Underwriting and Risk Analysis Flashcards

A 45-year-old applicant discloses a history of controlled Type 2 diabetes managed by diet alone. How would an underwriter most likely classify this risk?

Answer: Issue with a rated premium or exclusion rider

Well-controlled diabetes managed by diet is typically classified as a substandard risk, resulting in a rated premium or an exclusion rider rather than an outright decline.

Which underwriting concept refers to the tendency of individuals who know they are at high risk to disproportionately seek insurance coverage?

Answer: Adverse selection

Adverse selection occurs when higher-risk individuals are more likely to purchase insurance, skewing the insurer's risk pool unfavorably.

When an underwriter requests an Attending Physician's Statement (APS), what is the PRIMARY purpose?

Answer: To get detailed medical information directly from the applicant's doctor

An APS is requested to obtain detailed, firsthand medical information from the applicant's treating physician to clarify or expand on disclosed health conditions.

An applicant who works as a commercial deep-sea diver applies for a $1 million life insurance policy. This occupational risk is best addressed by the underwriter through which action?

Answer: Charging an extra flat extra premium to reflect the hazardous occupation

A flat extra premium per $1,000 of coverage is the standard underwriting tool for quantifiable, occupation-specific hazards like commercial diving.

In the context of life insurance underwriting, what does the term 'numerical rating system' refer to?

Answer: A method of assigning debits and credits to mortality risk factors to determine a final risk rating

The numerical rating system assigns positive or negative point values (debits/credits) to various risk factors such as build, health history, and occupation to arrive at an overall risk class.

A life insurance applicant reveals they participated in solo skydiving over the past two years. Which of the following underwriting responses is MOST typical?

Answer: Assessment of a flat extra premium or an aviation/avocation exclusion rider

Recreational skydiving is an avocation hazard typically addressed through a flat extra premium or an exclusion rider limiting the death benefit for aviation/skydiving-related deaths.

Which of the following best describes the concept of 'insurability' in life insurance underwriting?

Answer: Whether the risk presented by an applicant falls within the insurer's acceptable guidelines

Insurability refers to whether an applicant's combined risk factors—health, occupation, lifestyle—fall within the boundaries the insurer is willing to accept at a given rate class.