AINS 21 REVIEW EXAM 100% VERIFIED ANSWERS 2024/2025 CORRECT STUDY SET, Exams of Organization and Business Administration

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AINS 21 REVIEW EXAM 100%

VERIFIED ANSWERS

2024/2025 CORRECT STUDY

SET

Loss exposure any condition or situation that presents a possibility of a loss Loss prevention A risk control technique that reduces the frequency of a particular loss Loss reduction a risk control technique that reduces the severity of a particular loss Exposure unit A fundamental measure of the loss exposure assumed by an insurer Property casualty insurance one of two main sectors of insurance industry most of coverage covers damage to property or legal liabilities to others Life health insurance cover financial consequences of death injury or sickness utmost good faith an obligation to act in complete honesty and to disclose all relevant facts Contract of adhesion

Any contract in which one party must either accept the agreement as written by the other party or reject it Contract of indemnity Contract in which the insurer agrees in the event of a covered loss to pay the amount directly related to the amount of the loss Self Contained policy A single document that contains all the agreements between the insured and insurer and forms a complete insurance policy Modular policy Several documents none of which by itself form a complete policy Comprehensive coverage Coverage for direct and accidental loss or damage to a covered auto by any peril except collision overturn or peril specifically excluded Personal watercraft policy insurance policy that covers an individual's loss exposure arising out of ownership of watercraft use primarily for recreational purposes or personal transportation Umbrella liability policy provides excess coverage above underlying policies Liability coverage Coverage that protects insureds from damages owed because of legal liability to another party Term life insurance life insurance that provides coverage for a specified period such as ten or twenty year with no cash value Permanent life insurance

coverage until death Long term care insurance insurance that pays for extended medical care or custodial care received annuity type of life insurance policy that makes periodic payments to the recipient for a fixed period of time or life in exchange for a specific premium Commercial package policy policy that covers two or more lines of business by combining ISO's commercial line coverage parts Business owners policy package policy that combines property and liability coverage needed by small and medium sized business owners Commercial auto insurance Insurance that covers a business org against loss exposures arising out of ownership of automobiles Auto physical damage coverage coverage for damage or theft of a covered auto Commercial property insurance insurance that covers commercial buildings and their contents against various property loss ocean marine insurance covers vessels and their cargoes inland marine insurance covers different classes of property that typically involve an element of transportation Commercial crime insurance covers money securities and property from theft crime robbery extortion

Commercial general liability CLG Covers many loss exposure liabilities an org can face professional liability insurance that covers persons engaged in various occupations against liabilities resulting from their render or failing to render professional services workers compensation insurance insurance that provides coverage for benefits an employer is obligated to pay under workers comp laws mutual insurer an insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them Reciprocal insurance exchange an insurer owned by its policyholders, formed as a unincorporated association for the purpose of providing insurance coverage to its members called subscribers Subscribers members of a reciprocal insurance exchange Captive insurer a subsidiary formed to insure the loss exposures of its parent company and the parent's affiliates reinsurance transfer or insurance risk from one insurer to another through a contractual agreement underwriting the process of selecting insureds, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decisions made underwriter

an insurer employee who evaluates applicants for insurance and selects those acceptable Risk control conscious act or decision that reduces the severity or frequency of losses or makes losses more predictable premium audit methodical examination of a policyholder's surplus operations, records, to determine the actual exposure units and premiums for insurance coverage already provided Foreign insurer insurer licensed to operate in a state but incorporated in another state alien insurer an insurer domiciled in a country other than the United States Surplus Lines laws state laws that permit producers with a surplus lines license to write business for an acceptable no admitted insurer when protection from admitted insurer is not available Mandatory rate law State law under which insurance rates are set by a state agency or rating bureau and all licensed insurers are required to use those rates prior-approval law an insurance rating law in which the rates and supporting rules must be filed with and approved by the state insurance dept. before they can be used file-and-use law an insurance rating in which the insurer must file rates and supporting rules with the state insurance dept. prior to their use, but than the rates can then be used immediately without specific approval use-and-file law

an insurance rating law in which the rates must be filed with the state insurance dept. within a specified period after they are put into use Flex rating law insurance rating law under which prior approval is required only if the new rates exceed a certain percentage above the rated previously filed open competition allows insurers to develop and use rates without having to file with or get approval from the state insurance dept. market conduct regulation regulation of sales practices, underwriting, claim practices, and bad-faith actions Unfair trade practices law State law that specifies certain prohibited business practices National Association of insurance commissioners(NAIC) an association of insurance commissioners whose purpose is to coordinate insurance regulation activities among the various state depts. NAIC annual statement primary financial statement prepared by insurers and required by every state insurance dept. reserve the amount the insurer estimates and sets aside to pay on existing claim that has not been settled Insurance regulatory information system (IRIS) an information and early warning system established and operated by the NAIC to monitor the financial soundness of insurers Guaranty fund

a state established fund that provides a system for the payment of some unpaid claims of insolvent insurers licensed in that state, funded by assessments collected from all insurers licensed in the state Surplus Lines insurance insurance obtained from nonadmitted insurers when protection is not avalible through admitted insurers bylaws written rules for conduct of a corporation, association, or organization Why does a homeowners policy exclude coverage for professional services? to eliminate coverage for exposure that require special handling by the insurer National flood insurance program the government acts as partner with private insurer and reimburses the insurer fair rental value covers loss of rental income schedule rating plans allow... insurers to reflect the factors not included in the class rates in the final premium example of a covered damage of broad form policy damage from a falling tree limb what should producers consider when selecting an alternative dist'n channel? the ease of accessibility within the channel Loss adjustment expense the expense that an insurer incurs to investigate, defend and settle claims according to terms specified in the insurance policy incurred losses

losses that have occurred during policy period regardless of when claims are paid Incurred but not reported (IBNR) Losses that have occurred but have not been reported to the insurer nonadmitted assets regulators do not allow insurers to show assets on financial statements because they cannot quickly be converted to cash loss reserve an estimate of the amount of money the insurer expects to pay in the future for losses that have occurred and been reported unearnened premium reserve an insurer liability representing the amount of premiums received from policyholders that are not yet earned policyholders' surplus total admitted assets- total liabilities loss ratio (incurred loss + LAE)/earned premiums expense ratio underwrting expenses/ written premiums combined ratio loss ratio + expense ratio investment income ratio investment income/earned premiums binding authority

an insurance agent's authority to effect coverage on behalf of the insurer apparent authority a third party's reasonable belief that an agent has authority to act on the principal's behalf independent agency a business operated for the benefit of its owner that sell insurance usually as a representative of several unrelated insurers broker independent producer who represents insurance customers agency expiration list most valuable asset, lists date of expiration and names of policyholders independent agency network a group of agencies that contractually link to share services, resources, and insurers to gain advantages normally available to large regional and national brokers managing general agent (MGA) an authorized agent of the primary insurer that manages all or part of the primary insurer's insurance activities in specific area who is typically paid a negotiated fee? national broker exclusive agency marketing system an insurance marketing system under which agents contract to sell insurance exclusively for one insurer or an associated group when is it the hardest to switch marketing system? when you are renewing

direct writer marketing system an insurance marketing system that uses sales agents who are direct employees of the insurer mixed marketing system an insurer's use of more than one marketing system or distribution channel cold canvass contacting a prospect without an appointment loss run a report detailing an insured's history of claims that have occurred over a specific period valued as of a specific date agency bill a payment procedure in which the producer sends the premium bill to insured collects premium and sends premium to insurer less any commission direct bill a payment procedure in which the insurer assumes that responsibility for sending premium bills to the insured collecting premium and later sending commission to the producer contingent commission agreement a contract provision in which the insurer agrees to make supplemental payments to producers based on profitability volume, growth book of business a group of policies in which a common characteristic such as territory or type of coverage adverse selection the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance capacity

amount of business an insurer is able to write underwriting guidelines a written manual that communicates an insurer's underwriting policy that specifies the attributes of an account that an insurer is willing to insure underwriting authority the scope of decisions that an underwriter can make without receiving approval from someone at a higher level line underwriter underwriter who is primarily responsible for implementing the steps in the underwriting process staff underwriter underwriter who is usually located in the home office and assists underwriting management with making and implementing the underwriting policy underwriting policy a guide to individual and aggregate policy selection that supports an insurer's mission statement loss development the increase or decrease of incurred losses over time trending a statistical technique for analyzing environmental changes and projecting such changes into the future treaty reinsurance a reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer's individual loss exposures that fall within the treaty are automatically reinsured facultative reinsurance

reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer underwriting audit a review of underwriting files to ensure that individual underwriters are adhering to underwriting guidelines expert system computer software program that supplement the underwriting decision process ensure no information is overlooked hazard a condition that increase the frequency or severity of a loss moral hazard a condition that increase the likelihood that a person will intentionally cause or exaggerate a loss morale hazard a condition of carelessness that increase the severity or frequency of a loss legal hazard a condition of legal environment that increases the severity or frequency of a loss information efficiency the balance an underwriter must maintain between the hazards presented by the account and information needed to underwrite it experience rating a ratemaking technique that adjusts the insured's premium for the upcoming policy period based on the insured's experience for the current period schedule rating

a rating plan that awards debits and credits to modify the final premium to reflect factors that class rate does not include retrospective rating a ratemaking technique that adjusts the insured's premium for the current policy period based on the insured's loss experience during the current policy period; paid losses or incurred losses may be used to determine loss experience binder a temporary written or oral agreement to provide insurance coverage until a formal policy is issued rate the price per exposure unit for insurance coverage rate manual a resource for classifying accounts and developing premiums for given types of insurance actuary a person who uses mathematical methods to analyze loss data and make insurance rates insurance rating system the price per exposure unit determined by adjusting the prospective loss costs for expenses profits and contingencies loss costs the portion of the rate that covers projected claim payments and LAE Contingencies a provision in an insurance rate for losses that could not be anticipated in the loss data class rating uses rates reflecting the average proffitbailty of loss for businesses within large group of similar risks

what is the predominant method used for rating commercial properties class rating individual rate type of insurance rate that reflects the unique characteristics of an insured and their property judgement rating rating used by underwriters to rate one of a kind risks final rate the price per exposure unit determined by adjusting the prospective loss costs for expense, profits, and coningencies exapm