AINS 101 Exam Prep
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1. 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 exam-
ples 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.: When her car's windshield breaks, Ciara has to pay only $100 of the
$600 cost of replacing it.
2. 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 require-
ments.
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.: Insurance helps reduce the financial burden to society by com-
pensating accident victims.
3. 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-ca-
sualty policies would pay for the employees' injuries and illnesses?: Workers
compensation insurance
4. A homeowners policy is a type of: Personal property-casualty insurance policy.
5. 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 rev-
enues and profits.
B. Government programs can meet legitimate public demands unmet by pri-
vate insurers.
, AINS 101 Exam Prep
Study online at https://quizlet.com/_d3d076
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.: Government programs can meet legitimate public demands unmet
by private insurers.
6. 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?: Reinsurance
7. 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 appli-
cations. 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. Risk management information systems.
D. Actuator technology.: Artificial intelligence.
8. 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?: Speculative Risk
9. 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.: Insureds share the cost of each other's
losses.
, AINS 101 Exam Prep
Study online at https://quizlet.com/_d3d076
10. Which one of the following represents uncertainty about outcomes that
can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling: Risk
11. Coverage for money and other business property from various causes of
loss such as burglary, robbery, theft, and employee dishonesty typically is
provided by: Commercial crime insurance.
12. 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): Commercial Package Policy (CCP)
13. Which one of the following describes the characteristics of a mutual insur-
ance company?
A. A corporation owned by policyholders that provides insurance to its poli-
cyholders.
B. An unincorporated association that provides reciprocal coverage to sub-
scribers.
C. An unincorporated association that earns profits for its individual in-
vestors.
D. A corporation owned by stockholders that earns profits for the stockhold-
ers.: A corporation owned by policyholders that provides insurance to its policyhold-
ers.
14. 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.: Assumes loss exposures from a primary
insurer.
15. Autonomous Vehicle Applications (AVA) is a start-up company that devel-
ops safety technologies that can be sold to companies that are producing au-
tonomous 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
, AINS 101 Exam Prep
Study online at https://quizlet.com/_d3d076
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: -
Computer Vision
16. 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 com-
pliance 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: Artificial Intelligence
17. The primary role of insurance is to: Indemnify individuals and organizations
for covered losses
18. 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.: Insureds share the cost of each other's
losses.
19. 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: Mutual insurer.
20. 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 competi-
tive 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
Study online at https://quizlet.com/_d3d076
1. 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 exam-
ples 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.: When her car's windshield breaks, Ciara has to pay only $100 of the
$600 cost of replacing it.
2. 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 require-
ments.
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.: Insurance helps reduce the financial burden to society by com-
pensating accident victims.
3. 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-ca-
sualty policies would pay for the employees' injuries and illnesses?: Workers
compensation insurance
4. A homeowners policy is a type of: Personal property-casualty insurance policy.
5. 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 rev-
enues and profits.
B. Government programs can meet legitimate public demands unmet by pri-
vate insurers.
, AINS 101 Exam Prep
Study online at https://quizlet.com/_d3d076
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.: Government programs can meet legitimate public demands unmet
by private insurers.
6. 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?: Reinsurance
7. 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 appli-
cations. 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. Risk management information systems.
D. Actuator technology.: Artificial intelligence.
8. 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?: Speculative Risk
9. 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.: Insureds share the cost of each other's
losses.
, AINS 101 Exam Prep
Study online at https://quizlet.com/_d3d076
10. Which one of the following represents uncertainty about outcomes that
can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling: Risk
11. Coverage for money and other business property from various causes of
loss such as burglary, robbery, theft, and employee dishonesty typically is
provided by: Commercial crime insurance.
12. 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): Commercial Package Policy (CCP)
13. Which one of the following describes the characteristics of a mutual insur-
ance company?
A. A corporation owned by policyholders that provides insurance to its poli-
cyholders.
B. An unincorporated association that provides reciprocal coverage to sub-
scribers.
C. An unincorporated association that earns profits for its individual in-
vestors.
D. A corporation owned by stockholders that earns profits for the stockhold-
ers.: A corporation owned by policyholders that provides insurance to its policyhold-
ers.
14. 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.: Assumes loss exposures from a primary
insurer.
15. Autonomous Vehicle Applications (AVA) is a start-up company that devel-
ops safety technologies that can be sold to companies that are producing au-
tonomous 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
, AINS 101 Exam Prep
Study online at https://quizlet.com/_d3d076
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: -
Computer Vision
16. 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 com-
pliance 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: Artificial Intelligence
17. The primary role of insurance is to: Indemnify individuals and organizations
for covered losses
18. 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.: Insureds share the cost of each other's
losses.
19. 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: Mutual insurer.
20. 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 competi-
tive 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
