Assignment 1 - Fundamentals of Underwriting Questions And Answers On AU 60

Assignment 1 - Fundamentals of
Underwriting Questions And Answers
On AU 60
(a)pratedpclassificationp-pCORRECTppANSWER-
ThepratepclassificationspprovidedpbypthepISOpCommercialpLinespManualpthatpdescribepoper
ationspwithpuniquepcharacteristicsporpforpwhichpinadequatepstatisticalpexperiencepexists.

A.pAfterplearningpthatpapparticularlypactivephurricanepseasonpispexpected,pseveralphomeow
nerspinpapcoastalpcommunitypincreaseptheplimitsponptheirpwindstormpcoverage.p-
pCORRECTppANSWER-

Inpdecidingpwhichpapplicantsptheyparepwillingptopinsure,pinsurancepunderwriterspneedptoprec
ognizepthepeffectspofpadversepselection.pWhichponepofpthepfollowingpispthepbestpexamplepofp
adversepselection?

A.pAfterplearningpthatpapparticularlypactivephurricanepseasonpispexpected,pseveralphomeow
nerspinpapcoastalpcommunitypincreaseptheplimitsponptheirpwindstormpcoverage.
B.pBeforepinstallingpanpin-
groundpswimmingppoolpinpherphome'spbackpyard,pLucypincreasespthepdeductibleponpherpho
meownersppolicy.
C.pBeforepbuyingphispfirstpmotorboat,pLuisppurchasespapwatercraftpinsuranceppolicy.
D.pAfterpapneighbor'spbusinesspispburglarized,pAnnapinstallspanpalarmpsystempinpherpstore.

A.pAmendingppolicyptermspandpconditions.p-pCORRECTppANSWER-
ThepBakery,panpapplicantpforpcommercialppropertypinsurance,phaspexperiencedpapseriespofp
propertyplossespoverptheppastpthreepyears.pInporderptopfindpthispapplicantpviable,pthepunderw
riterpagreesptopincreaseptheppropertypdeductible.pThisptypepofpunderwritingpmodificationpispk
nownpas

A.pAmendingppolicyptermspandpconditions.
B.pRequiringplosspcontrolpmeasures.
C.pUsingpfacultativepreinsurance.
D.pUsingpschedulepratingpmodifications.

,A.pAudit.p-pCORRECTppANSWER-
Apmanagementpcontrolptoolpusedptopdeterminepwhetherplinepunderwritersparepproperlypimpl
ementingpunderwritingppolicypispknownpaspanpunderwriting

A.pAudit.
B.pGuide.
C.pRegulation.
D.pProcess.

A.pCarefullypselectingpthepapplicantspwhoseplosspexposuresptheyparepwillingptopinsure.p-
pCORRECTppANSWER-

Underwriterspcanpbestpminimizepthepeffectspofpadversepselectionpby

A.pCarefullypselectingpthepapplicantspwhoseplosspexposuresptheyparepwillingptopinsure.
B.pAcceptingpallpapplicantspthatparepsubmittedpbypthepproducer.
C.pRejectingpapplicantspwhophavephadpanyppriorplosses.
D.pChoosingptopinsureponlypthosepriskspwithpaphighpprobabilitypofploss.

A.pChloepandpElinparepunderwritingpidenticalphomeownerspriskspforpCromleypInsurancepCo
mpany.pThepapplicantsphavepthepsamepprotectionpclass,pconstruction,pandpcoveragepamou
nt.pAfterpcheckingpthepunderwritingpguidelines,ptheypcomeptopthepsamepunderwritingpdecisi
on.p-pCORRECTppANSWER-
Whichponepofpthepfollowingpcasespillustratesphowpunderwritingpguidelinespensurepuniformit
ypandpconsistency?

A.pChloepandpElinparepunderwritingpidenticalphomeownerspriskspforpCromleypInsurancepCo
mpany.pThepapplicantsphavepthepsamepprotectionpclass,pconstruction,pandpcoveragepamou
nt.pAfterpcheckingpthepunderwritingpguidelines,ptheypcomeptopthepsamepunderwritingpdecisi
on.
B.pCromleypidentifiespapplicantspthatppresentpaplowerpunderwritingpriskpbypassigningpaprank
porpscorepofpallpthepvariablesppresentedpbypanpaccountpandpitsplosspexposures.

C.pFurkanpandpDanielphavepexperiencepinpunderwritingpworkerspcompensationppoliciespforp
CromleypInsurancepCompany.pTheyphavepprovidedpfeedbackpandpexpertisepinpupdatingpth
epcurrentpworkerspcompensationpguidelinespinpthepunderwritingpmanual.
D.pCromley'spcontractor'spequipmentpunderwritingpguidelinespmightpindicatepthatpequipme
ntpusepispofpparamountpimportancepinpdeterminingpacceptabilitypandppricing.

A.pCompositionpofpthepinsurer'spbookpofpbusinessp-pCORRECTppANSWER-
Whichponepofpthepfollowingpispdeterminedpbypapcompany'spunderwritingppolicy?

A.pCompositionpofpthepinsurer'spbookpofpbusiness
B.pThepratingporganizationptopwhichpthepinsurerpwillpbelong
C.pThepmarketppursuedpbypthepinsurer
D.pThepunderwritingpauthoritypthepinsurerpgrantspitspproducers

, A.pDevelopingpunderwritingpalternativesp-pCORRECTppANSWER-
Anpunderwriterpreceivespaprenewalpapplicationpforpappropertypquotepfromphispproducer.pThe
papplicantphasphadpapseriespofpsmallplossespinptheprecentppast.pThepunderwriterpispdebatingp

whetherptoprejectpthepsubmissionporpquotepitpwithpappropertypdeductiblepofp$5,000.pDuringpw
hichponepofpthepfollowingpstepspinpthepunderwritingpprocesspispthepunderwriterpinvolved?

A.pDevelopingpunderwritingpalternatives
B.pMonitoringpunderwritingpdecisions
C.pEvaluatingpthepsubmission
D.pImplementingpthepunderwritingpdecision

A.pEnforcingpunderwritingpguidelinesp-pCORRECTppANSWER-
Taniapreceivespanpapplicationpforphomeowner'spinsurancepforpaphomepvaluedpatp$500,000p
frompPatrick,pthepproducerpforpKeithlypInsurancepCompany.pSincepTania'spunderwritingpaut
horitypisp$350,000ponppropertyprisks,pshepmustpreferpitptopLachlan,pherpunderwritingpsupervi
sor.pWhichponepofpthepfollowingpadditionalpfunctionspforpunderwritingpprofitabilitypdoespthisp
casepillustrate?

A.pEnforcingpunderwritingpguidelines
B.pPreventionpofperrorspandpomissions
C.pGuardingpagainstpadversepselection
D.pEnsuringpadequateppolicyholderpsurplus

A.pEvaluatingpnewpsubmissionspandprenewalpunderwriting.p-pCORRECTppANSWER-
Thepfocuspofpaplinepunderwriterpis

A.pEvaluatingpnewpsubmissionspandprenewalpunderwriting.
B.pConductingpeducationpandptraining.
C.pManagingpthepriskpselectionpprocess.
D.pSecuringpandpmaintainingptreatypreinsurance.

A.pFinancialpcapacityp-pCORRECTppANSWER-
Whichponepofpthepfollowingpispapconstraintptopthepdevelopmentpofpunderwritingppolicy?

A.pFinancialpcapacity
B.pUnderwritingpaudits
C.pUnderwritingpguides
D.pMarketpresearch

A.pInsuranceppoliciesprenewed.p-pCORRECTppANSWER-
Thepretentionpratiopaspanpunderwritingpperformancepmeasurepisptheppercentagepof

A.pInsuranceppoliciesprenewed.
B.pPoliciespwrittenptoppoliciespquoted.
C.pPremiumpheldpforplosses.
D.pUnderwritingpexpensesptopwrittenppremiums.