AU 60 EXAM SCRIPT 2026 VERIFIED
QUESTIONS AND ANSWERS FULL SOLUTION
◉ Which one of the following is the term used to refer to a situation that
occurs because people with the greatest profitability of loss are the ones
most likely to purchase insurance
A. probable maximum loss
B. spread of risk
C. risk inconsistency
D. adverse selection. Answer: D. adverse selection
◉ Underwriters can best minimize the effects of adverse selection by
A. accepting all applicants that are submitted by the producer
B. choosing to insure only those risks with a high profitability of loss
C. rejecting applicants who have had prior losses
D. carefully selecting the applicants whose loss exposures they are
willing to insure. Answer: D. carefully selecting the applicants whose
loss exposures they are willing to insure
◉ Victor, the sales manager for Hallbinger's Insurance Company, wants
the company to grow in written premium. He wants his agents to write
more auto and homeowners business. In order to do so, the company
must have adequate capacity. Which one of the following impacts
Victor's agents and the company the most concerning surplus and
capacity?
,A. sales must submit business with lower-than-average chance of loss
B. research and development must create policies which are marketable
C. claims must pay only covered losses and have low expenses
D. underwriting practices must generate policy premiums that exceed
losses and expenses. Answer: D. underwriting practices must generate
policy premiums that exceed losses and expenses
◉ An insurance company must have adequate policyholders' surplus if it
wishes to
A. avoid adverse selection
B. generate premiums that exceed losses
C. produce profitable business
D. increase its written premium volume. Answer: D. increase its written
premium volume
◉ which one of the following will draft a manuscript policy or
endorsement that is worded to address the specific needs of the insured?
A. producer
B. field underwriter
C. underwriting supervisor
D. corporate underwriter. Answer: D. corporate underwriter
◉ Which one of the following tasks is the responsibility of a corporate
underwriter as opposed to a field underwriter?
,A. prepare premium quotes
B. verify policies are issued with appropriate forms and endorsements
C. review and revise rating plans
D. assist producers and insureds in determining appropriate coverage.
Answer: C. review and revise rating plans
◉ While developing goals for its book of business, an insurer's corporate
underwriter decides to increase its market share of workers
compensation insurance in the construction industry. This type of
underwriting activity in known as
A. developing underwriting guides
B. reviewing and revising rating plans
C. formulating underwriting policy
D. providing assistance to policyholders. Answer: C. formulating
underwriting policy
◉ Corporate underwriters share research of the market responsibilities
with actuarial and marketing departments. Research included an ongoing
evaluation of which one of the following?
A. revision of coverage forms
B. optimal product mix in the book of business
C. average loss ratio for a book of business
D. the hit ratios by underwriter. Answer: B. optimal product mix in the
book of business
, ◉ Maja, who has 29 years of experience as a professional liability
underwriter, works in the home office of Richley Insurance Company.
Her primary responsibilities involve formulating underwriting policy
and revising underwriting guides for various lines of professional
liability insurance that will be used by personnel in the company's field
offices. Maja is functioning as a
A. field underwriter
B. corporate underwriter
C. chartered underwriter
D. line underwriter. Answer: B. corporate underwriter
◉ during a mid-year review of one of her large accounts, Annette
noticed that the frequency and severity of auto losses had been trending
downward over the past 18 months. When she consulted with the
account's risk management team, she learned that the insured had
installed telematics devices in many of their vehicles. This information
would help support Annette's decision to
A. propose a premium increase at renewal time
B. add a special endorsement to the policy
C. propose a premium reduction at renewal time
D. increase the physical damage deductible. Answer: C. propose a
premium reduction at renewal time
QUESTIONS AND ANSWERS FULL SOLUTION
◉ Which one of the following is the term used to refer to a situation that
occurs because people with the greatest profitability of loss are the ones
most likely to purchase insurance
A. probable maximum loss
B. spread of risk
C. risk inconsistency
D. adverse selection. Answer: D. adverse selection
◉ Underwriters can best minimize the effects of adverse selection by
A. accepting all applicants that are submitted by the producer
B. choosing to insure only those risks with a high profitability of loss
C. rejecting applicants who have had prior losses
D. carefully selecting the applicants whose loss exposures they are
willing to insure. Answer: D. carefully selecting the applicants whose
loss exposures they are willing to insure
◉ Victor, the sales manager for Hallbinger's Insurance Company, wants
the company to grow in written premium. He wants his agents to write
more auto and homeowners business. In order to do so, the company
must have adequate capacity. Which one of the following impacts
Victor's agents and the company the most concerning surplus and
capacity?
,A. sales must submit business with lower-than-average chance of loss
B. research and development must create policies which are marketable
C. claims must pay only covered losses and have low expenses
D. underwriting practices must generate policy premiums that exceed
losses and expenses. Answer: D. underwriting practices must generate
policy premiums that exceed losses and expenses
◉ An insurance company must have adequate policyholders' surplus if it
wishes to
A. avoid adverse selection
B. generate premiums that exceed losses
C. produce profitable business
D. increase its written premium volume. Answer: D. increase its written
premium volume
◉ which one of the following will draft a manuscript policy or
endorsement that is worded to address the specific needs of the insured?
A. producer
B. field underwriter
C. underwriting supervisor
D. corporate underwriter. Answer: D. corporate underwriter
◉ Which one of the following tasks is the responsibility of a corporate
underwriter as opposed to a field underwriter?
,A. prepare premium quotes
B. verify policies are issued with appropriate forms and endorsements
C. review and revise rating plans
D. assist producers and insureds in determining appropriate coverage.
Answer: C. review and revise rating plans
◉ While developing goals for its book of business, an insurer's corporate
underwriter decides to increase its market share of workers
compensation insurance in the construction industry. This type of
underwriting activity in known as
A. developing underwriting guides
B. reviewing and revising rating plans
C. formulating underwriting policy
D. providing assistance to policyholders. Answer: C. formulating
underwriting policy
◉ Corporate underwriters share research of the market responsibilities
with actuarial and marketing departments. Research included an ongoing
evaluation of which one of the following?
A. revision of coverage forms
B. optimal product mix in the book of business
C. average loss ratio for a book of business
D. the hit ratios by underwriter. Answer: B. optimal product mix in the
book of business
, ◉ Maja, who has 29 years of experience as a professional liability
underwriter, works in the home office of Richley Insurance Company.
Her primary responsibilities involve formulating underwriting policy
and revising underwriting guides for various lines of professional
liability insurance that will be used by personnel in the company's field
offices. Maja is functioning as a
A. field underwriter
B. corporate underwriter
C. chartered underwriter
D. line underwriter. Answer: B. corporate underwriter
◉ during a mid-year review of one of her large accounts, Annette
noticed that the frequency and severity of auto losses had been trending
downward over the past 18 months. When she consulted with the
account's risk management team, she learned that the insured had
installed telematics devices in many of their vehicles. This information
would help support Annette's decision to
A. propose a premium increase at renewal time
B. add a special endorsement to the policy
C. propose a premium reduction at renewal time
D. increase the physical damage deductible. Answer: C. propose a
premium reduction at renewal time
