CU Commercial Underwriting Practices 3

Question 1

When underwriting commercial umbrella liability, the underwriter's FIRST concern regarding the underlying policies is:

Accepted Answer

That underlying limits meet the umbrella's required minimum retained limits

Answer

Umbrella policies require underlying policies to carry specified minimum limits so the umbrella does not drop down to cover gaps the insured should self-retain.

Question 2

Which underwriting tool allows a commercial lines underwriter to adjust the manual rate up or down based on individual risk characteristics within a pre-approved range?

Accepted Answer

Schedule rating

Answer

Schedule rating applies credits or debits to the manual premium for specific positive or negative risk characteristics within filed guidelines.

Question 3

A commercial property underwriter is concerned about 'moral hazard.' Which scenario BEST exemplifies this concept?

Accepted Answer

An insured who inflates inventory values to collect excess claim proceeds

Answer

Moral hazard arises from the insured's intent to defraud or take undue advantage of coverage, such as over-insuring and then filing inflated claims.

Question 4

In workers compensation underwriting, the payroll audit is critical because:

Accepted Answer

Workers compensation premiums are based on actual payroll by class code

Answer

WC premiums are calculated as a rate per $100 of payroll by classification, so accurate payroll figures directly determine final earned premium.

Question 5

A commercial lines underwriter is reviewing a restaurant account. Which hazard is MOST unique to this class of business?

Accepted Answer

Products liability from food-borne illness

Answer

Food service operations carry a heightened products liability risk because contaminated food can injure multiple customers simultaneously.

(CU) Certified Underwriter Practice Test

(CU) Certified Underwriter Practice Test

CU Commercial Underwriting Practices 3