AU60 Exam 2025 Questions and
Answers
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.
underwriting - ✔✔The process of selecting insureds, pricing coverage, determining
insurance policy terms and conditions, and then monitoring the underwriting decisions
made.
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.
underwriting guidelines (UW guide) - ✔✔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 - ✔✔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 - ✔✔A type of computer that estimates losses from future potential
catastrophic events.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
,telematics - ✔✔The use of technological devices to transmit data via wireless
communication and GPS tracking.
capacity - ✔✔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 - ✔✔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 - ✔✔Sets of data that are too large to be gathered and analyzed by traditional
methods.
smart product - ✔✔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) - ✔✔A network of objects that transmit data to each other and
central hubs through the internet.
artificial intelligence (AI) - ✔✔Computer processing or output that simulates human
reasoning or knowledge
Machine learning - ✔✔artificial intelligence in which computers continually teach
themselves to make better decisions based on previous results and new data
Deep Learning - ✔✔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 - ✔✔The analysis of large amounts of data to find new relationships and
patterns that will assist in developing business solutions.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
,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 an auto insurance applicant 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 its producer, or a producer's refusal to forward such a
written request to an insurer.
termination - ✔✔An insurer's cancellation of a policy during the policy term or
nonrenewable of coverage at the end of a policy term.
notification requirements - ✔✔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 - ✔✔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 - ✔✔A capacity ratio that indicates an
insurer's financial strength by relating net written premiums to policyholders' surplus
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.
loss history - ✔✔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 - ✔✔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.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 3
, fee for service company - ✔✔an independent contractor who specializes in loss control
work and who is paid for each loss control survey performed
Actual Cash Value - ✔✔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 - ✔✔The cost to repair or replace property using new materials of like
kind and quality with no deduction for depreciation.
common-size statement - ✔✔A financial statement in which amounts are reported as a
percentage of a base figure
General Accepted Accounting Principles (GAAP) - ✔✔the common set of standards and
procedures used in the preparation of financial statements to ensure consistency of
presentation and reported results
fixed assets - ✔✔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 - ✔✔an analysis of ROA and ROE by breaking them down into their
component ratios
insurable interest - ✔✔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 - ✔✔A person, corporation, partnership, or other entity identified as an
insured party in an insurance policy's declarations page.
Sole Proprietorship - ✔✔a form of business in which one person own the business
assets and is personally liable for the business debts
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 4
Answers
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.
underwriting - ✔✔The process of selecting insureds, pricing coverage, determining
insurance policy terms and conditions, and then monitoring the underwriting decisions
made.
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.
underwriting guidelines (UW guide) - ✔✔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 - ✔✔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 - ✔✔A type of computer that estimates losses from future potential
catastrophic events.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
,telematics - ✔✔The use of technological devices to transmit data via wireless
communication and GPS tracking.
capacity - ✔✔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 - ✔✔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 - ✔✔Sets of data that are too large to be gathered and analyzed by traditional
methods.
smart product - ✔✔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) - ✔✔A network of objects that transmit data to each other and
central hubs through the internet.
artificial intelligence (AI) - ✔✔Computer processing or output that simulates human
reasoning or knowledge
Machine learning - ✔✔artificial intelligence in which computers continually teach
themselves to make better decisions based on previous results and new data
Deep Learning - ✔✔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 - ✔✔The analysis of large amounts of data to find new relationships and
patterns that will assist in developing business solutions.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
,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 an auto insurance applicant 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 its producer, or a producer's refusal to forward such a
written request to an insurer.
termination - ✔✔An insurer's cancellation of a policy during the policy term or
nonrenewable of coverage at the end of a policy term.
notification requirements - ✔✔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 - ✔✔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 - ✔✔A capacity ratio that indicates an
insurer's financial strength by relating net written premiums to policyholders' surplus
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.
loss history - ✔✔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 - ✔✔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.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 3
, fee for service company - ✔✔an independent contractor who specializes in loss control
work and who is paid for each loss control survey performed
Actual Cash Value - ✔✔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 - ✔✔The cost to repair or replace property using new materials of like
kind and quality with no deduction for depreciation.
common-size statement - ✔✔A financial statement in which amounts are reported as a
percentage of a base figure
General Accepted Accounting Principles (GAAP) - ✔✔the common set of standards and
procedures used in the preparation of financial statements to ensure consistency of
presentation and reported results
fixed assets - ✔✔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 - ✔✔an analysis of ROA and ROE by breaking them down into their
component ratios
insurable interest - ✔✔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 - ✔✔A person, corporation, partnership, or other entity identified as an
insured party in an insurance policy's declarations page.
Sole Proprietorship - ✔✔a form of business in which one person own the business
assets and is personally liable for the business debts
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 4
