Commercial Underwriting Practices Flashcards
7 cards from real CU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Commercial Underwriting Practices flashcards as text
When underwriting a commercial property risk, which factor is MOST significant in determining the maximum probable loss (MPL)?
Answer: Construction type and fire suppression systems
Construction type and fire suppression systems directly determine how far a fire or disaster can spread, which drives the MPL estimate.
A commercial underwriter reviewing a manufacturer's submission notes the facility stores flammable raw materials in a wood-frame warehouse. Which underwriting action is MOST appropriate?
Answer: Require sprinkler installation or apply a significant surcharge
Flammable materials in wood-frame structures represent elevated fire hazard, warranting loss-control requirements or rate adjustments before binding.
Which document in a commercial submission provides the underwriter with a five-year history of losses including reserve amounts?
Answer: Loss runs
Loss runs are carrier-supplied documents showing historical claims, paid amounts, and outstanding reserves by policy year.
An underwriter applies an experience modification factor of 1.15 to a commercial account. What does this indicate?
Answer: The account's losses are 15% above the expected average
An experience mod above 1.0 indicates adverse loss history relative to the expected losses for that class, resulting in a surcharge.
In commercial liability underwriting, the term 'occurrence basis' means the policy covers:
Answer: Losses arising from incidents that occur during the policy period
An occurrence policy triggers on the date the bodily injury or property damage actually takes place, not when the claim is filed.
Which rating element is unique to commercial auto underwriting compared to personal auto underwriting?
Answer: Vehicle use classification (radius of operations and business use)
Commercial auto rates heavily on business use class, radius of operations, and vehicle weight, factors absent in personal auto rating.
A commercial underwriter discovers a prior carrier non-renewed an account due to repeated slip-and-fall claims. This information MOST likely affects the underwriter's decision regarding:
Answer: General liability acceptability and pricing
Repeated premises liability claims signal a persistent hazard that directly affects general liability risk appetite and premium adequacy.