10 exam-style questions with answers and explanations, straight from our 1,030-question bank. Tap an answer to check yourself. When you're ready, take the scored version in the free practice test.
The AU-M exam has 50 questions and runs 1 hours 5 minutes.
These 10 free AU-M questions are organized by exam domain, so you can see how each part of the Associate in Commercial Underwriting - Management blueprint is tested. Reveal the answer and explanation under each question.
After a regional office introduces a bonus for quotation count, turnaround falls from four business days to one. Audits find more incorrect deductibles, and producers increasingly need revised quotes before binding. The insurer competes on reliable technical service. Which redesign would align the bonus with that strategy?
Correct answer: D - Reward timely, accurate quotations, with material file errors limiting the award.
During coaching, a new underwriter accurately explains the referral rules but repeatedly mishandles cases in which both a policy limit and a discretionary discount must be checked. A written test confirms her knowledge. Observation confirms that she has the correct guidance, system access, and sufficient time. Her manager has already clarified expectations. The intervention that addresses the demonstrated gap is:
Correct answer: C - Coached limit-and-discount cases, followed by observed decisions on unfamiliar accounts.
For a senior underwriting appointment, two finalists offer different strengths: one has a strong producer network and a persuasive interview style; the other has stronger technical credentials. The role requires identifying missing exposures, applying authority rules, and explaining decisions. What additional evidence would most directly support the appointment?
Correct answer: A - Performance on the same representative account exercise, scored against common job-related criteria.
An appointed producer asks for a discount to improve a low submission-to-bind conversion rate. Three findings emerge: the quote-to-submission ratio is low; the quote-to-bind ratio and developed profitability match those of comparable producers; and most unquoted submissions involve operations outside appetite. The relationship manager's most useful response is to:
Correct answer: D - Agree on target classes and give specific feedback on off-appetite submissions.
An insurer can fund one initiative to expand among precision-component manufacturers. Its engineering expertise is distinctive, but competitors process simple small-business risks more cheaply. Target buyers value tailored interruption protection and access to engineers more than the lowest premium. Which investment best supports a defensible competitive position?
Correct answer: A - Build a specialist manufacturing service combining coverage design with ongoing engineering support.
A proposed annual liability policy has expected losses of $70,000, including $7,000 of loss-adjustment expense, and fixed underwriting expense of $14,000. Variable expenses equal 25% of premium; required underwriting profit is 5% of premium. A producer offers $115,000 without changing coverage or exposure. There are no other costs or pricing constraints. Which response correctly identifies the minimum acceptable premium?
Correct answer: A - $120,000; the producer's offer falls short of the required underwriting margin.
Hours before a furniture factory is due to bind property coverage, a risk-control engineer reports that sprinklers are out of service while production continues. Program rules require verified operational sprinklers before binding, with no temporary-coverage exception. The producer offers a higher deductible and promises repairs within a week. Which instruction should be given now?
Correct answer: D - Hold binding; involve risk control immediately and require verified restoration before acceptance.
A wholesaler's latest annual property loss ratio is 180% after one large water-damage claim. The failed pipe has been replaced, risk control has verified the corrective work, and current property values and business-income needs have been reviewed. The risk remains within appetite, and the proposed renewal meets the insurer's prospective return target, authority limits, and concentration requirements. An account manager nevertheless recommends nonrenewal solely because of the annual loss ratio. How should the underwriting manager respond?
Correct answer: B - Offer renewal on the supported terms and continue monitoring the corrected exposure.
A reconciliation traces deterioration in a contractors' liability portfolio's calendar-year loss ratio to higher case reserves on older accidents. At comparable development ages, the current accident year's frequency and estimated ultimate loss ratio remain on plan. All loss ratios use consistent definitions. The chief underwriting officer asks whether the latest new-business campaign has failed. Which conclusion is justified?
Correct answer: B - Prior-year development explains the deterioration; these figures do not establish a campaign failure.
A dashboard's loss ratios improve sharply after a claims-system integration, especially for accounts with several claims. Incurred losses still reconcile to the claims ledger. Each claim appears once, but the full policy-term earned premium repeats on every claim row; claim-free policy terms are retained separately. Before these results inform renewal decisions, what repair is needed?
Correct answer: C - Total the losses by policy term; join to all terms, counting earned premium once.
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