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AU 60 Test Questions Chapters. 1-4 with complete solutions
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AU 60 Test Questions Chapters. 1-4 with complete solutions
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AU 60 Test Questions Chapters. 1-4 withcomplete solutions
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? -
correct answer -After learning that a particularly active hurricane season is expected, several
homeowners in a coastal community increase the limits on their windstorm coverage.
The retention ratio as an underwriting performance measure is the percentage of - correct answer -
Insurance policies renewed.
An underwriter receives a renewal application for a property quote from his producer. The applicant has
had a series of small losses in the recent past. The underwriter is debating whether to reject the
submission or quote it with a property deductible of $5,000. During which one of the following steps in
the underwriting process is the underwriter involved? - correct answer -Developing underwriting
alternatives
Which one of the following will draft a manuscript policy or endorsement that is worded to address the
specific needs of the insured? - correct answer -Line underwriter
Depending on the type of insurance, insurers use automated underwriting systems to - correct answer -
Encode underwriting guidelines.
An underwriter is working with a loss control representative on a new opportunity. Given the complexity
of the exposures, a physical survey is conducted by the loss control representative, and a formal report
is prepared. The report reveals that the insured owns several unattended properties, and that they were
unlocked when the loss control representative conducted the survey. This failure to properly secure an
unattended building would be an indicator to the underwriter of which one of the following types of
hazard? - correct answer -Morale
All of the following statements are true regarding the factors affecting the formation of an insurer's
underwriting policy, EXCEPT: - correct answer -The higher an insurer's premium-to-surplus ratio, the
greater its ability to expand premium writings.
, Aaron, a senior producer for Blithe Insurance Company (Blithe) has over 15 years experience in the field.
He knows Blithe's underwriting guidelines and is familiar with the type of business Blithe wants. He
takes pride in the loss ratio produced by his office and also produced by Blithe as a company. He often
trains new agents in his office because of his low rejection ratio of applications he writes. He is known as
a front-line underwriter for Blithe. Which one of the following is a benefit of Aaron's field underwriting?
- correct answer -Saves Blithe from having to evaluate accounts that they will ultimately reject
Which one of the following cases illustrates how underwriting guidelines ensure that selection decisions
provide uniformity and consistency by all the insurer's underwriters? - correct answer -Cromley is
training new underwriters and is using a work sample for a homeowner risk which has a unacceptable
roof and an overgrown yard. New underwriters Erin and Filip check the guidelines and make the same
underwriting decision to decline the risk.
Julio, a producer for Argot's Insurance Company, submits an application for a 50-year-old residence to
Mathilde, the underwriter. Julio wants to know why the homeowners rate is higher for his 50-year-old
residence. Mathilde explains that the homeowners rate for the 50-year-old residence is not the same for
a five-year-old residence because the exposures are different. Which one of the following underwriting
profitability functions of Argot is Mathilde's explanation supporting? - correct answer -Ensuring
adequate policyholder's surplus
Which one of the following is determined by a company's underwriting policy? - correct answer -
Composition of the insurer's book of business
An insurance company must have adequate policyholders' surplus if it wishes to - correct answer -
Increase its written premium volume.
Which one of the following represents two nonfinancial measures that are used to evaluate
underwriting performance by focusing on underwriting actions? - correct answer -Retention ratio and
hit ratio
Rating agencies such as Dun & Bradstreet (D&B) provide - correct answer -Data on credit ratings of
businesses.
An applicant for commercial property insurance is found unacceptable by an underwriter due to the
nature of its operations and the construction of the building it occupies. If the applicant installs an
automatic fire-extinguishing sprinkler system, the underwriter will approve the application. This type of
underwriting modification is known as - correct answer -Requiring loss control measures.
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