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

Construction type and fire suppression systems directly determine how far a fire or disaster can spread, which drives the MPL estimate.

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

Flammable materials in wood-frame structures represent elevated fire hazard, warranting loss-control requirements or rate adjustments before binding.

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

Loss runs are carrier-supplied documents showing historical claims, paid amounts, and outstanding reserves by policy year.

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

An experience mod above 1.0 indicates adverse loss history relative to the expected losses for that class, resulting in a surcharge.

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

An occurrence policy triggers on the date the bodily injury or property damage actually takes place, not when the claim is filed.

(CU) Certified Underwriter Practice Test

(CU) Certified Underwriter Practice Test

CU Commercial Underwriting Practices 2