AU 60 Chapter 7 complete set with
Questions and correct Answers
underwriting pricing activities - correct answer- ✅account classification, rating and application of
applicable premium modification plans
exposure unti - correct answer- ✅fundamental measure of the loss exposure assumed by an insurer
premium base - correct answer- ✅unit in which the exposure is measured, such as gross sales or payroll
homogenous - correct answer- ✅units of exposure that face approximately the same expected
frequency and severity of losses
independence - correct answer- ✅a situation in which the occurrence of one event has no effect on the
likelihood of the occurrence of any other event
ideally insurable loss exposures - correct answer- ✅1. pure not speculative risk
2. subject to accidental loss from the insured's standpoint
3. subject to losses that are definite in time and that are measureable
4. one of a large number of similar but independent exposures
5. not subject to a loss that would simultaneously affect many other loss exposures
6. economically feasible to insure
amount subject - correct answer- ✅total value exposed to loss at any one location from any one event
reinsurance - correct answer- ✅the transfer of insurance risk from one insurer to another through a
contractual agreement under which one insurer (the reinsurer) agrees in return for a reinsurance
premium to indemnify another insurer from some or all of the financial consequences of certain loss
exposures covered by the primary's insurance policies
rate regulation three objectives - correct answer- ✅1. rates are adequate (mos important)
2. rate are not excessive
3. rates are not unfairly discriminatory
loss costs - correct answer- ✅the portion of the rate that covers projected claim payments and loss
adjusting expenses
availability - correct answer- ✅a social goal of insurance that states that insurance is accessible to those
who want or need it
affordability - correct answer- ✅social goal of insurance ceiling placed on rates so people can purchase
it (inner city example)
simplicity - correct answer- ✅social goal of insurance stating rate must be reasonably simple to develop
and modify
Questions and correct Answers
underwriting pricing activities - correct answer- ✅account classification, rating and application of
applicable premium modification plans
exposure unti - correct answer- ✅fundamental measure of the loss exposure assumed by an insurer
premium base - correct answer- ✅unit in which the exposure is measured, such as gross sales or payroll
homogenous - correct answer- ✅units of exposure that face approximately the same expected
frequency and severity of losses
independence - correct answer- ✅a situation in which the occurrence of one event has no effect on the
likelihood of the occurrence of any other event
ideally insurable loss exposures - correct answer- ✅1. pure not speculative risk
2. subject to accidental loss from the insured's standpoint
3. subject to losses that are definite in time and that are measureable
4. one of a large number of similar but independent exposures
5. not subject to a loss that would simultaneously affect many other loss exposures
6. economically feasible to insure
amount subject - correct answer- ✅total value exposed to loss at any one location from any one event
reinsurance - correct answer- ✅the transfer of insurance risk from one insurer to another through a
contractual agreement under which one insurer (the reinsurer) agrees in return for a reinsurance
premium to indemnify another insurer from some or all of the financial consequences of certain loss
exposures covered by the primary's insurance policies
rate regulation three objectives - correct answer- ✅1. rates are adequate (mos important)
2. rate are not excessive
3. rates are not unfairly discriminatory
loss costs - correct answer- ✅the portion of the rate that covers projected claim payments and loss
adjusting expenses
availability - correct answer- ✅a social goal of insurance that states that insurance is accessible to those
who want or need it
affordability - correct answer- ✅social goal of insurance ceiling placed on rates so people can purchase
it (inner city example)
simplicity - correct answer- ✅social goal of insurance stating rate must be reasonably simple to develop
and modify
