AU 60 VOCABULARY EXAM QUESTIONS WITH SOLUTIONS
A+ 2025/2026
✔✔Predictive Modeling - ✔✔A process in which historical data based on behaviors and
events are blended with multiple variables and used to construct models of anticipated
future outcomes. (1-23)
✔✔Underwriter - ✔✔An Insurer employee who evaluates applicants for insurance,
selects those that are acceptable to the insurer, prices coverage, and determines policy
terms and conditions. (1-24)
✔✔Underwriting Submission - ✔✔Underwriting information for an initial application, or a
substantive policy midterm or renewal change. (1-25)
✔✔Expert Systems, or Knowledge-Based Systems - ✔✔Computer programs that
supplement the underwriting decision-making process. These systems ask for the
information necessary to make an underwriting decision, ensuring that no information is
overlooked. (1-26)
✔✔Loss Exposure - ✔✔Any condition or situation that presents a possibility of loss,
whether or not an actual loss occurs. (1-27)
✔✔Hazard - ✔✔A condition that increases the frequency or severity of a loss. (1-28)
✔✔Information Efficiency - ✔✔The balance that underwriters must maintain between
the hazards presented by the account and the information needed to underwrite it. (1-
29)
✔✔Application - ✔✔A legal document that provides information obtained directly from
an applicant requesting insurance and that an insurer can use for underwriting and
claim handling purposes. (1-30)
✔✔Loss Run - ✔✔A report detailing an insured's history of claims that have occurred
over a specific period, valued as of a specific date. (1-31)
✔✔Counteroffer - ✔✔A proposal an offeree makes to an offeror that varies in some
material way from the original offer, resulting in rejection of the original offer and
constituting a new offer. (1-32)
✔✔(a) Rated Classification - ✔✔The rate classifications provided by the ISO
Commercial Lines Manual that describe operations with unique characteristics or for
which inadequate stastical experience exists. (1-33)
,✔✔Estimated Loss Potentials (ELP) - ✔✔Rate development factors used for operations
with unique characters or for which inadequate statisitcal experience exists. ELPs are
multiplied by loss cost multipliers to develop rates. (1-34)
✔✔Experience Rating - ✔✔A ratemaking technique that adjusts the insured's premium
for the upcoming policy period based on the insured's experience for the current period.
(1-35)
✔✔Schedule Rating - ✔✔A rating plan that awards debits and credits based on specific
categories, such as the care and condition of the premises or the training and selection
of employees, to modify the final premium to reflect factors that the class rate does not
include. (1-36)
✔✔Retrospective Rating - ✔✔A ratemaking technique that adjusts the insured's
premium for the current policy period based on the insured's loss experience during the
current period; paid losses or incurred losses may be used to determine loss exposure.
(1-37)
✔✔Facultative Reinsurance - ✔✔Reinsurance of individual loss exposures in which the
primary insurer chooses which loss exposures to submit to the reinsurer, and the
reinsurer can accept or reject any loss exposures submitted. (1-38)
✔✔Account Underwriting - ✔✔A method of underwriting in which all of the business
from a particular applicant is evaluated as a whole. (1-39)
✔✔Unfair Trade Practices - ✔✔Methods of competition or advertising or procedures
that tend to deprive the public of information necessary to make informed insurance
decisions. (1-40)
✔✔Binder - ✔✔A temporary written or oral agreement to provide insurance coverage
until a formal written policy is issued. (1-41)
✔✔Certificate of Insurance - ✔✔A brief description of insurance coverage prepared by
an insurer or its agent commonly used by policyholders to provide evidence of
insurance. (1-42)
✔✔Combined Ratio - ✔✔A profitability ratio that indicates whether an insurer has made
an underwriting loss or gain. (1-43)
✔✔Underwriting Cycle - ✔✔A cyclical pattern of insurance pricing in which a soft market
is eventually followed by a hard market before the pattern again repeats itself. (1-44)
✔✔Production Underwriting - ✔✔Performing underwriting functions in an insurer's office
as well as traveling to visit and maintain rapport with agents and sometimes clients. (1-
45)
, ✔✔Hit Ratio - ✔✔The ratio of insurance policies written to those that have been quoted
to applicant for insurance. (1-46)
✔✔Unfair Discrimination - ✔✔Applying different standards or methods of treatment to
insureds who have the same basic characteristics and loss potential, such as charging
higher-than-normal rates for auto insurance based solely on the applicant's race,
religion, or ethnic background.
✔✔Declination - ✔✔An insurer's refusal to provide coverage to an applicant who has
made a written request to the insurer or it's producer, or a producer's refusal to forward
such a written request to an insurer. (2-2)
✔✔Termination - ✔✔An insurer's cancellation of a policy during the policy term or
nonrenewal of coverage at the end of a policy term. (2-3)
✔✔Notification Requirements - ✔✔Regulatory requirements relating to the timing and
contents of an insurer's notice to an insured of the declination, termination, and
nonrenewal of insurance coverage. (2-4)
✔✔Prior Approval - ✔✔An insurance rating law in which the rate and supporting rules
must be filed with and approved by the state insurance department before the can be
used. (2-5)
✔✔File and Use - ✔✔An insurance rating law in which the insurer must file rates and
supporting rules with the state insurance department prior to their use, but rates can
then be used immediately without specific approval. (2-6)
✔✔Use and File - ✔✔An insurance rating law in which the rates must be filed with the
state insurance department within a specified period after they are put into use. (2-7)
✔✔No-file Law - ✔✔An insurance rating law that allows insurers to develop and use
rates without having to file with or get approval from the state insurance department. (2-
8)
✔✔Deemer Provision - ✔✔A Law stating the if an insurance regulator does not approve
of an insurer's filing within a specific time, the filing is deemed approved. (2-9)
✔✔Cost-based Pricing - ✔✔Insurance rating that attempts to indentify and control for
every variable that has a significant effect in quantifying differences between otherwise
identical risks. (2-10)
✔✔Residual Market - ✔✔The term referring collection to insurers and other
organizations that make insurance available through a shared risk mechanism to those
who cannot obtain coverage in the admitted. (2-11)
A+ 2025/2026
✔✔Predictive Modeling - ✔✔A process in which historical data based on behaviors and
events are blended with multiple variables and used to construct models of anticipated
future outcomes. (1-23)
✔✔Underwriter - ✔✔An Insurer employee who evaluates applicants for insurance,
selects those that are acceptable to the insurer, prices coverage, and determines policy
terms and conditions. (1-24)
✔✔Underwriting Submission - ✔✔Underwriting information for an initial application, or a
substantive policy midterm or renewal change. (1-25)
✔✔Expert Systems, or Knowledge-Based Systems - ✔✔Computer programs that
supplement the underwriting decision-making process. These systems ask for the
information necessary to make an underwriting decision, ensuring that no information is
overlooked. (1-26)
✔✔Loss Exposure - ✔✔Any condition or situation that presents a possibility of loss,
whether or not an actual loss occurs. (1-27)
✔✔Hazard - ✔✔A condition that increases the frequency or severity of a loss. (1-28)
✔✔Information Efficiency - ✔✔The balance that underwriters must maintain between
the hazards presented by the account and the information needed to underwrite it. (1-
29)
✔✔Application - ✔✔A legal document that provides information obtained directly from
an applicant requesting insurance and that an insurer can use for underwriting and
claim handling purposes. (1-30)
✔✔Loss Run - ✔✔A report detailing an insured's history of claims that have occurred
over a specific period, valued as of a specific date. (1-31)
✔✔Counteroffer - ✔✔A proposal an offeree makes to an offeror that varies in some
material way from the original offer, resulting in rejection of the original offer and
constituting a new offer. (1-32)
✔✔(a) Rated Classification - ✔✔The rate classifications provided by the ISO
Commercial Lines Manual that describe operations with unique characteristics or for
which inadequate stastical experience exists. (1-33)
,✔✔Estimated Loss Potentials (ELP) - ✔✔Rate development factors used for operations
with unique characters or for which inadequate statisitcal experience exists. ELPs are
multiplied by loss cost multipliers to develop rates. (1-34)
✔✔Experience Rating - ✔✔A ratemaking technique that adjusts the insured's premium
for the upcoming policy period based on the insured's experience for the current period.
(1-35)
✔✔Schedule Rating - ✔✔A rating plan that awards debits and credits based on specific
categories, such as the care and condition of the premises or the training and selection
of employees, to modify the final premium to reflect factors that the class rate does not
include. (1-36)
✔✔Retrospective Rating - ✔✔A ratemaking technique that adjusts the insured's
premium for the current policy period based on the insured's loss experience during the
current period; paid losses or incurred losses may be used to determine loss exposure.
(1-37)
✔✔Facultative Reinsurance - ✔✔Reinsurance of individual loss exposures in which the
primary insurer chooses which loss exposures to submit to the reinsurer, and the
reinsurer can accept or reject any loss exposures submitted. (1-38)
✔✔Account Underwriting - ✔✔A method of underwriting in which all of the business
from a particular applicant is evaluated as a whole. (1-39)
✔✔Unfair Trade Practices - ✔✔Methods of competition or advertising or procedures
that tend to deprive the public of information necessary to make informed insurance
decisions. (1-40)
✔✔Binder - ✔✔A temporary written or oral agreement to provide insurance coverage
until a formal written policy is issued. (1-41)
✔✔Certificate of Insurance - ✔✔A brief description of insurance coverage prepared by
an insurer or its agent commonly used by policyholders to provide evidence of
insurance. (1-42)
✔✔Combined Ratio - ✔✔A profitability ratio that indicates whether an insurer has made
an underwriting loss or gain. (1-43)
✔✔Underwriting Cycle - ✔✔A cyclical pattern of insurance pricing in which a soft market
is eventually followed by a hard market before the pattern again repeats itself. (1-44)
✔✔Production Underwriting - ✔✔Performing underwriting functions in an insurer's office
as well as traveling to visit and maintain rapport with agents and sometimes clients. (1-
45)
, ✔✔Hit Ratio - ✔✔The ratio of insurance policies written to those that have been quoted
to applicant for insurance. (1-46)
✔✔Unfair Discrimination - ✔✔Applying different standards or methods of treatment to
insureds who have the same basic characteristics and loss potential, such as charging
higher-than-normal rates for auto insurance based solely on the applicant's race,
religion, or ethnic background.
✔✔Declination - ✔✔An insurer's refusal to provide coverage to an applicant who has
made a written request to the insurer or it's producer, or a producer's refusal to forward
such a written request to an insurer. (2-2)
✔✔Termination - ✔✔An insurer's cancellation of a policy during the policy term or
nonrenewal of coverage at the end of a policy term. (2-3)
✔✔Notification Requirements - ✔✔Regulatory requirements relating to the timing and
contents of an insurer's notice to an insured of the declination, termination, and
nonrenewal of insurance coverage. (2-4)
✔✔Prior Approval - ✔✔An insurance rating law in which the rate and supporting rules
must be filed with and approved by the state insurance department before the can be
used. (2-5)
✔✔File and Use - ✔✔An insurance rating law in which the insurer must file rates and
supporting rules with the state insurance department prior to their use, but rates can
then be used immediately without specific approval. (2-6)
✔✔Use and File - ✔✔An insurance rating law in which the rates must be filed with the
state insurance department within a specified period after they are put into use. (2-7)
✔✔No-file Law - ✔✔An insurance rating law that allows insurers to develop and use
rates without having to file with or get approval from the state insurance department. (2-
8)
✔✔Deemer Provision - ✔✔A Law stating the if an insurance regulator does not approve
of an insurer's filing within a specific time, the filing is deemed approved. (2-9)
✔✔Cost-based Pricing - ✔✔Insurance rating that attempts to indentify and control for
every variable that has a significant effect in quantifying differences between otherwise
identical risks. (2-10)
✔✔Residual Market - ✔✔The term referring collection to insurers and other
organizations that make insurance available through a shared risk mechanism to those
who cannot obtain coverage in the admitted. (2-11)
