Exam (elaborations)
AU 60 QUESTIONS AND ANSWERS
- Course
- Institution
AU 60 QUESTIONS AND ANSWERS
[Show more]
Content preview
AU 60 QUESTIONS AND ANSWERSTo achieve profitability, the underwriting function serves which one of the following
additional purposes? - Answers- C. Guarding against adverse selection
Which one of the following will draft a manuscript policy or endorsement that is worded
to address the specific needs of the insured - Answers- Line underwriter
Depending on the type of insurance, insurers use automated underwriting systems to -
Answers- Encode underwriting guidelines.
Specialty insurers such as those offering surety bonds, aviation insurance, and livestock
mortality insurance usually - Answers- Centralize underwriting authority.
All of the following statements are true regarding the factors affecting the formation of
an insurer's underwriting policy, EXCEPT: - Answers- The higher an insurer's premium-
to-surplus ratio, the greater its ability to expand premium writings.v
Argot Stock Insurance Company's (Argot) net income is $1,000,000 and its average
owners' equity is $16,500,000. Argot's average policyholders' surplus is $20,000,000.
Using the GAAP approach, which one of the following is Argot's return on equity? -
Answers- Argot's return on equity using the GAAP approach is 6 percent, determined by
net income ($1,000,000) divided by average owners' equity ($16,500,000).
Which one of the following is determined by a company's underwriting policy? -
Answers- Composition of the insurer's book of business
A rating plan available to commercial insurance applicants that awards debits and
credits to a submission based on specific categories is known as a(n) - Answers-
Schedule rating plan.
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? - Answers- Morale
Which one of the following is a financial measure of underwriting performance? -
Answers- Combined ratio
Which one of the following statements is correct regarding nonfinancial measures of
underwriting results? - Answers- Selection standards for underwriters usually support
overall underwriting goals and are evaluated during audits.
, Which one of the following statements is correct with respect to market conduct
examinations? - Answers- They protect both insurers and consumers from unfair
insurer practices.
Emma is a workers compensation underwriter. She has been advised that one of her
insureds is expanding its operations, and she is not sure how to classify the new payroll.
Which one of the following of her fellow employees should Emma go to for help? -
Answers- Premium auditor
Wrap-ups do not usually include which one of the following coverages? - Answers- Auto
Which one of the following statements is true regarding additional insureds? - Answers-
Additional insured endorsements restrict coverage to those claims arising out of the
named insureds operations.
Which one of the following factors about an employers' compensation program could
indicate that the insurer is receiving a lower premium relative to the exposure assumed?
- Answers- Low Wages
The report of management is a report to the users of financial statements, required as
part of the company annual report. Which one of the following is true regarding this
report? - Answers- The chairman of the board signs it acknowledging the integrity of the
report.
An underwriter is attempting to conduct ratio analysis on a company. The underwriter
notices that the company has $3 million in total assets, $1 million in current assets, $2
million in total liabilities, and $1 million in current liabilities. Which one of the following
conclusions can the underwriter reach by calculating the company's debt-to-assets
ratio? - Answers- Debt-to-assets ratio = Total liabilities ÷ total assets. $2 million ÷ $3
million = .667. A ration over .5 indicates financing mostly by debt. The company's assets
are financed mostly through debt.
In financial statement analysis, leverage ratios measure which one of the following? -
Answers- The extent to which a company has borrowed money
Which one of the following is an example of a liquidity ratio? - Answers- Acid-test ratio
Which one of the following statements is true? - Answers- If a nonfinancial company
has a debt-to-equity ratio greater than 100 percent, it indicates that the company is
financed mostly by debt.
Insurers differ in their approach to calculating each account's amount subject. Which
one of the following is the objective in making this determination? - Answers- To
determine potential loss severity
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Greaterheights. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
77254 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now