AU 60 UPDATED Exam Questions and
CORRECT Answers
Alan is a commercial insurance underwriter. He is reviewing the application for B & L
Restaurant. B & L is open from 6 AM to 2 PM daily and offers both seated dining and take-out
service for breakfast and lunch. The restaurant had a good reputation and financial reports were
strong, but Alan was concerned when he learned that the risk was part of a franchise agreement.
The franchise arrangement raises a concern about which one of the following leadership
characteristics?
Select one:
A. Operational authority
B. Training
C. Quality of work
D. Prudence of operations - CORRECT ANSWER - A. Operational authority
The entity's management may be restricted by their franchise agreement and not have the
authority to implement processes or risk control autonomously
While reunderwriting its book of personal auto policies, XYZ Insurance Company noted that it
was paying-out significantly more in medical payment benefits in two territories than in its other
fifteen territories combined. A review of policies from the two territories showed that many of
these policies were issued with significantly higher medical payments limits (e.g. $50,000 per-
person) than their other auto policies. The company also noticed that most of the claims were for
soft-tissue injuries (whiplash, lower lumbar strain, etc.). XYZ underwriters want to keep the auto
physical damage and auto liability business in the two problem territories, but to stop losing
money on the medical payments coverage. The company decided that upon renewal, a medical
payments limit of $5,000 per-person would be strictly enforced in the two troublesome
territories. Which corrective action does this change illustrate?
Select one:
A. - CORRECT ANSWER - D. Modify products or coverages
WC Distribution is located in California and distributes refrigerated foods throughout the West
Coast region. As a commercial lines underwriter evaluating the organization, you are concerned
,about threats to the operations and supply chain. Which one of the following would be a major
area of concern for WC Distribution?
Select one:
A. Employment issues or strikes
B. Natural or man-made catastrophes
C. Third-party suppliers
D. Production bottlenecks - CORRECT ANSWER - B. Natural or man-made catastrophes
Natural or man-made catastrophes would be a major area concern for WC Distribution.
Earthquakes, wildfires, and other natural disasters could damage facilities or interfere with
transportation routes. Normal supply and distribution channels could be disrupted for extended
periods. WC Distribution would not likely rely on a single machine or product that would create
a bottleneck.
Patrick is an underwriter for Metro Insurance Company (MIC), and Kathy is a producer assigned
to him. Over the last few months, they have lost a number of large auto policies to a competitor
that has filed lower rates. Kathy has contacted Patrick about two renewals effective July 1st, that
she is in fear of losing to the same competitor. She is asking him to revise his renewal pricing
and undercut the competitor. Patrick and Kathy agree that these are valued accounts for MIC.
Which one of the following approaches should Patrick take during this stage of the renewal
process?
Select one:
A. Patrick should avoid discussions of the other accounts lost to the competitor, and continue to
price the July 1st renewals as indicated.
B. Patrick should focus all discussions on discrediting the competitor, and suggesting that they
will be gone by next year.
C. Patrick should acknowledge the recent business lost to the competitor, - CORRECT
ANSWER - Patrick should acknowledge the recent business lost to this competitor, and
express a willingness to negotiate pricing and coverage to help renew these valued accounts.
How many years of loss experience, not including the current year, are required by most
experience rating plans?
Select one:
A. One
, B. Two
C. Three
D. Five - CORRECT ANSWER - C. Three
ABC Insurance Company's ratio of premiums to surplus is 2 to 1. If the state requirement where
ABC transacts business is 3 to 1, then ABC
Select one:
A. Needs to issue more policies to be in compliance with state surplus requirements.
B. Can no longer write new business in that state.
C. Is likely to be the subject of a Department of Insurance market conduct examination due to its
solvency indicators.
D. Is meeting the state's surplus requirement. - CORRECT ANSWER - D. Is meeting the
state's surplus requirement.
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?
Select one:
A. Premium auditor
B. Claims adjuster
C. Risk control representative
D. Producer - CORRECT ANSWER - A. Premium auditor
Which one of the following statements is true regarding additional insureds in liability
insurance?
Select one:
A. Additional insured endorsements commonly extend liability coverage to all operations of the
additional insured.
B. Additional insureds are granted coverage under the insured's liability policy and have the
same rights and duties as named insureds.
CORRECT Answers
Alan is a commercial insurance underwriter. He is reviewing the application for B & L
Restaurant. B & L is open from 6 AM to 2 PM daily and offers both seated dining and take-out
service for breakfast and lunch. The restaurant had a good reputation and financial reports were
strong, but Alan was concerned when he learned that the risk was part of a franchise agreement.
The franchise arrangement raises a concern about which one of the following leadership
characteristics?
Select one:
A. Operational authority
B. Training
C. Quality of work
D. Prudence of operations - CORRECT ANSWER - A. Operational authority
The entity's management may be restricted by their franchise agreement and not have the
authority to implement processes or risk control autonomously
While reunderwriting its book of personal auto policies, XYZ Insurance Company noted that it
was paying-out significantly more in medical payment benefits in two territories than in its other
fifteen territories combined. A review of policies from the two territories showed that many of
these policies were issued with significantly higher medical payments limits (e.g. $50,000 per-
person) than their other auto policies. The company also noticed that most of the claims were for
soft-tissue injuries (whiplash, lower lumbar strain, etc.). XYZ underwriters want to keep the auto
physical damage and auto liability business in the two problem territories, but to stop losing
money on the medical payments coverage. The company decided that upon renewal, a medical
payments limit of $5,000 per-person would be strictly enforced in the two troublesome
territories. Which corrective action does this change illustrate?
Select one:
A. - CORRECT ANSWER - D. Modify products or coverages
WC Distribution is located in California and distributes refrigerated foods throughout the West
Coast region. As a commercial lines underwriter evaluating the organization, you are concerned
,about threats to the operations and supply chain. Which one of the following would be a major
area of concern for WC Distribution?
Select one:
A. Employment issues or strikes
B. Natural or man-made catastrophes
C. Third-party suppliers
D. Production bottlenecks - CORRECT ANSWER - B. Natural or man-made catastrophes
Natural or man-made catastrophes would be a major area concern for WC Distribution.
Earthquakes, wildfires, and other natural disasters could damage facilities or interfere with
transportation routes. Normal supply and distribution channels could be disrupted for extended
periods. WC Distribution would not likely rely on a single machine or product that would create
a bottleneck.
Patrick is an underwriter for Metro Insurance Company (MIC), and Kathy is a producer assigned
to him. Over the last few months, they have lost a number of large auto policies to a competitor
that has filed lower rates. Kathy has contacted Patrick about two renewals effective July 1st, that
she is in fear of losing to the same competitor. She is asking him to revise his renewal pricing
and undercut the competitor. Patrick and Kathy agree that these are valued accounts for MIC.
Which one of the following approaches should Patrick take during this stage of the renewal
process?
Select one:
A. Patrick should avoid discussions of the other accounts lost to the competitor, and continue to
price the July 1st renewals as indicated.
B. Patrick should focus all discussions on discrediting the competitor, and suggesting that they
will be gone by next year.
C. Patrick should acknowledge the recent business lost to the competitor, - CORRECT
ANSWER - Patrick should acknowledge the recent business lost to this competitor, and
express a willingness to negotiate pricing and coverage to help renew these valued accounts.
How many years of loss experience, not including the current year, are required by most
experience rating plans?
Select one:
A. One
, B. Two
C. Three
D. Five - CORRECT ANSWER - C. Three
ABC Insurance Company's ratio of premiums to surplus is 2 to 1. If the state requirement where
ABC transacts business is 3 to 1, then ABC
Select one:
A. Needs to issue more policies to be in compliance with state surplus requirements.
B. Can no longer write new business in that state.
C. Is likely to be the subject of a Department of Insurance market conduct examination due to its
solvency indicators.
D. Is meeting the state's surplus requirement. - CORRECT ANSWER - D. Is meeting the
state's surplus requirement.
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?
Select one:
A. Premium auditor
B. Claims adjuster
C. Risk control representative
D. Producer - CORRECT ANSWER - A. Premium auditor
Which one of the following statements is true regarding additional insureds in liability
insurance?
Select one:
A. Additional insured endorsements commonly extend liability coverage to all operations of the
additional insured.
B. Additional insureds are granted coverage under the insured's liability policy and have the
same rights and duties as named insureds.
