CU - Certified Underwriter Fraud Identification and Mitigation Questions and Answers

Question 1

An underwriter reviews a life insurance application for a large face amount from an elderly applicant.
The applicant has a modest, fixed income, and the beneficiary is a trust managed by a third-party investor who is also paying the premiums via a non-recourse loan.
Which of the following is the STRONGEST indicator of potential stranger-originated life insurance (STOLI) fraud?

Accepted Answer

The lack of an insurable interest between the applicant and the premium-paying investor.

Answer

The high face amount of the policy.

Answer

The applicant's modest, fixed income.

Answer

The use of a trust as the policy beneficiary.

Question 2

An underwriter evaluating a new personal auto application wants to verify the applicant's reported claims history with previous insurers. Which of the following is the most appropriate industry database to use for this purpose?

Accepted Answer

Comprehensive Loss Underwriting Exchange (C.L.U.E.)

Answer

Medical Information Bureau (MIB)

Answer

National Crime Information Center (NCIC)

Answer

Dun & Bradstreet (D&B) Report

Question 3

Which of the following is a key mitigation strategy an underwriter should employ after identifying several significant red flags on a workers' compensation application, such as an applicant's use of a P.O. box and a history of frequent claims?

Accepted Answer

Refer the application to the company's Special Investigation Unit (SIU) for further review before making a final decision.

Answer

Immediately decline the application and close the file.

Answer

Approve the policy but apply the maximum premium surcharge to account for the increased risk.

Answer

Contact the agent and instruct them to obtain a notarized affidavit from the applicant.

Question 4

A restaurant owner applies for a commercial property policy. During the application process, the underwriter specifically asks if the property has any uncorrected fire code violations. The owner, knowing there is an outstanding violation for faulty wiring, answers "no." Based on this answer, the policy is issued. This owner's action is an example of what?

Accepted Answer

Material Misrepresentation

Answer

Morale Hazard

Answer

Hard Fraud

Answer

Breach of Warranty

Question 5

An underwriter is reviewing a disability income application where the applicant's stated income seems unusually high for their occupation. The applicant has submitted tax documents that appear to have been altered. This situation is most indicative of which type of fraud?

Accepted Answer

Application fraud

Answer

Claims padding

Answer

Staged accident fraud

Answer

Internal fraud

Question 6

An underwriter observes a pattern where a single insurance agent submits multiple homeowners' applications in a short period. All applications are for high-value homes, list minimal personal property, use a post office box for a mailing address, and request the highest available liability limits. This combination of red flags most likely indicates a scheme to:

Accepted Answer

create "paper policies" to set up future staged liability claims.

Answer

defraud a mortgage lender through inflated property values.

Answer

churn policies to generate high first-year commissions for the agent.

Answer

secure coverage for properties with known, undisclosed structural defects.