AU60 PRACTICE QUESTIONS AND
ANSWERS (RATED A+)
The overarching purpose of underwriting is - ANSWERDevelop and maintain a
profitable book of business.
Underwriters can best minimize the effects of adverse selection by -
ANSWERCarefully selecting the applicants whose loss exposures they are willing to
insure.
A group of policies with a common characteristic, such as territory or type of
coverage, or all policies written by a particular insurer, producer, or agency is
referred to as - ANSWERA book of business.
Which one of the following tasks is the responsibility of a corporate underwriter as
opposed to a field underwriter? - ANSWERReview and revise rating plans.
The most important thing a field underwriter does is - ANSWEREvaluating new
submissions and renewal underwriting.
The common distinction between field underwriters and corporate underwriters is
that line underwriters - ANSWERImplement the steps in the underwriting process.
Corporate underwriters assist underwriting management with formulating
underwriting policy.
Which one of the following will draft a manuscript policy or endorsement that is
worded to address the specific needs of the insured? - ANSWERCorporate
underwriter.
An insurance company must have adequate policyholders' surplus if it wishes to -
ANSWERIncrease its written premium volume.
Ace Woodworking Company makes household furniture. Which one of the following
best describes an expense that should be classified as an operating expense on
Ace's income statement? - ANSWERUtility charges for the manufacturing plant.
Which one of the following financial reporting services focuses on the trucking
industry? - ANSWERCentral Analysis Bureau.
Home builder Jerry Barton engaged an electrician to install overhead ceiling fans in
many new homes. Jerry paid the electrician by the hour, supervised his work, and
had the right to discharge him. Which one of the following terms best describes the
employment status of the electrician? - ANSWEREmployee.
,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? - ANSWERClassifying
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? - ANSWERField underwriter.
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? - ANSWERMachine learning.
To achieve profitability, the underwriting process serves which one of the following
additional purposes? - ANSWERGuarding against adverse selection.
An insurance company must have adequate policyholders surplus if it wishes to -
ANSWERIncrease its written premium volume.
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
office. Maja is functioning as a - ANSWERCorporate underwriter.
Corporate underwriters share research of the market responsibilities with actuarial
and marketing departments. Research includes an ongoing evaluation of which one
of the following? - ANSWEROptimal product mix in the book of business.
The state advisory organization has developed a new homeowners form which
increases the limits of liability for personal property in guns, silverware, jewelry, and
boats. Jancy Insurance Company is considering modifying this form for its own use.
Which one of the following members of Jancys staff would be involved in the
research and development of this new form? - ANSWEREmma, the corporate
underwriter.
Jane is Regional Manager for Goshen Mutual. The retention rate for her region's
commercial auto book has dropped by 10% over the last 18 months. Jane has asked
for an 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? - ANSWERDate mining.
, Which one of the following is the most common use of predictive modeling in the
underwriting of small commercial accounts? - ANSWERRating.
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 accounts 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 - ANSWERPropose a premium
reduction at renewal time.
Which one of the following statements is correct with respect to market conduct
examinations? - ANSWERThe Department of Insurance (DOI) may suspend or
revoke the insurers certificate of authority if it finds that an insurer has violated a law.
Underwriting regulations seek to ensure correct classification of insureds because -
ANSWERMisclassification can result in inadequate premiums and drain an insurers
surplus.
Which one of the following is the primary reason that governments seek to prevent
insurer insolvency through underwriting regulations? - ANSWERTo prevent insureds
from being left without coverage and suffering great financial loss.
Underwriters, in conjunction with ratemakers, help achieve actuarial equity by -
ANSWERAssigning insureds with similar characteristics to the same rating class.
The principle purpose of underwriting is to - ANSWERDevelop and maintain a
profitable book of business for the insurer.
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 homeowners
business. In order to do so, the company must have adequate capacity. Which one
of the following impacts Victors agents and the company the most concerning
surplus and capacity? - ANSWERUnderwriting practices must generate policy
premiums that exceed losses and expenses.
In deciding which applicants they are willing to insure, insurance underwriters need
to recognize the effects of adverse selection. Which one of the following is the best
example of adverse selection? - ANSWERAfter learning that a particularly active
hurricane season is expected, several homeowners in a coastal community increase
the limits on their windstorm coverage.
With advancements in technology, underwriting data is becoming increasingly
abundant and more reliable. These technological advancements changed
underwriting in which one of the following ways? - ANSWERMore insurers are
turning to automated systems.
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 - ANSWERThe Internet of Things.
ANSWERS (RATED A+)
The overarching purpose of underwriting is - ANSWERDevelop and maintain a
profitable book of business.
Underwriters can best minimize the effects of adverse selection by -
ANSWERCarefully selecting the applicants whose loss exposures they are willing to
insure.
A group of policies with a common characteristic, such as territory or type of
coverage, or all policies written by a particular insurer, producer, or agency is
referred to as - ANSWERA book of business.
Which one of the following tasks is the responsibility of a corporate underwriter as
opposed to a field underwriter? - ANSWERReview and revise rating plans.
The most important thing a field underwriter does is - ANSWEREvaluating new
submissions and renewal underwriting.
The common distinction between field underwriters and corporate underwriters is
that line underwriters - ANSWERImplement the steps in the underwriting process.
Corporate underwriters assist underwriting management with formulating
underwriting policy.
Which one of the following will draft a manuscript policy or endorsement that is
worded to address the specific needs of the insured? - ANSWERCorporate
underwriter.
An insurance company must have adequate policyholders' surplus if it wishes to -
ANSWERIncrease its written premium volume.
Ace Woodworking Company makes household furniture. Which one of the following
best describes an expense that should be classified as an operating expense on
Ace's income statement? - ANSWERUtility charges for the manufacturing plant.
Which one of the following financial reporting services focuses on the trucking
industry? - ANSWERCentral Analysis Bureau.
Home builder Jerry Barton engaged an electrician to install overhead ceiling fans in
many new homes. Jerry paid the electrician by the hour, supervised his work, and
had the right to discharge him. Which one of the following terms best describes the
employment status of the electrician? - ANSWEREmployee.
,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? - ANSWERClassifying
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? - ANSWERField underwriter.
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? - ANSWERMachine learning.
To achieve profitability, the underwriting process serves which one of the following
additional purposes? - ANSWERGuarding against adverse selection.
An insurance company must have adequate policyholders surplus if it wishes to -
ANSWERIncrease its written premium volume.
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
office. Maja is functioning as a - ANSWERCorporate underwriter.
Corporate underwriters share research of the market responsibilities with actuarial
and marketing departments. Research includes an ongoing evaluation of which one
of the following? - ANSWEROptimal product mix in the book of business.
The state advisory organization has developed a new homeowners form which
increases the limits of liability for personal property in guns, silverware, jewelry, and
boats. Jancy Insurance Company is considering modifying this form for its own use.
Which one of the following members of Jancys staff would be involved in the
research and development of this new form? - ANSWEREmma, the corporate
underwriter.
Jane is Regional Manager for Goshen Mutual. The retention rate for her region's
commercial auto book has dropped by 10% over the last 18 months. Jane has asked
for an 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? - ANSWERDate mining.
, Which one of the following is the most common use of predictive modeling in the
underwriting of small commercial accounts? - ANSWERRating.
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 accounts 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 - ANSWERPropose a premium
reduction at renewal time.
Which one of the following statements is correct with respect to market conduct
examinations? - ANSWERThe Department of Insurance (DOI) may suspend or
revoke the insurers certificate of authority if it finds that an insurer has violated a law.
Underwriting regulations seek to ensure correct classification of insureds because -
ANSWERMisclassification can result in inadequate premiums and drain an insurers
surplus.
Which one of the following is the primary reason that governments seek to prevent
insurer insolvency through underwriting regulations? - ANSWERTo prevent insureds
from being left without coverage and suffering great financial loss.
Underwriters, in conjunction with ratemakers, help achieve actuarial equity by -
ANSWERAssigning insureds with similar characteristics to the same rating class.
The principle purpose of underwriting is to - ANSWERDevelop and maintain a
profitable book of business for the insurer.
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 homeowners
business. In order to do so, the company must have adequate capacity. Which one
of the following impacts Victors agents and the company the most concerning
surplus and capacity? - ANSWERUnderwriting practices must generate policy
premiums that exceed losses and expenses.
In deciding which applicants they are willing to insure, insurance underwriters need
to recognize the effects of adverse selection. Which one of the following is the best
example of adverse selection? - ANSWERAfter learning that a particularly active
hurricane season is expected, several homeowners in a coastal community increase
the limits on their windstorm coverage.
With advancements in technology, underwriting data is becoming increasingly
abundant and more reliable. These technological advancements changed
underwriting in which one of the following ways? - ANSWERMore insurers are
turning to automated systems.
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 - ANSWERThe Internet of Things.
