AU60 Exam UPDATED ACTUAL Questions
and CORRECT Answers
book of business - CORRECT ANSWER - A group of policies with a common
characteristic, such as territory or type of coverage, or all policies written by a particular insurer
or agency.
underwriting - CORRECT ANSWER - The process of selecting insureds, pricing
coverage, determining insurance policy terms and conditions, and then monitoring the
underwriting decisions made.
adverse selection - CORRECT ANSWER - In general, the tendency for people with the
greatest probability of loss to be the ones most likely to purchase insurance.
policyholders' surplus - CORRECT ANSWER - Under statutory accounting principles
(SAP), an insurer's total admitted assets minus its total liabilities.
underwriting guidelines (UW guide) - CORRECT ANSWER - A written manual that
communicates an insurer's underwriting policy and that specifies the attributes of an account that
an insurer is willing to insure.
predictive modeling - CORRECT ANSWER - A process in which historical data based on
behaviors and events is blended with multiple variables and used to construct models of
anticipated future outcomes.
catastrophe model - CORRECT ANSWER - A type of computer that estimates losses from
future potential catastrophic events.
telematics - CORRECT ANSWER - The use of technological devices to transmit data via
wireless communication and GPS tracking.
,capacity - CORRECT ANSWER - The amount of business an insure is able to write,
usually based on a comparison of the insurer's written premiums to its policyholder's surplus.
manuscript policy or manuscript endorsement - CORRECT ANSWER - An insurance
policy or endorsement that specifically drafted according to terms negotiated between a specific
insured (or group of insureds) and an insurer.
big data - CORRECT ANSWER - Sets of data that are too large to be gathered and
analyzed by traditional methods.
smart product - CORRECT ANSWER - An innovative item that uses sensors; wireless
sensor networks; and data collection, transmission, and analysis to further enable the item to be
faster, more useful, or otherwise improved.
internet of things (IoT) - CORRECT ANSWER - A network of objects that transmit data to
each other and central hubs through the internet.
artificial intelligence (AI) - CORRECT ANSWER - Computer processing or output that
simulates human reasoning or knowledge
Machine learning - CORRECT ANSWER - artificial intelligence in which computers
continually teach themselves to make better decisions based on previous results and new data
Deep Learning - CORRECT ANSWER - Insights into data use and processing gained by
combining artificial intelligence and machine learning. It is based on algorithms derived from
artificial neural networks.
data mining - CORRECT ANSWER - The analysis of large amounts of data to find new
relationships and patterns that will assist in developing business solutions.
Unfair Discrimination - CORRECT ANSWER - 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 an auto insurance applicant based solely on the applicant's
race, religion, or ethnic background
declination - CORRECT ANSWER - An insurer's refusal to provide coverage to an
applicant who has made a written request to the insurer or its producer, or a producer's refusal to
forward such a written request to an insurer.
termination - CORRECT ANSWER - An insurer's cancellation of a policy during the
policy term or nonrenewable of coverage at the end of a policy term.
notification requirements - CORRECT ANSWER - regulatory requirements relating to
timing and contents of an insurers notice to an insured of the declination, termination and
nonrenewal of insurance coverage
Market Conduct Examination - CORRECT ANSWER - An analysis of an insurer's
practices in four operational areas: sales and advertising, underwriting, ratemaking, and claim
handling.
Premium-to-surplus ratio, or capacity ratio - CORRECT ANSWER - A capacity ratio that
indicates an insurer's financial strength by relating net written premiums to policyholders' surplus
application - CORRECT ANSWER - 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.
loss history - CORRECT ANSWER - A listing of past claims, including the date of
occurrence, the line of business, the type or description of the claim, the date of the claim, the
amount paid, the amount reserved, and the claim's current status.
experience rating plan - CORRECT ANSWER - A rating plan that increases or reduces the
premium for a future period based on the insured's own loss experience for a period in the recent
past.
, fee for service company - CORRECT ANSWER - an independent contractor who
specializes in loss control work and who is paid for each loss control survey performed
Actual Cash Value - CORRECT ANSWER - A method in valuing property that is
calculated as the cost to replace or repair property minus depreciation, the fair market value, or a
valuation determined by the broad evidence rule.
replacement cost - CORRECT ANSWER - The cost to repair or replace property using
new materials of like kind and quality with no deduction for depreciation.
common-size statement - CORRECT ANSWER - A financial statement in which amounts
are reported as a percentage of a base figure
General Accepted Accounting Principles (GAAP) - CORRECT ANSWER - the common
set of standards and procedures used in the preparation of financial statements to ensure
consistency of presentation and reported results
fixed assets - CORRECT ANSWER - Resources that cannot be expected to be sold or
consumed within the business's normal operating cycle and that are usually considered to be long
lived.
DuPont Indentity - CORRECT ANSWER - an analysis of ROA and ROE by breaking
them down into their component ratios
insurable interest - CORRECT ANSWER - An interest in the subject of an insurance
policy that is not unduly remote and that would cause the interested party to suffer financial loss
if an insured event occurred.
named insured - CORRECT ANSWER - A person, corporation, partnership, or other entity
identified as an insured party in an insurance policy's declarations page.
and CORRECT Answers
book of business - CORRECT ANSWER - A group of policies with a common
characteristic, such as territory or type of coverage, or all policies written by a particular insurer
or agency.
underwriting - CORRECT ANSWER - The process of selecting insureds, pricing
coverage, determining insurance policy terms and conditions, and then monitoring the
underwriting decisions made.
adverse selection - CORRECT ANSWER - In general, the tendency for people with the
greatest probability of loss to be the ones most likely to purchase insurance.
policyholders' surplus - CORRECT ANSWER - Under statutory accounting principles
(SAP), an insurer's total admitted assets minus its total liabilities.
underwriting guidelines (UW guide) - CORRECT ANSWER - A written manual that
communicates an insurer's underwriting policy and that specifies the attributes of an account that
an insurer is willing to insure.
predictive modeling - CORRECT ANSWER - A process in which historical data based on
behaviors and events is blended with multiple variables and used to construct models of
anticipated future outcomes.
catastrophe model - CORRECT ANSWER - A type of computer that estimates losses from
future potential catastrophic events.
telematics - CORRECT ANSWER - The use of technological devices to transmit data via
wireless communication and GPS tracking.
,capacity - CORRECT ANSWER - The amount of business an insure is able to write,
usually based on a comparison of the insurer's written premiums to its policyholder's surplus.
manuscript policy or manuscript endorsement - CORRECT ANSWER - An insurance
policy or endorsement that specifically drafted according to terms negotiated between a specific
insured (or group of insureds) and an insurer.
big data - CORRECT ANSWER - Sets of data that are too large to be gathered and
analyzed by traditional methods.
smart product - CORRECT ANSWER - An innovative item that uses sensors; wireless
sensor networks; and data collection, transmission, and analysis to further enable the item to be
faster, more useful, or otherwise improved.
internet of things (IoT) - CORRECT ANSWER - A network of objects that transmit data to
each other and central hubs through the internet.
artificial intelligence (AI) - CORRECT ANSWER - Computer processing or output that
simulates human reasoning or knowledge
Machine learning - CORRECT ANSWER - artificial intelligence in which computers
continually teach themselves to make better decisions based on previous results and new data
Deep Learning - CORRECT ANSWER - Insights into data use and processing gained by
combining artificial intelligence and machine learning. It is based on algorithms derived from
artificial neural networks.
data mining - CORRECT ANSWER - The analysis of large amounts of data to find new
relationships and patterns that will assist in developing business solutions.
Unfair Discrimination - CORRECT ANSWER - 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 an auto insurance applicant based solely on the applicant's
race, religion, or ethnic background
declination - CORRECT ANSWER - An insurer's refusal to provide coverage to an
applicant who has made a written request to the insurer or its producer, or a producer's refusal to
forward such a written request to an insurer.
termination - CORRECT ANSWER - An insurer's cancellation of a policy during the
policy term or nonrenewable of coverage at the end of a policy term.
notification requirements - CORRECT ANSWER - regulatory requirements relating to
timing and contents of an insurers notice to an insured of the declination, termination and
nonrenewal of insurance coverage
Market Conduct Examination - CORRECT ANSWER - An analysis of an insurer's
practices in four operational areas: sales and advertising, underwriting, ratemaking, and claim
handling.
Premium-to-surplus ratio, or capacity ratio - CORRECT ANSWER - A capacity ratio that
indicates an insurer's financial strength by relating net written premiums to policyholders' surplus
application - CORRECT ANSWER - 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.
loss history - CORRECT ANSWER - A listing of past claims, including the date of
occurrence, the line of business, the type or description of the claim, the date of the claim, the
amount paid, the amount reserved, and the claim's current status.
experience rating plan - CORRECT ANSWER - A rating plan that increases or reduces the
premium for a future period based on the insured's own loss experience for a period in the recent
past.
, fee for service company - CORRECT ANSWER - an independent contractor who
specializes in loss control work and who is paid for each loss control survey performed
Actual Cash Value - CORRECT ANSWER - A method in valuing property that is
calculated as the cost to replace or repair property minus depreciation, the fair market value, or a
valuation determined by the broad evidence rule.
replacement cost - CORRECT ANSWER - The cost to repair or replace property using
new materials of like kind and quality with no deduction for depreciation.
common-size statement - CORRECT ANSWER - A financial statement in which amounts
are reported as a percentage of a base figure
General Accepted Accounting Principles (GAAP) - CORRECT ANSWER - the common
set of standards and procedures used in the preparation of financial statements to ensure
consistency of presentation and reported results
fixed assets - CORRECT ANSWER - Resources that cannot be expected to be sold or
consumed within the business's normal operating cycle and that are usually considered to be long
lived.
DuPont Indentity - CORRECT ANSWER - an analysis of ROA and ROE by breaking
them down into their component ratios
insurable interest - CORRECT ANSWER - An interest in the subject of an insurance
policy that is not unduly remote and that would cause the interested party to suffer financial loss
if an insured event occurred.
named insured - CORRECT ANSWER - A person, corporation, partnership, or other entity
identified as an insured party in an insurance policy's declarations page.
