AU 60 UPDATED ACTUAL Exam
Questions and CORRECT Answers
To achieve profitability, the underwriting function serves which one of the following additional
purposes? - CORRECT ANSWER - C. Guarding against adverse selection
Which one of the following will draft a manuscript policy or endorsement that is worded to
address the specific needs of the insured - CORRECT ANSWER - Line underwriter
Depending on the type of insurance, insurers use automated underwriting systems to -
CORRECT ANSWER - Encode underwriting guidelines.
Specialty insurers such as those offering surety bonds, aviation insurance, and livestock mortality
insurance usually - CORRECT ANSWER - Centralize underwriting authority.
All of the following statements are true regarding the factors affecting the formation of an
insurer's underwriting policy, EXCEPT: - CORRECT ANSWER - The higher an insurer's
premium-to-surplus ratio, the greater its ability to expand premium writings.v
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? - CORRECT
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).
Which one of the following is determined by a company's underwriting policy? - CORRECT
ANSWER - Composition of the insurer's book of business
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) - CORRECT ANSWER -
Schedule rating plan.
, 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? - CORRECT ANSWER -
Morale
Which one of the following is a financial measure of underwriting performance? - CORRECT
ANSWER - Combined ratio
Which one of the following statements is correct regarding nonfinancial measures of
underwriting results? - CORRECT ANSWER - Selection standards for underwriters
usually support overall underwriting goals and are evaluated during audits.
Which one of the following statements is correct with respect to market conduct examinations? -
CORRECT ANSWER - They protect both insurers and consumers from unfair insurer
practices.
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? - CORRECT ANSWER -
Premium auditor
Wrap-ups do not usually include which one of the following coverages? - CORRECT
ANSWER - Auto
Which one of the following statements is true regarding additional insureds? - CORRECT
ANSWER - Additional insured endorsements restrict coverage to those claims arising out
of the named insureds operations.
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? - CORRECT
ANSWER - Low Wages
Questions and CORRECT Answers
To achieve profitability, the underwriting function serves which one of the following additional
purposes? - CORRECT ANSWER - C. Guarding against adverse selection
Which one of the following will draft a manuscript policy or endorsement that is worded to
address the specific needs of the insured - CORRECT ANSWER - Line underwriter
Depending on the type of insurance, insurers use automated underwriting systems to -
CORRECT ANSWER - Encode underwriting guidelines.
Specialty insurers such as those offering surety bonds, aviation insurance, and livestock mortality
insurance usually - CORRECT ANSWER - Centralize underwriting authority.
All of the following statements are true regarding the factors affecting the formation of an
insurer's underwriting policy, EXCEPT: - CORRECT ANSWER - The higher an insurer's
premium-to-surplus ratio, the greater its ability to expand premium writings.v
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? - CORRECT
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).
Which one of the following is determined by a company's underwriting policy? - CORRECT
ANSWER - Composition of the insurer's book of business
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) - CORRECT ANSWER -
Schedule rating plan.
, 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? - CORRECT ANSWER -
Morale
Which one of the following is a financial measure of underwriting performance? - CORRECT
ANSWER - Combined ratio
Which one of the following statements is correct regarding nonfinancial measures of
underwriting results? - CORRECT ANSWER - Selection standards for underwriters
usually support overall underwriting goals and are evaluated during audits.
Which one of the following statements is correct with respect to market conduct examinations? -
CORRECT ANSWER - They protect both insurers and consumers from unfair insurer
practices.
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? - CORRECT ANSWER -
Premium auditor
Wrap-ups do not usually include which one of the following coverages? - CORRECT
ANSWER - Auto
Which one of the following statements is true regarding additional insureds? - CORRECT
ANSWER - Additional insured endorsements restrict coverage to those claims arising out
of the named insureds operations.
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? - CORRECT
ANSWER - Low Wages
