CU Risk & Underwriting Principles

Question 1

What is the primary role of underwriting in insurance?

Accepted Answer

To evaluate risk and set premium rates

Answer

To market insurance products.

Answer

To pay claims directly.

Answer

To invest in real estate.

Question 2

What is a risk in underwriting?

Accepted Answer

Possibility of a financial loss

Answer

Guaranteed profit.

Answer

Client acquisition rate.

Answer

Sales bonus program.

Question 3

Why is risk classification important in underwriting?

Accepted Answer

To group similar risks and determine accurate premiums

Answer

To confuse applicants.

Answer

To delay application processing.

Answer

To reduce competition.

Question 4

What is 'adverse selection' in insurance?

Accepted Answer

High-risk individuals seeking more coverage

Answer

Offering lower prices to risky clients.

Answer

Random policy cancellations.

Answer

Insurance companies refusing all clients.

Question 5

What is the purpose of underwriting guidelines?

Accepted Answer

To ensure consistent and effective risk evaluation

Answer

To confuse new underwriters.

Answer

To eliminate client interviews.

Answer

To increase marketing activities.

Question 6

Which factor is NOT typically considered during risk assessment?

Accepted Answer

Applicant's marketing preferences

Answer

Applicant's health.

Answer

Applicant's occupation.

Answer

Applicant's financial background.

Question 7

What is the objective of risk pooling in insurance?

Accepted Answer

Spread risk across a large group

Answer

Increase profits instantly.

Answer

Insure only high-risk clients.

Answer

Focus only on low-risk groups.

Question 8

Which document summarizes the underwriting decision?

Accepted Answer

Underwriting report

Answer

Claim report.

Answer

Marketing proposal.

Answer

Sales prospectus.

Question 9

What does 'moral hazard' mean in underwriting?

Accepted Answer

Increased risky behavior by insured individuals

Answer

Insurance fraud by agents.

Answer

Underwriting process errors.

Answer

Errors in claim settlement.