AINS 101 Unit 1 - Practice Quiz

Someone broke into Mike's house while he was away on vacation. The robber stole his expensive guitar. What type of insurance would cover the loss?

Homeowner's insurance would provide protection against damage to or theft of Mike's home and/or belongings.

Who benefits from insurance?

Insurance benefits those whose losses it pays as well as society.

Charlie works for a private insurer that provides insurance coverages unavailable in the standard market. What kind of insurer does Charlie work for?

Surplus Lines Insurance

What are some examples of federal government insurance plans?

1. National Flood Insurance Program 2. Terrorism Risk Insurance Program

Into what 2 categories can risk be classified?

1. Pure Risk 2. Speculative Risk

What 3 concepts are pertinent to understanding insurance?

1. Risk 2. Transferring 3. Pooling

Pure Risk - Operational Risk

Arises from people, processes, systems, or controls - People Risk - IT Risk - Management Oversight - Business Processes

Pure Risk - Hazard Risk

Arises from property, liability, or personnel loss exposures. - Property Risk - Legal Risk - Personnel Risk - Consequential Loss

Speculative Risk - Financial Risk

Arises from the effect of market forces on financial assets or liabilities - Market Risk - Credit Risk - Price Risk - Liquidity Risk

Speculative Risk - Strategic Risk

Arises from trends in the economy and society - Economic Environment - Political Environment - Demographics - Competition

What type of insurance would an insured purchase to protect a new sports car?

Personal Auto Insurance

A fire destroys Sarah's restaurant. What type of insurance would cover the damages to the restaurant?

Property insurance would cover the damages to the restaurant by covering the cost of repairing or replacing property that's lost, damaged, or destroyed.

What are the 4 quadrants of risk?

Pure Risk: Hazard Risk Operational Risk Speculative Risk: Financial Risk Strategic Risk

You can see how emerging technologies can benefit risk management, but can you think of risks created by these same emerging technologies?

Risks related to privacy and data protection, cybersecurity, and liability ig. driverless vehicles

Under what circumstances would the government participate in insurance?

When private insurers are unable or unwilling to satisfy legitimate insurance needs.

If Katherine has an insurance policy that covers PD to her bicycle shop, how does that affect her budget?

With the insurance policy, Katherine just has to budget for premiums and deductibles, not the full cost of rebuilding.

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. Artificial intelligence b. Radiant sensors c. Actuator technology d. Risk management information systems

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

a. Commercial crime insurance b. Professional liability insurance c. Inland marine insurance d. Ocean marine insurance

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?

a. Commercial umbrella insurance b. Commercial general liability insurance c. Commercial property insurance d. Workers Compensation Insurance

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

a. Mutual insurer b. Stock insurer c. Reciprocal insurance exchange d. Captive insurer

Which one of the following represents uncertainty about outcomes that can be negative or positive?

a. Pooling b. Risk c. Transfer d. Loss Exposure

Which one of the following best describes the concept of pooling?

a. Risk management is concerned with positive and negative risks. b. The financial consequences of unanticipated losses are transferred to an insurer. c. Insured share the cost of each other's losses d. Insurance benefits society as a whole.

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

a. Stock insurer b. Mutual insurer c. Captive insurer d. Reciprocal insurance exchange

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

a. Transducer technology b. Computer vision c. Accelerometer technology d. Visual acuity