CU Core Underwriting Principles 2

Question 1

Which underwriting concept refers to the tendency of higher-risk individuals to seek insurance more than lower-risk individuals?

Accepted Answer

Adverse selection

Answer

Moral hazard

Answer

Risk pooling

Answer

Subrogation

Question 2

An underwriter applying the 'law of large numbers' is primarily trying to achieve which goal?

Accepted Answer

Make loss predictions more statistically reliable

Answer

Reduce policy premiums below market rates

Answer

Increase the number of exclusions per policy

Answer

Eliminate all underwriting judgment

Question 3

What is the purpose of a deductible in an insurance policy from an underwriting perspective?

Accepted Answer

To reduce moral hazard and eliminate small nuisance claims

Answer

To increase insurer profit margins

Answer

To comply with state mandatory minimum requirements

Answer

To allow insurers to deny all large claims

Question 4

Which term describes the maximum amount an insurer will pay for all claims arising from a single occurrence?

Accepted Answer

Per-occurrence limit

Answer

Aggregate limit

Answer

Sublimit

Answer

Retention limit

Question 5

In underwriting, what does 'hazard' refer to specifically?

Accepted Answer

A condition that increases the frequency or severity of loss

Answer

The probability that a loss will occur

Answer

The financial consequence of a covered peril

Answer

The premium charged for coverage

Question 6

What does an underwriter mean by 'schedule rating'?

Accepted Answer

Adjusting a standard premium up or down based on specific risk characteristics

Answer

Setting premiums based solely on industry loss statistics

Answer

Scheduling inspections for large commercial accounts

Answer

Rating policies according to a fixed government fee schedule

Question 7

Which type of underwriting authority allows a field agent to bind coverage up to specified limits without prior home-office approval?

Accepted Answer

Delegated binding authority

Answer

Facultative authority

Answer

Treaty authority

Answer

Surplus lines authority