CU Commercial Underwriting Practices 2

Question 1

When underwriting a commercial property risk, which factor is MOST significant in determining the maximum probable loss (MPL)?

Accepted Answer

Construction type and fire suppression systems

Answer

Geographic location of the property

Answer

Age of the business entity

Answer

Number of employees on-site

Question 2

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?

Accepted Answer

Require sprinkler installation or apply a significant surcharge

Answer

Decline the risk outright

Answer

Accept with standard rates

Answer

Refer the risk to the marketing department

Question 3

Which document in a commercial submission provides the underwriter with a five-year history of losses including reserve amounts?

Accepted Answer

Loss runs

Answer

ACORD 125 Commercial Insurance Application

Answer

Schedule rating worksheet

Answer

Inspection report

Question 4

An underwriter applies an experience modification factor of 1.15 to a commercial account. What does this indicate?

Accepted Answer

The account's losses are 15% above the expected average

Answer

The account's losses are 15% below the expected average

Answer

The premium is discounted by 15%

Answer

The policy limit is increased by 15%

Question 5

In commercial liability underwriting, the term 'occurrence basis' means the policy covers:

Accepted Answer

Losses arising from incidents that occur during the policy period

Answer

Claims filed during the policy period regardless of when the injury occurred

Answer

Only losses reported within 30 days of the policy expiration

Answer

Aggregate claims capped at the per-occurrence limit

Question 6

Which rating element is unique to commercial auto underwriting compared to personal auto underwriting?

Accepted Answer

Vehicle use classification (radius of operations and business use)

Answer

Driver age and gender

Answer

Prior insurance carrier

Answer

Annual mileage estimates

Question 7

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:

Accepted Answer

General liability acceptability and pricing

Answer

Property valuation

Answer

Workers compensation experience mod

Answer

Commercial auto fleet rating