insurance for high-risk drivers is profitable, and the program enables the state
to share in the profits.
/.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?
A. Operational risk
B. Financial risk
C. Strategic risk
D. Hazard risk
/.Renegade Insurance prides itself on its upstanding reputation through its commitment
to small communities' homeowners coverage needs over the past twenty years. Which
Complete Solutions | Verified | Updated
/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?
A. Ciara needs her car to get to her job, and she needs her job to make car payments
and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara is
faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months.
/.Which one of the following statements is correct regarding the benefits provided by
insurance?
A. Insurance reduces the financial consequences of loss exposures but not the related
uncertainty.
B. The primary role of insurance is to meet mandatory insurance requirements.
C. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by compensating accident
victims
/.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
/.A homeowners policy is a type of - Answer-Personal property-casualty insurance
policy.
/.Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues and
profits.
,B. Government programs can meet legitimate public demands unmet by private
insurers.
C. Competition from government plans keeps private insurer's premiums competitive.
D. Preventing high-risk individuals or activities from being insured is in the public
interest.
/.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? - Answer-Reinsurance
/.In an effort to reduce expenses, increase profitability, and reduce human errors; ABC
Insurance Company decided to automate most of its personal lines underwriting
function. The company now uses standardized application forms that are submitted
electronically to one of the company's regional offices. At each regional office, a
computer with a scanner reads the applications. The computer has been programmed
with acceptable answers to the questions. If the answers on the application are all
acceptable, the policy is automatically issued. Rejected applications are automatically
forwarded to a human underwriter who reviews them. The use of this technology has
reduced the company's expense ratio by two and a half percent, and reduced the time it
takes to issue a policy. ABC Insurance Company's use of computers to evaluate
applications electronically is an application of
A. Radiant sensors.
B. Artificial intelligence.
C.Artificial intelligence.
/.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. What type of risk is this? - Answer-Speculative
Risk
/.Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole
/.Which one of the following represents uncertainty about outcomes that can be
negative or positive?
A. Loss exposure
B. Transfer
,C. Risk
D. Pooling
/.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.
/.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) -
Answer-Commercial Package Policy (CCP)
/.Which one of the following describes the characteristics of a mutual insurance
company?
A. A corporation owned by policyholders that provides insurance to its policyholders.
B. An unincorporated association that provides reciprocal coverage to subscribers.
C. An unincorporated association that earns profits for its individual investors.
D. A corporation owned by stockholders that earns profits for the stockholders. -
/.A reinsurance company
A. Assumes loss exposures from a primary insurer.
B. Provides primary insurance for loss exposures that private insurers are unwilling to
provide.
C. Is formed to write all or part of the insurance for a parent company.
D. Transfers losses to a primary insurer
/.Autonomous Vehicle Applications (AVA) is a start-up company that develops safety
technologies that can be sold to companies that are producing autonomous vehicles.
One technology AVA is developing allows an autonomous vehicle to detect, extract, and
analyze images; and then to respond to the images. For example, the technology would
detect a presence in a crosswalk, extract the image, and a computer would analyze the
image. When the image was determined to be a human being, the vehicle would slow
down or stop until the crosswalk was clear. This technology, which is designed to
capture and analyze images, and to act on the recognition of the image; is called -
Answer-Computer Vision
/.Mutual Fund Company (MFC) offers a wide array of mutual fund options to investors.
Each mutual fund has a different fund objective and set of investment guidelines that
apply to the fund. While MFC gives considerable freedom to its fund portfolio managers,
they are required to abide by the fund's investment guidelines. To monitor compliance,
MFC developed a computer algorithm. The computer algorithm continuously monitors
each fund's compliance with investment guidelines. If a fund manager violates the
, investment guidelines, the computer immediately notifies MFC's internal control director,
and corrective action is taken. MFC's use of the computer algorithm to monitor
investment compliance and to provide notification when corrective action is necessary
illustrates use of - Answer-Artificial Intelligence
/.The primary role of insurance is to - Answer-Indemnify individuals and organizations
for covered losses
/.Which one of the following best describes the concept of pooling?
A. Insureds share the cost of each other's losses.
B. Risk management is concerned with positive and negative risks.
C. The financial consequences of unanticipated losses are transferred to an insurer.
D. Insurance benefits society as a whole
/.A type of insurer that is owned by policyholders and may pay dividends to
policyholders as a return of a portion of premiums paid is a - Answer-Mutual insurer.
/.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?
A. Private insurers face limited competition, and the state increases competitive
pressures by operating this type of plan.
B. Auto insurance is compulsory, and the program makes it possible for all drivers to
have reasonably priced insurance.
C. Private insurers overcharge for auto insurance, and the state provides a low-cost
alternative.
D. Auto insurance for high-risk drivers is profitable, and the program enables the state
to share in the profits.
/.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?
A. Operational risk
B. Financial risk
C. Strategic risk
D. Hazard risk
/.Renegade Insurance prides itself on its upstanding reputation through its commitment
to small communities' homeowners coverage needs over the past twenty years. Which
