NM ADJUSTER CERTIFICATION SCRIPT 2026 QUESTIONS
WITH SOLUTIONS GRADED A+
● Victor, the 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 Victor's agents and the company the most concerning surplus
and capacity?. Answer: Underwriting practices must generate policy premiums that exceed
losses and expenses.
● An insurance company must have adequate policyholders' surplus if it wishes to:.
Answer: Increase its written premium volume.
● 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?. Answer: After learning that a particularly active hurricane
season is expected, several homeowners in a coastal community increase the limits on their
windstorm coverage.
● Sofie and the members of her homeowner's association have homeowner's policies
on their coastal dwellings. They have heard that there are eleven named hurricane
storms predicted for their coastal area this year. Sofie and the homeowner association
members plan to increase their homeowner's property coverage limits to handle their
concern about the possible hurricane damage. Their action is known as:. Answer:
Adverse selection.
● Staff underwriters share research of the market responsibilities with actuarial and
marketing departments. Research includes an ongoing evaluation of which one of the
following?. Answer: Optimal product mix in the book of business
● The state advisory organization has developed a new homeowner's form which
increases the personal property limits for guns, silverware, jewelry, and boats. Jancy
Insurance Company is considering modifying the form for its own use. Which one of
the following members of Jancy's staff would be involved in the research and
development of this new form?. Answer: Emma, the staff underwriter
● Staff underwriters share research of the market responsibilities with actuarial and
marketing departments. Research includes an ongoing evaluation of which one of the
, following?. Answer: Optimal product mix in the book of business
● 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
offices. Maja is functioning as a:. Answer: Staff underwriter
● Underwriting authority requirements are usually communicated to an underwriter
through:. Answer: The underwriting guidelines
● 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?. Answer: Saves Blithe from having to evaluate accounts that they will
ultimately reject
● Specialty insurers such as those offering surety bonds, aviation insurance, and
livestock mortality insurance usually :. Answer: Centralize underwriting authority.
● Depending on the type of insurance, insurers use automated underwriting systems
to:. Answer: Encode underwriting guidelines.
● Which one of the following is a constraint to the development of underwriting
policy?. Answer: Financial capacity
● Which one of the following is a constraint of underwriting policy?. Answer:
Reinsurance
● Argot Stock Insurance Company's (Argot) net income is $1,000,000 and its average
owners' equity is $18,000,000. Argot's average policyholders' surplus is $20,000,000.
Using the GAAP formula, which one of the following is Argot's return on equity?.
Answer: 1,000,000/18,000,000=5.56%
● Which one of the following is determined by a company's underwriting policy?.
Answer: Composition of the insurer's book of business
● Underwriting guidelines serve which one of the following purposes?. Answer: Avoid
duplication of effort
WITH SOLUTIONS GRADED A+
● Victor, the 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 Victor's agents and the company the most concerning surplus
and capacity?. Answer: Underwriting practices must generate policy premiums that exceed
losses and expenses.
● An insurance company must have adequate policyholders' surplus if it wishes to:.
Answer: Increase its written premium volume.
● 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?. Answer: After learning that a particularly active hurricane
season is expected, several homeowners in a coastal community increase the limits on their
windstorm coverage.
● Sofie and the members of her homeowner's association have homeowner's policies
on their coastal dwellings. They have heard that there are eleven named hurricane
storms predicted for their coastal area this year. Sofie and the homeowner association
members plan to increase their homeowner's property coverage limits to handle their
concern about the possible hurricane damage. Their action is known as:. Answer:
Adverse selection.
● Staff underwriters share research of the market responsibilities with actuarial and
marketing departments. Research includes an ongoing evaluation of which one of the
following?. Answer: Optimal product mix in the book of business
● The state advisory organization has developed a new homeowner's form which
increases the personal property limits for guns, silverware, jewelry, and boats. Jancy
Insurance Company is considering modifying the form for its own use. Which one of
the following members of Jancy's staff would be involved in the research and
development of this new form?. Answer: Emma, the staff underwriter
● Staff underwriters share research of the market responsibilities with actuarial and
marketing departments. Research includes an ongoing evaluation of which one of the
, following?. Answer: Optimal product mix in the book of business
● 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
offices. Maja is functioning as a:. Answer: Staff underwriter
● Underwriting authority requirements are usually communicated to an underwriter
through:. Answer: The underwriting guidelines
● 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?. Answer: Saves Blithe from having to evaluate accounts that they will
ultimately reject
● Specialty insurers such as those offering surety bonds, aviation insurance, and
livestock mortality insurance usually :. Answer: Centralize underwriting authority.
● Depending on the type of insurance, insurers use automated underwriting systems
to:. Answer: Encode underwriting guidelines.
● Which one of the following is a constraint to the development of underwriting
policy?. Answer: Financial capacity
● Which one of the following is a constraint of underwriting policy?. Answer:
Reinsurance
● Argot Stock Insurance Company's (Argot) net income is $1,000,000 and its average
owners' equity is $18,000,000. Argot's average policyholders' surplus is $20,000,000.
Using the GAAP formula, which one of the following is Argot's return on equity?.
Answer: 1,000,000/18,000,000=5.56%
● Which one of the following is determined by a company's underwriting policy?.
Answer: Composition of the insurer's book of business
● Underwriting guidelines serve which one of the following purposes?. Answer: Avoid
duplication of effort
