AU 60: Evaluating Commercial
Underwriting Risks 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, classifying, and pricing
applicants for insurance
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 (underwriting 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 are blended with multiple variables and used to construct models of
anticipated future outcomes.
Catastrophe Model - CORRECT ANSWER - A type of computer program 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.
Underwriting Risks 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, classifying, and pricing
applicants for insurance
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 (underwriting 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 are blended with multiple variables and used to construct models of
anticipated future outcomes.
Catastrophe Model - CORRECT ANSWER - A type of computer program 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.
