AU 60 MISSED PRACTICE TEST EXAM
STUDY GUIDE 2026 COMPLETE ANSWERS
⫸ Which one of the following will draft a manuscript policy or
endorsement that is worded to address the specific needs of the insured
Answer: Line underwriter
⫸ Depending on the type of insurance, insurers use automated
underwriting systems to Answer: Encode underwriting guidelines.
⫸ Specialty insurers such as those offering surety bonds, aviation
insurance, and livestock mortality insurance usually Answer: Centralize
underwriting authority.
⫸ All of the following statements are true regarding the factors
affecting the formation of an insurer's underwriting policy, EXCEPT:
Answer: 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? Answer: 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? Answer: 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) Answer: 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? Answer: Morale
⫸ Which one of the following is a financial measure of underwriting
performance? Answer: Combined ratio
⫸ Which one of the following statements is correct regarding
nonfinancial measures of underwriting results? Answer: 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? Answer: 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? Answer: Premium
auditor
⫸ Wrap-ups do not usually include which one of the following
coverages? Answer: Auto
⫸ Which one of the following statements is true regarding additional
insureds? Answer: 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? Answer: 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? Answer: The chairman of the
board signs it acknowledging the integrity of the report.
STUDY GUIDE 2026 COMPLETE ANSWERS
⫸ Which one of the following will draft a manuscript policy or
endorsement that is worded to address the specific needs of the insured
Answer: Line underwriter
⫸ Depending on the type of insurance, insurers use automated
underwriting systems to Answer: Encode underwriting guidelines.
⫸ Specialty insurers such as those offering surety bonds, aviation
insurance, and livestock mortality insurance usually Answer: Centralize
underwriting authority.
⫸ All of the following statements are true regarding the factors
affecting the formation of an insurer's underwriting policy, EXCEPT:
Answer: 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? Answer: 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? Answer: 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) Answer: 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? Answer: Morale
⫸ Which one of the following is a financial measure of underwriting
performance? Answer: Combined ratio
⫸ Which one of the following statements is correct regarding
nonfinancial measures of underwriting results? Answer: 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? Answer: 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? Answer: Premium
auditor
⫸ Wrap-ups do not usually include which one of the following
coverages? Answer: Auto
⫸ Which one of the following statements is true regarding additional
insureds? Answer: 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? Answer: 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? Answer: The chairman of the
board signs it acknowledging the integrity of the report.
