CU Core Underwriting Principles 3

Question 1

When an underwriter 'non-renews' a policy rather than cancelling it mid-term, the primary reason is usually:

Accepted Answer

Mid-term cancellation is often restricted by state law, making non-renewal the practical exit

Answer

Many states restrict mid-term cancellation to specific grounds after the policy has been in force beyond a brief initial period, so underwriters use non-renewal at expiration as the standard exit strategy.

Question 2

What is 'experience rating' in commercial underwriting?

Accepted Answer

Adjusting premiums based on the insured's own past loss history relative to expected losses

Answer

Experience rating modifies a prospective premium by comparing the insured's actual past losses to the expected losses for its class, rewarding good loss history with credits.

Question 3

Which underwriting action is most appropriate when a risk has one unacceptable characteristic but is otherwise desirable?

Accepted Answer

Exclude the unacceptable exposure or add an endorsement to address it

Answer

Underwriters can exclude a specific hazard or modify coverage terms via endorsement rather than declining the entire account, preserving a profitable relationship while managing the problematic exposure.

Question 4

Which document formally outlines the underwriting guidelines and risk appetite for a specific line of business?

Accepted Answer

Underwriting manual

Answer

An underwriting manual contains the rules, eligibility criteria, rating procedures, and authority levels that guide underwriters in evaluating and pricing risks for a given line.

Question 5

In property underwriting, 'coinsurance' is a provision that penalizes an insured who:

Accepted Answer

Insures property for less than a required percentage of its value

Answer

Coinsurance clauses require the insured to carry coverage equal to a specified percentage (commonly 80%) of property value; underinsurance results in the insured bearing a proportionate share of any partial loss.

(CU) Certified Underwriter Practice Test

(CU) Certified Underwriter Practice Test

CU Core Underwriting Principles 3