AU 60: EVALUATING COMMERCIAL
UNDERWRITING RISKS QUESTIONS
& ANSWERS (GRADED A+)
Book of Business - ANSWERA group of policies with a common characteristic, such
as territory or type of coverage, or all policies written by a particular insurer or
agency.
Underwriting - ANSWERthe process of selecting, classifying, and pricing applicants
for insurance
Premium-to-surplus ratio, or capacity ratio - ANSWERA capacity ratio that indicates
an insurer's financial strength by relating net written premiums to policyholders'
surplus
Application - ANSWERA legal document that provides information obtained directly
from an applicant requesting insurance and that an insurer can use for underwriting
and claim handling purposes.
Declination - ANSWERAn insurer's refusal to provide coverage to an applicant who
has made a written request to the insurer or its producer, or a producer's refusal to
forward such a written request to an insurer.
Termination - ANSWERAn Insurer's cancellation of a policy during the policy term or
nonrenewal of coverage at the end of a policy term.
Notification Requirements - ANSWERregulatory requirements relating to timing and
contents of an insurers notice to an insured of the declination, termination and
nonrenewal of insurance coverage
Market Conduct Examination - ANSWERAn analysis of an insurer's practices in four
operational areas: sales and advertising, underwriting, ratemaking, and claim
handling.
Loss History - ANSWERA listing of past claims, including the date of occurrence, the
line of business, the type or description of the claim, the date of the claim, the
amount paid, the amount reserved, and the claim's current status.
Experience rating plan - ANSWERA rating plan that increases or reduces the
premium for a future period based on the insured's own loss experience for a period
in the recent past.
UNDERWRITING RISKS QUESTIONS
& ANSWERS (GRADED A+)
Book of Business - ANSWERA group of policies with a common characteristic, such
as territory or type of coverage, or all policies written by a particular insurer or
agency.
Underwriting - ANSWERthe process of selecting, classifying, and pricing applicants
for insurance
Premium-to-surplus ratio, or capacity ratio - ANSWERA capacity ratio that indicates
an insurer's financial strength by relating net written premiums to policyholders'
surplus
Application - ANSWERA legal document that provides information obtained directly
from an applicant requesting insurance and that an insurer can use for underwriting
and claim handling purposes.
Declination - ANSWERAn insurer's refusal to provide coverage to an applicant who
has made a written request to the insurer or its producer, or a producer's refusal to
forward such a written request to an insurer.
Termination - ANSWERAn Insurer's cancellation of a policy during the policy term or
nonrenewal of coverage at the end of a policy term.
Notification Requirements - ANSWERregulatory requirements relating to timing and
contents of an insurers notice to an insured of the declination, termination and
nonrenewal of insurance coverage
Market Conduct Examination - ANSWERAn analysis of an insurer's practices in four
operational areas: sales and advertising, underwriting, ratemaking, and claim
handling.
Loss History - ANSWERA listing of past claims, including the date of occurrence, the
line of business, the type or description of the claim, the date of the claim, the
amount paid, the amount reserved, and the claim's current status.
Experience rating plan - ANSWERA rating plan that increases or reduces the
premium for a future period based on the insured's own loss experience for a period
in the recent past.
