AU 60 FINAL EXAM QUESTIONS
WITH CORRECT DETAILED
ANSWERS || ALREADY GRADED A+
< LATEST VERSION >
1. To achieve profitability, the underwriting function serves which one of the
following additional purposes? - ANSWER 🗸 C. Guarding against adverse
selection
2. 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
3. Depending on the type of insurance, insurers use automated underwriting
systems to - ANSWER 🗸 Encode underwriting guidelines.
4. Specialty insurers such as those offering surety bonds, aviation insurance,
and livestock mortality insurance usually - ANSWER 🗸 Centralize
underwriting authority.
5. 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
,6. 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).
7. Which one of the following is determined by a company's underwriting
policy? - ANSWER 🗸 Composition of the insurer's book of business
8. 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.
9. 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
10.Which one of the following is a financial measure of underwriting
performance? - ANSWER 🗸 Combined ratio
11.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.
,12.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.
13.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
14.Wrap-ups do not usually include which one of the following coverages? -
ANSWER 🗸 Auto
15.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.
16.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
17.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.
18.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? -
ANSWER 🗸 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.
19.In financial statement analysis, leverage ratios measure which one of the
following? - ANSWER 🗸 The extent to which a company has borrowed
money
20.Which one of the following is an example of a liquidity ratio? - ANSWER 🗸
Acid-test ratio
21.Which one of the following statements is true? - ANSWER 🗸 If a
nonfinancial company has a debt-to-equity ratio greater than 100 percent, it
indicates that the company is financed mostly by debt.
22.Insurers differ in their approach to calculating each account's amount
subject. Which one of the following is the objective in making this
determination? - ANSWER 🗸 To determine potential loss severity
23.All of the following are objectives of rate regulation, EXCEPT - ANSWER
🗸 Rates promote availability and affordability of insurance.
24.To effectively price insurance accounts, underwriters must be familiar with
rate manuals. Which one of the following is true regarding rate manuals? -
ANSWER 🗸 Rate manuals provide information concerning the use of
endorsements that amend the policy.
WITH CORRECT DETAILED
ANSWERS || ALREADY GRADED A+
< LATEST VERSION >
1. To achieve profitability, the underwriting function serves which one of the
following additional purposes? - ANSWER 🗸 C. Guarding against adverse
selection
2. 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
3. Depending on the type of insurance, insurers use automated underwriting
systems to - ANSWER 🗸 Encode underwriting guidelines.
4. Specialty insurers such as those offering surety bonds, aviation insurance,
and livestock mortality insurance usually - ANSWER 🗸 Centralize
underwriting authority.
5. 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
,6. 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).
7. Which one of the following is determined by a company's underwriting
policy? - ANSWER 🗸 Composition of the insurer's book of business
8. 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.
9. 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
10.Which one of the following is a financial measure of underwriting
performance? - ANSWER 🗸 Combined ratio
11.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.
,12.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.
13.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
14.Wrap-ups do not usually include which one of the following coverages? -
ANSWER 🗸 Auto
15.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.
16.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
17.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.
18.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? -
ANSWER 🗸 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.
19.In financial statement analysis, leverage ratios measure which one of the
following? - ANSWER 🗸 The extent to which a company has borrowed
money
20.Which one of the following is an example of a liquidity ratio? - ANSWER 🗸
Acid-test ratio
21.Which one of the following statements is true? - ANSWER 🗸 If a
nonfinancial company has a debt-to-equity ratio greater than 100 percent, it
indicates that the company is financed mostly by debt.
22.Insurers differ in their approach to calculating each account's amount
subject. Which one of the following is the objective in making this
determination? - ANSWER 🗸 To determine potential loss severity
23.All of the following are objectives of rate regulation, EXCEPT - ANSWER
🗸 Rates promote availability and affordability of insurance.
24.To effectively price insurance accounts, underwriters must be familiar with
rate manuals. Which one of the following is true regarding rate manuals? -
ANSWER 🗸 Rate manuals provide information concerning the use of
endorsements that amend the policy.
