Life & Health Insurance Underwriting and Risk Classification Questions and Answers

Question 1

An applicant for life insurance discloses a hazardous hobby of recreational scuba diving. How would an underwriter most likely address the increased risk?

Accepted Answer

Issue the policy with a higher premium or an exclusion rider for scuba diving.

Answer

Issue the policy at preferred rates because the applicant is likely physically fit.

Answer

Decline the application immediately as scuba diving is a prohibited activity.

Answer

Ignore the hobby as personal activities are not considered in underwriting.

Question 2

An underwriter reviewing a life insurance application finds that information in the applicant's MIB (Medical Information Bureau) report conflicts with the medical history provided on the application. What is the underwriter's most appropriate next step?

Accepted Answer

Request an Attending Physician's Statement (APS) for more detailed information.

Answer

Immediately decline the application based on the MIB report.

Answer

Issue the policy but increase the premium to a substandard rate.

Answer

Report the applicant to the state's Department of Insurance for attempted fraud.

Question 3

An applicant is 35 years old, in excellent health with no chronic conditions, has a desk job, and does not use tobacco products. Into which risk classification would this individual most likely be placed?

Accepted Answer

Preferred

Answer

Substandard

Answer

Standard

Answer

Declined

Question 4

Which of the following best defines the principle of 'adverse selection' from an insurer's perspective?

Accepted Answer

The tendency for individuals with a higher-than-average risk of loss to seek insurance coverage.

Answer

The process of selecting only the healthiest, lowest-risk applicants for insurance.

Answer

The illegal practice of discriminating against applicants based on prohibited factors.

Answer

The selection of a diverse portfolio of investments to fund policy reserves.

Question 5

All of the following are primary factors used in life insurance underwriting to classify risk EXCEPT:

Accepted Answer

Race

Answer

Tobacco Use

Answer

Occupation

Answer

Health History

Question 6

What is the primary source of information an underwriter uses to determine an applicant's eligibility and risk classification for a life insurance policy?

Accepted Answer

The completed insurance application

Answer

The agent's report

Answer

The Medical Information Bureau (MIB) report

Answer

The Attending Physician's Statement (APS)