AU 60 - Chpt 1 Key Items UPDATED
ACTUAL Questions and CORRECT
Answers
To achieve profitability, the UWing function serves additional purposes: - CORRECT
ANSWER - 1. Guarding against adverse selection. 2. Ensuring adequate policyholder's
surplus. 3.Enforcing UWing guidelines
An insurer's capacity is limited by - CORRECT ANSWER - regulatory guidelines & often
by its own voluntary constraints. If an insurer's UWing practices generate policy premiums that
exceed losses & expenses, the policyholder's surplus increases, increasing capacity
UWing guidelines reflect - CORRECT ANSWER - the levels of UWing authority that are
granted to varying levels of UWing, producers, & managing general agents(MGAs)
Underwriting guidelines reflect the levels of - CORRECT ANSWER - Underwriting
authority.
The principal purpose of underwriting is to - CORRECT ANSWER - Develop and
maintain a profitable book of business for the insurer.
Underwriters can best minimize the effects of adverse selection by - CORRECT
ANSWER - Carefully selecting the applicants whose loss exposures they are willing to
insure.
Julio, a producer for Argot's Insurance Company, submits an application for a 50-year-old
residence to Mathilde, the underwriter. Julio wants to know why the homeowners rate is higher
for his 50-year-old residence. Mathilde explains that the homeowners rate for the 50-year-old
residence is not the same for a five-year-old residence because the exposures are different.
Which one of the following underwriting profitability functions of Argot is Mathilde's
explanation supporting? - CORRECT ANSWER - Ensuring adequate policyholder's
surplus
, Which one of the following is the term used to refer to a situation that occurs because people
with the greatest probability of loss are the ones most likely to purchase insurance? - CORRECT
ANSWER - Adverse selection
Which one of the following tasks is the responsibility of a staff underwriter as opposed to a line
underwriter? - CORRECT ANSWER - Review and revise rating plans
Staff underwriters share research of the market responsibilities with actuarial and marketing
departments. Research includes an ongoing evaluation of which one of the following? -
CORRECT ANSWER - Optimal product mix in the book of business
Sofie, a property underwriter for Cintriell Insurance Company is reviewing a new homeowners
application. Sofie has changed the protection class to unprotected, as the fire protection class
listed by the producer is an eight and is incorrect. Which one of the following line underwriter
activities is Sofie performing? - CORRECT ANSWER - Classifying and pricing accounts
An insurance company needs to hire an employee with knowledge of insurance policy forms and
the ability to relate policy provisions to the loss exposures of individual policyholders. The
person will also prepare premium quotes and process cancellations. Which one of the following
employees would best suit the company's needs? - CORRECT ANSWER - Line
underwriter
Which one of the following statements is correct with respect to line underwriters? - CORRECT
ANSWER - Line underwriters can offer valuable technical assistance to an insured's risk
manager and to the producer responsible for the account.
Underwriting authority requirements are usually communicated to an underwriter through -
CORRECT ANSWER - The underwriting guidelines.
Specialty insurers such as those offering surety bonds, aviation insurance, and livestock mortality
insurance usually - CORRECT ANSWER - Centralize underwriting authority.
ACTUAL Questions and CORRECT
Answers
To achieve profitability, the UWing function serves additional purposes: - CORRECT
ANSWER - 1. Guarding against adverse selection. 2. Ensuring adequate policyholder's
surplus. 3.Enforcing UWing guidelines
An insurer's capacity is limited by - CORRECT ANSWER - regulatory guidelines & often
by its own voluntary constraints. If an insurer's UWing practices generate policy premiums that
exceed losses & expenses, the policyholder's surplus increases, increasing capacity
UWing guidelines reflect - CORRECT ANSWER - the levels of UWing authority that are
granted to varying levels of UWing, producers, & managing general agents(MGAs)
Underwriting guidelines reflect the levels of - CORRECT ANSWER - Underwriting
authority.
The principal purpose of underwriting is to - CORRECT ANSWER - Develop and
maintain a profitable book of business for the insurer.
Underwriters can best minimize the effects of adverse selection by - CORRECT
ANSWER - Carefully selecting the applicants whose loss exposures they are willing to
insure.
Julio, a producer for Argot's Insurance Company, submits an application for a 50-year-old
residence to Mathilde, the underwriter. Julio wants to know why the homeowners rate is higher
for his 50-year-old residence. Mathilde explains that the homeowners rate for the 50-year-old
residence is not the same for a five-year-old residence because the exposures are different.
Which one of the following underwriting profitability functions of Argot is Mathilde's
explanation supporting? - CORRECT ANSWER - Ensuring adequate policyholder's
surplus
, Which one of the following is the term used to refer to a situation that occurs because people
with the greatest probability of loss are the ones most likely to purchase insurance? - CORRECT
ANSWER - Adverse selection
Which one of the following tasks is the responsibility of a staff underwriter as opposed to a line
underwriter? - CORRECT ANSWER - Review and revise rating plans
Staff underwriters share research of the market responsibilities with actuarial and marketing
departments. Research includes an ongoing evaluation of which one of the following? -
CORRECT ANSWER - Optimal product mix in the book of business
Sofie, a property underwriter for Cintriell Insurance Company is reviewing a new homeowners
application. Sofie has changed the protection class to unprotected, as the fire protection class
listed by the producer is an eight and is incorrect. Which one of the following line underwriter
activities is Sofie performing? - CORRECT ANSWER - Classifying and pricing accounts
An insurance company needs to hire an employee with knowledge of insurance policy forms and
the ability to relate policy provisions to the loss exposures of individual policyholders. The
person will also prepare premium quotes and process cancellations. Which one of the following
employees would best suit the company's needs? - CORRECT ANSWER - Line
underwriter
Which one of the following statements is correct with respect to line underwriters? - CORRECT
ANSWER - Line underwriters can offer valuable technical assistance to an insured's risk
manager and to the producer responsible for the account.
Underwriting authority requirements are usually communicated to an underwriter through -
CORRECT ANSWER - The underwriting guidelines.
Specialty insurers such as those offering surety bonds, aviation insurance, and livestock mortality
insurance usually - CORRECT ANSWER - Centralize underwriting authority.
