Fundamentals of Insurance Underwriting Quiz

Insurance underwriting involves evaluating risks associated with insuring individuals or assets and setting appropriate premiums based on those risks.

The primary objective of insurance underwriting is to accurately evaluate the level of risk associated with insuring individuals or assets and establish premiums that adequately reflect those risks.

Gender is increasingly being considered in insurance underwriting, but historically, it has been less influential compared to factors such as age, health, occupation, and lifestyle.

Medical exams are conducted during life insurance underwriting to evaluate the applicant's current health status, medical history, and potential risks.

The loss ratio is a key metric in insurance underwriting, representing the ratio of claims paid out by an insurer to the premiums collected.

Actuarial tables are statistical tools used in insurance underwriting to estimate the likelihood of future events, such as mortality rates, accident frequencies, and claim probabilities.

Loss reserves represent the funds that insurers set aside to cover anticipated future claim payments, ensuring they have adequate resources to meet their obligations to policyholders.

Favorite color is not a relevant factor in insurance underwriting, which focuses on assessing risks related to health, behavior, occupation, and other pertinent variables.

Adverse selection refers to the situation where individuals with a higher likelihood of making claims are more likely to purchase insurance, potentially leading to adverse financial consequences for insurers.

Underwriting capacity represents the financial capability of an insurer to absorb and manage risks, including the ability to pay out claims.

Life insurance often requires underwriting to assess the health and mortality risk of individuals applying for coverage.

Cancellation is not typically considered an underwriting decision; instead, it is a separate administrative action taken by insurers to terminate a policy.

Retention refers to the portion of risk that an insurer chooses to keep for its own account after purchasing reinsurance to offset potential losses.

The number of vehicles owned is not a typical underwriting criterion for property insurance; instead, factors such as the property's location, construction, occupancy, and fire protection measures are more relevant.

Moral hazard describes the phenomenon where individuals may engage in riskier behavior because they are protected by insurance, leading to increased likelihood of claims.

Actuarial science involves using statistical analysis to assess risks, predict future events, and calculate appropriate premiums for insurance policies.

Reinsurance involves insurers transferring a portion of their risk to other insurers, thereby reducing their exposure to large losses.

A moratorium refers to a temporary halt or suspension of insurance coverage, often due to specific circumstances or conditions.

Subrogation involves the transfer of an insured individual's rights to the insurer after the insurer has paid a claim, allowing the insurer to pursue recovery from third parties.

Catastrophe modeling involves using advanced mathematical and statistical techniques to assess the potential financial losses resulting from large-scale events such as natural disasters.

Renewal underwriting involves reassessing the risk profile of existing policyholders at the time of policy renewal to determine whether any changes in premiums, coverage, or terms are warranted.