Risk Assessment & Underwriting Flashcards
7 cards from real CPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Assessment & Underwriting flashcards as text
A company misclassifies a roofer as a clerical worker for workers' compensation purposes. What is the primary financial risk?
Answer: Significant additional premium charges at policy audit
Misclassifying high-risk workers as lower-rated classes results in substantial back-premium charges when the insurer audits payroll at policy year end.
Which factor most directly affects a company's Experience Modification Rate (EMR) for workers' compensation?
Answer: Actual claims history compared to expected losses
The EMR compares a company's actual loss experience to the expected losses for its industry, rewarding or penalizing based on claims history.
An underwriter is reviewing a contractor's payroll submission for workers' comp. Which payroll element is typically EXCLUDED from the premium calculation?
Answer: Overtime premium (the extra half-time portion)
Most states allow exclusion of the overtime premium (the extra 50% portion above straight-time) from workers' comp payroll, reducing the premium base.
Under the NCCI payroll cap rule, what is the maximum weekly payroll per employee used to calculate workers' compensation premiums for executive officers?
Answer: A state-specific maximum set by statute
NCCI and individual states establish minimum and maximum payroll caps for executive officers that vary by state and are updated periodically.
When a staffing agency places workers at a client site, workers' compensation coverage responsibility generally falls on:
Answer: The staffing agency, as the employer of record
Staffing agencies, as the employer of record for placed workers, typically carry the workers' compensation policy and include those workers in their auditable payroll.
A payroll specialist notices that subcontractor payments were not documented with certificates of insurance. What is the risk exposure?
Answer: The client may owe additional workers' comp premium for uninsured subcontractors
Without certificates of insurance, insurers may treat uninsured subcontractor payroll as covered payroll and charge premium on it during audit.
Which report does an employer submit to the state to facilitate workers' compensation risk underwriting by providing detailed payroll by job classification?
Answer: Unit Statistical Report (USR)
The Unit Statistical Report (USR) provides insurers and rating bureaus with payroll and loss data by classification code used in workers' comp underwriting.