AU 60 MISSED PRACTICE TEST EXAM 2024 WITH 100% CORRECT ANSWERS
When insuring a partnership, it is essential to identify which one of the following on the policy declaration page?
Choose one answer. A. The partnership B. All partners C. General partners only D. All partners and their share of the partnership Answer ✔✔- A. The partnership
If a company's inventory turnover ratio is higher than the industry benchmark, it indicates that
Choose one answer. A. Its inventory is becoming obsolete compared to that of its competitors. B. The company is holding its inventory longer than its competitors. C. The company is selling its inventory more quickly than its competitors. D. The company's inventory is generating higher costs than that of its competitors. Answer ✔✔- C. The company is selling its inventory more quickly than its competitors.
Which one of the following is determined by a company's underwriting policy? Choose one answer. A. The underwriting authority the insurer grants its producers B. Composition of the insurer's book of business C. The market pursued by the insurer D. The rating organization to which the insurer will belong Answer ✔✔- B. Composition of the insurer's book of business
Which one of the following statements is true regarding ratemaking in different types of insurance?
Choose one answer. A. Most losses from catastrophic events, such as hurricanes, are included in ratemaking data in the affected states.
B. Trending of losses in fire insurance is generally restricted to claim severity. C. The experience period used for property causes of loss other than fire is usually five years or less. D. Applying loss development factors to data is critical when claims settle quickly and loss reserves are relatively small. Answer ✔✔- B. Trending of losses in fire insurance is generally restricted to claim severity.
Which one of the following types of individual rating plans can be used by medium to large insureds in combination with risk control and allows the insured to manage its cash flow by avoiding upfront payments?
Choose one answer. A. Schedule rating plan B. Large deductible plan C. Individual risk premium modification plan D. Expense modification plan Answer ✔✔- B. Large deductible plan
An insurer must decide what provision for profit and contingencies should be included in the rate and should consider the overall desired rate of return, including likely returns from investment income versus
Choose one answer. A. Policyholder surplus. B. Underwriting profit. C. Loss reserve amounts.
D. Loss adjustment expenses. Answer ✔✔- B. Underwriting profit.
The amount included in the insurance rate to protect insurers against the possibility that actual claims or
expenses will exceed projections is referred to as
Choose one answer. A. The prospective loss costs. B. The expense factor. C. The loading for profits and contingencies. D. The claims and eventualities factor. Answer ✔✔- C. The loading for profits and contingencies.
Underwriting pricing activities usually include all of the following, EXCEPT:
Choose one answer. A. Account classification B. Rating C. Application of premium modification plans D. Forecasting Answer ✔✔- D. Forecasting
Insurance Company's actuary has calculated the pure premium for its automobile insurance line as $67. Fixed expenses for the line are $25 per exposure unit, and the loading for profit and contingencies is 7%.
Using the pure premium ratemaking method and rounding to the nearest whole dollar, which one of the
following is the rate per exposure unit?
Choose one answer. A. $86 B. $99 C. $106 D. $115 Answer ✔✔- B. $99
Using the pure premium ratemaking method, the rate per exposure unit equals the pure premium plus the expenses per exposure unit, divided by 1 minus the profit and contingencies factor. ($67 + $25)/(1 - 0.07) = $99
When insuring a partnership, it is essential to identify which one of the following on the policy declaration page?
Choose one answer. A. The partnership B. All partners C. General partners only D. All partners and their share of the partnership Answer ✔✔- A. The partnership
If a company's inventory turnover ratio is higher than the industry benchmark, it indicates that
Choose one answer. A. Its inventory is becoming obsolete compared to that of its competitors. B. The company is holding its inventory longer than its competitors. C. The company is selling its inventory more quickly than its competitors. D. The company's inventory is generating higher costs than that of its competitors. Answer ✔✔- C. The company is selling its inventory more quickly than its competitors.
Which one of the following is determined by a company's underwriting policy? Choose one answer. A. The underwriting authority the insurer grants its producers B. Composition of the insurer's book of business C. The market pursued by the insurer D. The rating organization to which the insurer will belong Answer ✔✔- B. Composition of the insurer's book of business
Which one of the following statements is true regarding ratemaking in different types of insurance?
Choose one answer. A. Most losses from catastrophic events, such as hurricanes, are included in ratemaking data in the affected states.
B. Trending of losses in fire insurance is generally restricted to claim severity. C. The experience period used for property causes of loss other than fire is usually five years or less. D. Applying loss development factors to data is critical when claims settle quickly and loss reserves are relatively small. Answer ✔✔- B. Trending of losses in fire insurance is generally restricted to claim severity.
Which one of the following types of individual rating plans can be used by medium to large insureds in combination with risk control and allows the insured to manage its cash flow by avoiding upfront payments?
Choose one answer. A. Schedule rating plan B. Large deductible plan C. Individual risk premium modification plan D. Expense modification plan Answer ✔✔- B. Large deductible plan
An insurer must decide what provision for profit and contingencies should be included in the rate and should consider the overall desired rate of return, including likely returns from investment income versus
Choose one answer. A. Policyholder surplus. B. Underwriting profit. C. Loss reserve amounts.
D. Loss adjustment expenses. Answer ✔✔- B. Underwriting profit.
The amount included in the insurance rate to protect insurers against the possibility that actual claims or
expenses will exceed projections is referred to as
Choose one answer. A. The prospective loss costs. B. The expense factor. C. The loading for profits and contingencies. D. The claims and eventualities factor. Answer ✔✔- C. The loading for profits and contingencies.
Underwriting pricing activities usually include all of the following, EXCEPT:
Choose one answer. A. Account classification B. Rating C. Application of premium modification plans D. Forecasting Answer ✔✔- D. Forecasting
Insurance Company's actuary has calculated the pure premium for its automobile insurance line as $67. Fixed expenses for the line are $25 per exposure unit, and the loading for profit and contingencies is 7%.
Using the pure premium ratemaking method and rounding to the nearest whole dollar, which one of the
following is the rate per exposure unit?
Choose one answer. A. $86 B. $99 C. $106 D. $115 Answer ✔✔- B. $99
Using the pure premium ratemaking method, the rate per exposure unit equals the pure premium plus the expenses per exposure unit, divided by 1 minus the profit and contingencies factor. ($67 + $25)/(1 - 0.07) = $99
