AU60 Study Guide Latest 2025 Questions &
Answers
Underwriting - ✔✔The process of selecting insureds, pricing coverage, determining
insurance policy terms and conditions, and then monitoring the underwriting decisions made.
Book of Business - ✔✔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.
Adverse Selection - ✔✔In general, the tendency for people with the greatest probability of
loss to be the ones most likely to purchase insurance.
Policyholders' Surplus - ✔✔Under statutory accounting principles (SAP), an insurer's total
admitted assets minus its total liabilities.
Capacity - ✔✔The amount of business an insurer is able to write, usually based on a
comparison of the insurer's written premiums to its policyholders' surplus.
Underwriting Guidelines - ✔✔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.
Underwriting Authority - ✔✔The scope of decision that an underwriter can make without
receiving approval from someone at a higher level.
Line Underwriter - ✔✔Underwriter who is primarily responsible for implementing the steps
in the underwriting process.
Staff Underwriter - ✔✔Underwriter who is usually located in the home office and who
assists underwriting management with making and implementing underwriting policy.
,Manuscript Policy - ✔✔an insurance policy that is specifically drafted according to terms
negotiated between a specific insured (or group of insureds) and an insurer
Underwriting Policy - ✔✔A guide to individual and aggregate policy selection that supports
an insurer's mission statement.
Advisory Organization - ✔✔An independent organization that works with and on behalf of
insurers that purchase or subscribe to its services.
Prospective Loss Costs - ✔✔Loss data that are modified by loss development, trending, and
credibility processes, but without considerations for profit and expenses.
Loss Development - ✔✔The increase or decrease of incurred losses over time.
Trending - ✔✔A statistical technique for analyzing environmental changes and projecting
such changes into the future.
Premium-to-Surplus Ratio, or Capacity Ratio - ✔✔A capacity ratio that indicates an insurer's
financial strength by relating net written premiums to policyholders' surplus
Market Conduct Examination - ✔✔An analysis of an insurer's practices in four operational
areas: sales and advertising, underwriting, ratemaking, and claim handling.
Expert systems, or knowledge-based systems - ✔✔Computer software 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.
Information Efficiency - ✔✔The balance that underwriters must maintain between the
hazards presented by the account and the information needed to underwrite it.
, 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.
Estimated Loss Potentials - ✔✔Rate development factors used for operations with unique
characteristics or for which inadequate statistical experience exists. Multiplied by loss cost
multipliers to develop rates
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
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.
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 experience.
Account Underwriting - ✔✔a method of underwriting in which all of the business from a
particular applicant is evaluated as a whole
Combined Ratio - ✔✔A profitability ratio that indicates whether an insurer has made an
underwriting loss or gain
Production Underwriting - ✔✔performing underwriting functions in an insurer's office as
well as traveling to visit and maintain rapport with agents and sometimes clients
Hit Ratio - ✔✔The ratio of insurance policies written to those that have been quoted to
applicants for insurance
Answers
Underwriting - ✔✔The process of selecting insureds, pricing coverage, determining
insurance policy terms and conditions, and then monitoring the underwriting decisions made.
Book of Business - ✔✔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.
Adverse Selection - ✔✔In general, the tendency for people with the greatest probability of
loss to be the ones most likely to purchase insurance.
Policyholders' Surplus - ✔✔Under statutory accounting principles (SAP), an insurer's total
admitted assets minus its total liabilities.
Capacity - ✔✔The amount of business an insurer is able to write, usually based on a
comparison of the insurer's written premiums to its policyholders' surplus.
Underwriting Guidelines - ✔✔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.
Underwriting Authority - ✔✔The scope of decision that an underwriter can make without
receiving approval from someone at a higher level.
Line Underwriter - ✔✔Underwriter who is primarily responsible for implementing the steps
in the underwriting process.
Staff Underwriter - ✔✔Underwriter who is usually located in the home office and who
assists underwriting management with making and implementing underwriting policy.
,Manuscript Policy - ✔✔an insurance policy that is specifically drafted according to terms
negotiated between a specific insured (or group of insureds) and an insurer
Underwriting Policy - ✔✔A guide to individual and aggregate policy selection that supports
an insurer's mission statement.
Advisory Organization - ✔✔An independent organization that works with and on behalf of
insurers that purchase or subscribe to its services.
Prospective Loss Costs - ✔✔Loss data that are modified by loss development, trending, and
credibility processes, but without considerations for profit and expenses.
Loss Development - ✔✔The increase or decrease of incurred losses over time.
Trending - ✔✔A statistical technique for analyzing environmental changes and projecting
such changes into the future.
Premium-to-Surplus Ratio, or Capacity Ratio - ✔✔A capacity ratio that indicates an insurer's
financial strength by relating net written premiums to policyholders' surplus
Market Conduct Examination - ✔✔An analysis of an insurer's practices in four operational
areas: sales and advertising, underwriting, ratemaking, and claim handling.
Expert systems, or knowledge-based systems - ✔✔Computer software 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.
Information Efficiency - ✔✔The balance that underwriters must maintain between the
hazards presented by the account and the information needed to underwrite it.
, 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.
Estimated Loss Potentials - ✔✔Rate development factors used for operations with unique
characteristics or for which inadequate statistical experience exists. Multiplied by loss cost
multipliers to develop rates
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
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.
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 experience.
Account Underwriting - ✔✔a method of underwriting in which all of the business from a
particular applicant is evaluated as a whole
Combined Ratio - ✔✔A profitability ratio that indicates whether an insurer has made an
underwriting loss or gain
Production Underwriting - ✔✔performing underwriting functions in an insurer's office as
well as traveling to visit and maintain rapport with agents and sometimes clients
Hit Ratio - ✔✔The ratio of insurance policies written to those that have been quoted to
applicants for insurance
