AINS 21 practice exam

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Which one to the following correctly describes a reason for government involvement in property causality insurance

Government programs can meet legitimate public demands unmet by privates insurers

Which oone of the following insurance customers may be compelled to meet it's liability insurance needs through the excess and surplus lines market

Hazardous waste facility

Private insurers are reluctant to provide windstorm insurance on coastal properties. This is because the loss exposures fail to meet the criteria that ideally insurable exposures must be

Independent and not catastrophic

Which one of the following measures the amount an insurer would owe its policyholders in premium refunds if it were to immediately cease operations

Unearned premium reserve

Coverage for money, securities, and other property from various causes of loss such as burglary, robbery, theft, and employee dishonesty typically is provided by

commercial crime insurance

The type of insurance that provides periodic income payments to an insured who is unable to work because of sickness or injury is

Disability income insurance

A small business owner concerned about something happening and not being able to work or earn a living for extended period of time due to an accident should purchase

Disability insurance

Some insurance rating laws allow rates to be put into use immediately bit require insurers to file the rates with the state within a specific period of time. these types of laws are known as

File and use laws

Some insurance rating laws allow rates to put into use immediately but require insurers to file the rates with the state within a specific period of time these types of laws are

flex rating laws

Insurance is not the only risk management transfer technique. when circumstances are appropriate, transfer can be accomplished through

non insurance transfer technique

Insurance is not the only risk management transfer technique . when circumstances are appropriate, transfer can be accomplished through

non insurance transfer techniques

Insurance is not the only risk management transfer technique. When circumstances are appropriate, transfer can be accomplished through

noninsurance transfer technique

A stock insurer is distinguished from a mutual insurer by the fact that

owners are not necessarily insureds

On November 1, Peafowl insurance company issued a one year business auto policy to Tristate painting company with a premium of 24,000. What was the written premium for this policy as of December 31?

24,000 the written premium was 24,000 the amount the insured was billed at the beginning of the policy period

On January 1, 2005, the xyz insurance company issued a policy with a one year policy period. the premium for this policy was 1,200. What was the unearned premium for this policy as of may 1, 2005

800$ 5th may=5th month so 4 months earned and 8 unearned, 8 times 100/month= 800 of unearned premium

Loss reserves are amounts designated by insurers to pay claims for losses that have

Already occurred but are not yet settled

Which of the following is an opportunity cost of insurance

An insureds funds that could be invested elsewhere if purchasing insurance were not necessary

Which one of the following is an example of a fortuitous loss

An unknown vandal spray-paints graffiti on the insured's garage

A loss exposure is

Any condition that presents the possibility of a loss

Though premiums are an obvious cost of insurance, many insureds believe that are too high because

Benefits are intangible until loss occurs

A company interested in improving cash flow should consider meeting its insurance needs through which one of the following types of insurance organizations

Captive insurers

The premium charged for an insurance policy should be

Commensurate with the exposure

Liability coverage for loss exposures arising from a business organizations premises and operations, its products, or its completed work is typically provided by

Commercial general liability insurance

an increase in earned premiums with no change in written premiums or any other financial figures will generally cause a decrease in all of the following , except

Expense ratio

Which one of the following statements concerning government insurance program is true

Fair access to insurance requirements FAIR plans make basic property insurance

Which one of the following statements is correct regarding characteristics of ideally insurable los exposures

Ideally, loss exposures should be spread across a large number of similar exposure units within the same period

How do flex rating laws work

Insurers may adjust rates within a range without prior approval

How does flex rating law work

Insurers may adjust rates within a range without prior approval

Why are insurance regulators concerned about effects of large catastrophes

Insurers may become insolvent

Which one of the following statements is correct regarding the benefits that insurance provides

Investment income helps keep insurance premiums at a reasonable level

Oscars custom built vehicle looks like a sausage sandwich on wheels. he plans to drive it to special events at schools around the country where it will serve as a mobile billboard to promote his product, is oscar is surprised to learn insurers are reluctant to insure his vehicle because it fails to meet one of the ideal characteristics of an insurable risk. which characteristic is Oscar's vehicle least likely to meet

Large number of similar exposures

Which one of the following insurance customers might be compelled to meet its liability insurance needs through excess and surplus lines market

Major airline requiring multi-billion limits

Which one of the following is true regarding a homeowners policy

Most include coverage for theft of contents within the home

which one of the following statements is true

Mutual insurance include some large national insurers

which one of the following is a federal insurance plan in which the government acts as a partner with a private insurer that sells insurance and pay the claims, and then reimburses the insurer for the portion of losses that exceeds premiums and investment income

National flood insurance

if an insurers losses and expenses exceed its written premiums and investment income, which one of the following must the insurer use to meet its obligations

Policyholders surplus which represents a cushion for absorbing adverse results

Which one of the following is an operating cost of insurers

Producers commissions

Sally is a recent college graduate who lives in the suburbs and drives to work daily in the city. She recognizes that owning a car creates both property damage and liability exposures for her and the same time she has the burden of student loans. for someone in sally's circumstance the most practical risk management technique for dealing with her auto related loss exposure is

Risk transfer

Sally is a recent college graduate who lives in the suburbs and drives to work daily in the city. she recognizes that owning a car creates both property damage and liability exposures for her and at the same time she has the burden of student loans. For someone in Sally's circumstances the most particular risk management technique for dealing with her auto related loss exposures is

Risk transfer

The capital of a stock insurance company comes primarily from

Sale of company stock

Market conduct regulation focuses on insurers treatment of applicants for insurance insureds and others who present claims for coverage. Market conduct regulation affects which one of the following areas of operations?

Sales

the capital of stock insurance company primarily comes from

Sales of company stock

Riko's insurance agent was caught embezzling several insured's premiums, which involves what area of insurance company operations and what punishment by state regulators

Sales, agent license revoked

One of the costs of insurance is said to be opportunity costs. this means that if capital and labor were not being used in the insurance business, they could be used elsewhere and making other productive contributions to

Society

What term refers to the ability of an insurer to meet it's obligations as they become due

Solvency

Insurers are required to submit annual financial statements to

State insurance departments

An insurer that was formed for the purpose of earning a profit for its stockholders is a

Stock insurer

Owners of reciprocal insurance exchanges are also known as

Subscribers

Kyle is a professional athlete who has had several successful seasons. he earns 10 million a year, and is hopeful that his salary will double when he renegotiates his contract next year. His financial adviser recommends that he purchase an umbrella policy with multimillion dollar limits to provide an excess layer of protection above his primary personal insurance policies . Kyle's insurance broker has approached many of the large, well-known insurance companies and they have balked at writing limits as high as those needed by Kyle. the broker is likely to find the coverage that kyle needs in the

Surplus line insurance market

Which one of the following is generally exempt from state insurance regulations pertaining to policy forms and rates

Surplus line insurers

which of the following is generally exempt from state insurance regulations pertaining to policy forms and rates

Surplus line insurers

What is solvency?

The ability of an insurer to meet its obligations as the become due

Prompt and professional loss adjustment services are a responsibility of what part of an insurer's organizations

The claims function

adhering to the characteristics of an ideally insurable loss exposure in selling insurance help assure that

The insurer is able to change a premium that the insured can afford to pay

Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help assure that

The insurer is able to charge a premium that the insured can afford to pay

Retention is often used in combination with insurance as a way of treating loss exposures. One of the major downsides of individuals using retention alone is

The potential for financial ruin

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

When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it

which one of the following best describes what is determined by the insurers staff review of applications from prospective insureds?

Whether the characteristics of the customer match the insurers eligibility and selection guidelines

State governments can be involved in insurance at various levels. Some states provide which one of the following types of insurance in competition with private insurers?

Workers compensation

an Ohio insurer that is licensed to sell insurance in Michigan is known as what in Michigan

a foreign insurer

A flex rating law is

an insurance rating law under which prior approval is required only if the new rates exceed a certain percentage above and sometimes below the rates previously file

A flex rating law is

an insurance rating law under which prior approval is required only if the new rates exceed a certain percentage above and sometimes below the rates previously filed

What is an opportunity cost of insurance

an insurers funds that could be invested elsewhere if purchasing insurance were not necessary

Generally how often must a foreign insurer's license be renewed

annually

a reinsurance company

assumes loss exposures from a primary insurer

A homeowners insurance policy typically includes

both property and liability coverage

the two objectives of insurance policy form regulation are to ensure that policies are clear and readable and to

detect and address any policy provisions that are unfair

which one of the following statements is correct regarding government insurance programs

government programs can operate as reinsurers, reinsuring 100 percent of the risk or that part in excess of the private insurers retention

Which of the following statements is correct regarding characteristics of ideally insurable loss exposures

ideally, loss exposures should be spread across a large number of similar exposure units within the same period

Which one of the following is true regarding the administration of insurance regulatory information system iris

if regulators determine that an insurer is insolvent, the state insurance department places it in receivership

Claim buildup is considered to be among which of the following costs of insurance

increased losses

Claim buildup is considered to be among which one of the following costs of insurance

increased losses

Sometimes the existence of insurance encourages losses. the result of this phenomenon is that in

increases the total cost of insurance

Which one of the following categories of loss expenses can an insurer use to compare its revenue

incurred losses

Which of the following statements is correct with regard to risk and ideally insurable characteristics of loss exposures

indemnification is the process of restoring an insured to pre-loss financial condition

The primary role of insurance is to

indemnify individuals and organizations for covered losses

For insurers to utilize pooling most effectively and prevent catastrophic losses, the insured exposure units need to be

independent

Coverage for miscellaneous types of property such as movable property, goods in domestic transit, and property use in transportation and communication, typically is provided by

inland marine insurance

Which one of the following statements is true

insurance regulators review policies to determine if they benefit consumers

destructive competition in the insurance industry could result in

insurance shortages

Which one of the following statements is correct

insurers investment income helps keep premiums at reasonable level

A reciprocal insurance exchange

is an unincorporated association providing insurance coverage to its subscribers

A mutual insurance company is owned by

policyholders

Pravalt Construction Company pays less than its competitors for workers compensation insurance because Pravalt has had substantially fewer employee injuries than other firms in its class. this illustrates which one of the following benefits of insurance

promote risk control

Insurance company wrote a commercial liability policy for a manufacturer of off-road motorcycles. The potential cost of the insureds loss exposure exceed insurance co capacity. Insurance co could consider which type of contractual transferring agreement to meet its need

reinsurance

Insurance company wrote a commercial liability policy for a manufacturer of off-road motorcycles. the potential costs of the insureds loss exposure exceed insurance company's capacity. Insurance company could consider which type of contracture transferring agreement to meet its needs?

reinsurance

Market conduct regulation focuses on insurers treatment of applicants for insurance, insureds, and others who present claims for coverage. market conduct regulation affects which one of the following areas of operation

sales

insurers are required to submit annual financial statements to

state insurance departments

Owners of reciprocal insurance exchanges are also known as

subscribers

When deciding to approve or disapprove an insurers request for a rate, a state insurance commissioner must determine of the rates are adequate. Adequate means that the rates should be

sufficient to pay all claims and the expenses related to those claims

the size of an employers loss exposure for workers compensation insurance is based on

the amount of it's payroll

What is the most common reason premium audits are conducted

the amount of the loss exposure is unknown at the start of the policy period

Another name for liability insurance is

third party insurance

Some loss exposures are not easy to retain, avoid, or control. What risk management techniques is frequently used to treat such exposures

transfer

Some loss exposures are not easy to retain, avoid, or control. what risk management technique is frequently used to treat such exposures?

transfer

From a risk management view point, insurance is used to

transfer the cost of losses

From a risk management viewpoint, insurance is used to

transfer the cost of losses

Unity insurance company has an operating ratio of 0.98, a combined ratio of 1.02, and a loss ratio of 0.77. Considering these ratios, which one of the following statements is true for uic

uic's investment income is offsetting losses and expenses from its underwriting operations

Which one of the following is part of the written premium

unearned premiums


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