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...
AINS 101 Exam Prep 2024 | 100% Correct
Answers | Verified | Latest 2024 Version
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. - ✔✔When
her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it.
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. -
✔✔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? - ✔✔Workers
compensation insurance
A homeowners policy is a type of - ✔✔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. -
✔✔Government programs can meet legitimate public demands unmet by private insurers.
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
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? - ✔✔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. - ✔✔Insureds share the cost of each other's losses.
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
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.
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)
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 corporation
owned by policyholders that provides insurance to its policyholders.
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.
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 - ✔✔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 - ✔✔Artificial Intelligence
The primary role of insurance is to - ✔✔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. - ✔✔Insureds share the cost of each other's losses.
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.
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