AU60 PRACTICE
EXAM/ASSIGNMENT QUESTIONS &
ANSWERS 100% CORRECT
Underwriters can best minimize the effects of adverse selection by
Select one:
A. Carefully selecting the applicants whose loss exposures they are willing to insure.
B. Choosing to insure only those risks with a high probability of loss.
C. Accepting all applicants that are submitted by the producer.
D. Rejecting applicants who have had any prior losses. - ANSWERA. Carefully
selecting the applicants whose loss exposures they are willing to insure.
Victor, sales manager for Hallbinger's Insurance Company wants the company to
grow in written premium. He wants his agents to write more auto and homeowner
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?
Select one:
A. Claims must pay only covered losses and have low expenses.
B. Underwriting practices must generate policy premiums that exceed losses and
expenses.
C. Sales must write profitable business not loss producing business.
D. Research and development must create policies which are marketable. -
ANSWERB. Underwriting practices must generate policy premiums that exceed
losses and expenses.
Which one of the following types of emerging technology allows a risk management
team to continuously monitor jobsites, manufacturing facilities, vehicle performance,
and employees' proximity to hazardous work areas?
Select one:
A. Machine learning
B. Third-party databases
C. Data mining
D. Sensors and telematics - ANSWERD. Sensors and telematics
Which one of the following statements is correct with respect to market conduct
examinations?
Select one:
A. They analyze only the underwriting and claims aspects of an insurer's operations.
B. They are performed by the National Association of Insurance Commissioners.
C. They protect both insurers and consumers from unfair insurer practices.
D. They are conducted only in response to a consumer complaint. - ANSWERC.
They protect both insurers and consumers from unfair insurer practices.
,Which one of the following statements regarding monthly report variations and
quarterly reports used in reunderwriting is true?
Select one:
A. Corrective actions immediately impact the entire book of business.
B. A catastrophe in a single month renders a monthly report for that month useless.
C. Annual goals for the year must be apportioned evenly across the months.
D. By the end of the third quarter, it may be too late to improve that year's operating
results. - ANSWERD. By the end of the third quarter, it may be too late to improve
that year's operating results.
Which one of the following statements about using nonrenewal as a reunderwriting
corrective measure is true?
Select one:
A. Nonrenewal is an illegal market action in most states.
B. Nonrenewal means that unprofitable policies are immediately canceled.
C. Ordering nonrenewal of a group of polices immediately curtails losses from these
policies.
D. State law may restrict or limit an insurer's ability to use nonrenewal. - ANSWERD.
State law may restrict or limit an insurer's ability to use nonrenewal.
For underwriting to achieve its purpose,
Select one:
A. Underwriters must select applicants with legal hazards.
B. Insurers must minimize the effects of adverse selection on the book of business.
C. Underwriters must randomly select applicants to insure.
D. Insurers must follow the steps in the underwriting process in strict sequence. -
ANSWERB. Insurers must minimize the effects of adverse selection on the book of
business.
The purpose of underwriting is to
Select one:
A. Develop and maintain a profitable book of business for the insurer.
B. Compile information to develop a profile of loss exposures.
C. "Pre-qualify" or field underwrite applicants.
D. Maximize the impact of adverse selection on the portfolio. - ANSWERA. Develop
and maintain a profitable book of business for the insurer.
To achieve profitability, the underwriting process serves which one of the following
additional purposes?
Select one:
A. Guarding against adverse selection
B. Selecting accounts with a lower-than-average chance of loss
C. Transferring the risks of individuals and businesses
D. Charging fair premiums for applications that are accepted - ANSWERA. Guarding
against adverse selection
Sofie, a property underwriter for Cintriell Insurance Company is reviewing a new
homeowners application. Sofie has changed the protection class to unprotected, as
,the fire protection class listed by the producer is an eight and is incorrect. Which one
of the following line underwriter activities is Sofie performing?
Select one:
A. Classifying and pricing accounts
B. Selecting insureds
C. Coordinating with producer efforts
D. Recommending correct coverage - ANSWERA. Classifying and pricing accounts
An insurance company needs to hire an employee with knowledge of insurance
policy forms and the ability to relate policy provisions to the loss exposures of
individual policyholders. The person will also prepare premium quotes and process
cancellations. Which one of the following employees would best suit the company's
needs?
Select one:
A. Premium auditor
B. Field underwriter
C. Corporate underwriter
D. Producer - ANSWERB. Field underwriter
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 is known as
Select one:
A. Formulating underwriting policy.
B. Providing assistance to policyholders.
C. Reviewing and revising rating plans.
D. Developing underwriting guides. - ANSWERA. Formulating underwriting policy.
Corporate underwriters share research of the market responsibilities with actuarial
and marketing departments. Research includes an ongoing evaluation of which one
of the following?
Select one:
A. Average loss ratio for a book of business
B. Revisions to coverage forms
C. Positive effects of a hard market
D. Optimal product mix in the book of business - ANSWERD. Optimal product mix in
the book of business
The common distinction between field underwriters and corporate underwriters is
that line underwriters
Select one:
A. Conduct underwriting audits. Corporate underwriters prepare files for the data
entry department.
B. Implement the steps in the underwriting process. Corporate underwriters assist
underwriting management with formulating underwriting policy.
C. Develop underwriting guides. Corporate underwriters provide service to
policyholders.
D. Research the market. Corporate underwriters verify that policies are issued with
the appropriate forms and endorsements. - ANSWERB. Implement the steps in the
, underwriting process. Corporate underwriters assist underwriting management with
formulating underwriting policy.
Jane is Regional Manager for Goshen Mutual. The retention rate for her region's
commercial auto book has dropped by 10 percent over the last 18 months. Jane has
asked an information technology (IT) specialist to help her determine common
characteristics among the accounts that are renewing, those that are not renewing,
and those that are most profitable. She is also trying to determine if there is a
common reason why accounts are not renewing. Which one of the following forms of
analysis will the IT specialist use to help Jane focus on improving her auto retention?
Select one:
A. Internet of Things
B. Smart products
C. Data mining
D. Predictive modeling - ANSWERC. Data mining
In an effort to control its loss exposures, Furlong Distributing uses a network of
objects that transmit data to each other and to central hubs through the internet. This
network is known as
Select one:
A. A big data network.
B. Artificial intelligence.
C. Social media.
D. The Internet of Things. - ANSWERD. The Internet of Things.
As a commercial lines underwriter, William would spend many hours reviewing and
summarizing the loss runs that were part of a new business application. He can now
rely on a computer to digitalize and summarize those loss runs. This is an example
of how underwriting has been transformed by which one of the following
advancements in technology?
Select one:
A. Wireless sensor networks
B. Machine learning
C. Internet of Things
D. Smart products - ANSWERB. Machine learning
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
Select one:
A. Increase the physical damage deductible.
B. Propose a premium increase at renewal time.
C. Add a special endorsement to the policy.
D. Propose a premium reduction at renewal time. - ANSWERD. Propose a premium
reduction at renewal time.
Unlicensed teenage driver Bill applied for insurance on his automobile. Upon
learning that Bill was not only unlicensed but that he intentionally misstated his age
EXAM/ASSIGNMENT QUESTIONS &
ANSWERS 100% CORRECT
Underwriters can best minimize the effects of adverse selection by
Select one:
A. Carefully selecting the applicants whose loss exposures they are willing to insure.
B. Choosing to insure only those risks with a high probability of loss.
C. Accepting all applicants that are submitted by the producer.
D. Rejecting applicants who have had any prior losses. - ANSWERA. Carefully
selecting the applicants whose loss exposures they are willing to insure.
Victor, sales manager for Hallbinger's Insurance Company wants the company to
grow in written premium. He wants his agents to write more auto and homeowner
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?
Select one:
A. Claims must pay only covered losses and have low expenses.
B. Underwriting practices must generate policy premiums that exceed losses and
expenses.
C. Sales must write profitable business not loss producing business.
D. Research and development must create policies which are marketable. -
ANSWERB. Underwriting practices must generate policy premiums that exceed
losses and expenses.
Which one of the following types of emerging technology allows a risk management
team to continuously monitor jobsites, manufacturing facilities, vehicle performance,
and employees' proximity to hazardous work areas?
Select one:
A. Machine learning
B. Third-party databases
C. Data mining
D. Sensors and telematics - ANSWERD. Sensors and telematics
Which one of the following statements is correct with respect to market conduct
examinations?
Select one:
A. They analyze only the underwriting and claims aspects of an insurer's operations.
B. They are performed by the National Association of Insurance Commissioners.
C. They protect both insurers and consumers from unfair insurer practices.
D. They are conducted only in response to a consumer complaint. - ANSWERC.
They protect both insurers and consumers from unfair insurer practices.
,Which one of the following statements regarding monthly report variations and
quarterly reports used in reunderwriting is true?
Select one:
A. Corrective actions immediately impact the entire book of business.
B. A catastrophe in a single month renders a monthly report for that month useless.
C. Annual goals for the year must be apportioned evenly across the months.
D. By the end of the third quarter, it may be too late to improve that year's operating
results. - ANSWERD. By the end of the third quarter, it may be too late to improve
that year's operating results.
Which one of the following statements about using nonrenewal as a reunderwriting
corrective measure is true?
Select one:
A. Nonrenewal is an illegal market action in most states.
B. Nonrenewal means that unprofitable policies are immediately canceled.
C. Ordering nonrenewal of a group of polices immediately curtails losses from these
policies.
D. State law may restrict or limit an insurer's ability to use nonrenewal. - ANSWERD.
State law may restrict or limit an insurer's ability to use nonrenewal.
For underwriting to achieve its purpose,
Select one:
A. Underwriters must select applicants with legal hazards.
B. Insurers must minimize the effects of adverse selection on the book of business.
C. Underwriters must randomly select applicants to insure.
D. Insurers must follow the steps in the underwriting process in strict sequence. -
ANSWERB. Insurers must minimize the effects of adverse selection on the book of
business.
The purpose of underwriting is to
Select one:
A. Develop and maintain a profitable book of business for the insurer.
B. Compile information to develop a profile of loss exposures.
C. "Pre-qualify" or field underwrite applicants.
D. Maximize the impact of adverse selection on the portfolio. - ANSWERA. Develop
and maintain a profitable book of business for the insurer.
To achieve profitability, the underwriting process serves which one of the following
additional purposes?
Select one:
A. Guarding against adverse selection
B. Selecting accounts with a lower-than-average chance of loss
C. Transferring the risks of individuals and businesses
D. Charging fair premiums for applications that are accepted - ANSWERA. Guarding
against adverse selection
Sofie, a property underwriter for Cintriell Insurance Company is reviewing a new
homeowners application. Sofie has changed the protection class to unprotected, as
,the fire protection class listed by the producer is an eight and is incorrect. Which one
of the following line underwriter activities is Sofie performing?
Select one:
A. Classifying and pricing accounts
B. Selecting insureds
C. Coordinating with producer efforts
D. Recommending correct coverage - ANSWERA. Classifying and pricing accounts
An insurance company needs to hire an employee with knowledge of insurance
policy forms and the ability to relate policy provisions to the loss exposures of
individual policyholders. The person will also prepare premium quotes and process
cancellations. Which one of the following employees would best suit the company's
needs?
Select one:
A. Premium auditor
B. Field underwriter
C. Corporate underwriter
D. Producer - ANSWERB. Field underwriter
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 is known as
Select one:
A. Formulating underwriting policy.
B. Providing assistance to policyholders.
C. Reviewing and revising rating plans.
D. Developing underwriting guides. - ANSWERA. Formulating underwriting policy.
Corporate underwriters share research of the market responsibilities with actuarial
and marketing departments. Research includes an ongoing evaluation of which one
of the following?
Select one:
A. Average loss ratio for a book of business
B. Revisions to coverage forms
C. Positive effects of a hard market
D. Optimal product mix in the book of business - ANSWERD. Optimal product mix in
the book of business
The common distinction between field underwriters and corporate underwriters is
that line underwriters
Select one:
A. Conduct underwriting audits. Corporate underwriters prepare files for the data
entry department.
B. Implement the steps in the underwriting process. Corporate underwriters assist
underwriting management with formulating underwriting policy.
C. Develop underwriting guides. Corporate underwriters provide service to
policyholders.
D. Research the market. Corporate underwriters verify that policies are issued with
the appropriate forms and endorsements. - ANSWERB. Implement the steps in the
, underwriting process. Corporate underwriters assist underwriting management with
formulating underwriting policy.
Jane is Regional Manager for Goshen Mutual. The retention rate for her region's
commercial auto book has dropped by 10 percent over the last 18 months. Jane has
asked an information technology (IT) specialist to help her determine common
characteristics among the accounts that are renewing, those that are not renewing,
and those that are most profitable. She is also trying to determine if there is a
common reason why accounts are not renewing. Which one of the following forms of
analysis will the IT specialist use to help Jane focus on improving her auto retention?
Select one:
A. Internet of Things
B. Smart products
C. Data mining
D. Predictive modeling - ANSWERC. Data mining
In an effort to control its loss exposures, Furlong Distributing uses a network of
objects that transmit data to each other and to central hubs through the internet. This
network is known as
Select one:
A. A big data network.
B. Artificial intelligence.
C. Social media.
D. The Internet of Things. - ANSWERD. The Internet of Things.
As a commercial lines underwriter, William would spend many hours reviewing and
summarizing the loss runs that were part of a new business application. He can now
rely on a computer to digitalize and summarize those loss runs. This is an example
of how underwriting has been transformed by which one of the following
advancements in technology?
Select one:
A. Wireless sensor networks
B. Machine learning
C. Internet of Things
D. Smart products - ANSWERB. Machine learning
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
Select one:
A. Increase the physical damage deductible.
B. Propose a premium increase at renewal time.
C. Add a special endorsement to the policy.
D. Propose a premium reduction at renewal time. - ANSWERD. Propose a premium
reduction at renewal time.
Unlicensed teenage driver Bill applied for insurance on his automobile. Upon
learning that Bill was not only unlicensed but that he intentionally misstated his age
