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Understanding Insurance Underwriting FINAL EXAM (FL-PC SAMPLE) Copy

Posted on 01.03.19

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Question 1 of 42

1. Question
The job of an underwriter is to do which of the following?
- Draft insurance advertisements
- Evaluate the subject seeking insurance
- Rule on the legality of policies
- Decide which locations should be redlined
Question 2 of 42

2. Question
Which of the following describes the type of documents an underwriter would want to help in his or her evaluation?
- An insurance form
- Supporting documents
- Statistical data applicable to the insured
- All of the answers supplied are correct
Question 3 of 42

3. Question
Which of the following describes a realistic workload for a fairly normal underwriter?
- Underwriting two or three different types of policies
- Underwriting all the policies offered by an insurance company
- Underwriting only a specific type of policy
- Underwriting all the policies offered by an agent
Question 4 of 42

4. Question
When underwriting insurance for clients, underwriters need to know which of the following?
- The risks the client is involved in and methods for dealing with those risks
- Only the risks the client is involved in
- Only the methods of dealing with the risks involved
- None of the answers supplied are correct
Question 5 of 42

5. Question
Which of the following is true of the lines covered by most property and casualty underwriters?
- They try to stop clients from getting the coverage they need.
- They either underwrite personal or commercial lines.
- They write in coverage exclusions to confuse clients.
- They underwrite both personal and commercial lines.
Question 6 of 42

6. Question
An underwriter that would use medical history to evaluate a client’s insurability would most likely be which of the following?
- A property underwriter
- A personal line underwriter
- A life and health underwriter
- A liability underwriter
Question 7 of 42

7. Question
Traditionally, a group underwriter creates a rate for which of the following?
- The entire group to be insured
- Each individual in the group to be insured with full marketing costs
- The entire class that includes the group to be insured
- All of the answers supplied are correct
Question 8 of 42

8. Question
A group insurance policy that offers individual rates saves money by reducing which of the following?
- Interest rates
- Marketing costs
- Insurable interest
- Premiums
Question 9 of 42

9. Question
Applicants are rejected by underwriters for which reason?
- They represent the highest risk still contained within the boundaries of the policy.
- They represent the lowest risk still contained within the boundaries of the policy.
- They represent a level of risk for which the policy was specifically designed.
- They represent a risk that falls outside of standards set by the insurance company.
Question 10 of 42

10. Question
Applicants are issued policies on a standard basis for which of the following reasons?
- They represent the highest risk still contained within the boundaries of the policy.
- They represent the lowest risk still contained within the boundaries of the policy.
- They represent a level of risk for which the policy was specifically designed.
- They represent a risk that falls outside of standards set by the insurance company.
Question 11 of 42

11. Question
Applicants are issued policies on a substandard basis for which of the following reasons?
- They represent the highest risk still contained within the boundaries of the policy.
- They represent the lowest risk still contained within the boundaries of the policy.
- They represent a level of risk for which the policy was specifically designed.
- They represent a risk that falls outside of standards set by the insurance company.
Question 12 of 42

12. Question
When is a policy no longer in need of underwriting?
- When the client signs the policy
- When the underwriter is done evaluating the client
- After the policy has been renewed five times
- None of the answers supplied are correct
Question 13 of 42

13. Question
Reviewing a client’s information on an annual basis is done for which of the following reasons?
- To attempt to talk them into replacing their coverage, thereby earning a commission for selling a policy
- To attempt to work in coverage exclusions at an early point before the client knows they need certain things covered
- To make sure the insurer is still comfortable with the risk and the insured is still comfortable with the coverage
- None of the answers supplied are correct
Question 14 of 42

14. Question
In order to avoid intentional losses, the underwriter will try to establish which of the following?
- Insurable interest
- Insurable risk
- Calculable loss
- None of the answers supplied are correct
Question 15 of 42

15. Question
Under property insurance, a insured client must meet which of the following requirements?
- Be in a position to suffer a loss related to the insured property
- All of the answers supplied are correct
- Must not be in a position to profit from a loss pertaining to the insured property
- Must have financial interest in protecting the insured property
Question 16 of 42

16. Question
Which of the following is one of the four elements of a legal insurance contract?
- A premium set by the state
- A reasonable deductible
- A low rate
- Competent parties
Question 17 of 42

17. Question
States have placed regulations on property-casualty insurance in order to prevent which of the following?
- Overly specific coverage options
- Unreasonable deductibles
- Misleading or ambiguous provisions
- High rates
Question 18 of 42

18. Question
Which of the following losses would not be insurable?
- A loss arising from a pure risk
- A loss that occurred to many people simultaneously
- An unintentional loss
- A calculable loss
Question 19 of 42

19. Question
A pure risk must have the potential for which two results?
- Loss or gain
- No loss or gain
- Sudden loss or sudden gain
- Loss or no loss
Question 20 of 42

20. Question
A definable loss is a loss that can be defined by which of the following?
- Cause, time, interest, and amount
- Time, place, and cause
- Cause, time, place, and amount
- Cause, impact, place, and emotion
Question 21 of 42

21. Question
Why are insurers not capable of covering losses that affect many people simultaneously?
- The premiums would not be able to cover the losses.
- The insurer doesn't want to give up any money.
- They have the courts on their side.
- State regulations are for the benefit of the insurance companies, not the insured.
Question 22 of 42

22. Question
Which of the following describes an occasion when intentional losses are insurable?
- The losses were caused by knowing negligence, not any direct action of the insured.
- None of the answers supplied are correct.
- The losses were caused by intentional wear and tear.
- The losses were caused by the intentions of someone that the insured hired to damage the insured property.
Question 23 of 42

23. Question
Underwriters may use which three broad methods to assign rates?
- All of the answers provided are correct
- Risk rating, interest rating, morale rating
- Judgement rating, manual rating, and merit rating
- Judgement rating, Merit rating, and scheduled risk rating
Question 24 of 42

24. Question
When an underwriter uses a predetermined rate found in a manual, they are using which rate assignment method?
- Manual rating
- Judgement rating
- Merit rating
- None of the answers supplied are correct
Question 25 of 42

25. Question
Heavily regulated lines of insurance are most likely to use which of the following as their rate assignment method?
- Merit rating
- Manual rating
- Judgement rating
- All of the answers supplied are correct
Question 26 of 42

26. Question
When a competitive market does not exist for some clients, what action does the state usually undertake?
- None of the answers supplied are correct
- Requiring the insurance commissioner to fire agents until they start offering insurance to the uninsured individuals
- Requiring the largest insurance company to provide customers with affordable insurance
- Requiring the insurance commissioner to provide customers with affordable insurance
Question 27 of 42

27. Question
Besides rates, underwriters can also require applicants to do which of the following?
- Buy coverage they do not want or need
- Move their business to areas that the insurance company has redlined
- Perform certain actions that reduce risk
- All of the answers supplied are correct
Question 28 of 42

28. Question
How do group health insurance applications compare to individual health insurance options?
- Group health insurance applications are often simpler
- Individual health insurance applications are often simpler
- Individual health insurance applications are objectively worse
- Individual health insurance applications require much less information
Question 29 of 42

29. Question
Which of the following is illegal to use as a factor in determining automobile insurance rates?
- Sex
- Marital status
- Age
- Race
Question 30 of 42

30. Question
Professional liability and errors and omissions applications require what?
- More agents than all other applications
- More information than most other applications
- Higher rates than other policies
- A better underwriter than all other applications
Question 31 of 42

31. Question
Inland marine personal property applications include more information about which of the following than other forms of insurance?
- The applicant's health
- The safekeeping of the property
- The applicant's wealth
- The size of the property to be insured
Question 32 of 42

32. Question
Ocean marine insurance is intended to cover which of the following?
- Personal ocean vessels
- None of the answers supplied are correct
- Goods transported over the ocean
- Commercial Ocean vessels
Question 33 of 42

33. Question
Who fills out an APS for a health insurance applications?
- The agent
- The applicant
- The applicant's doctor
- The underwriter
Question 34 of 42

34. Question
Which of the following regulates credit and consumer reports?
- The Model Act
- The Fair Credit Reporting Act
- The Pure Risk Act
- The Discrimination Act
Question 35 of 42

35. Question
Which of the following is NOT one of the three hazards discussed in this course?
- Moral hazards
- Morale hazards
- Material hazards
- Physical hazards
Question 36 of 42

36. Question
Insurance regulations that address insurance rates are trying to establish which of the following?
- Low rates available for all applicants
- High rates to maximize insurance company profits
- Adequate rates that are not excessive or discriminatory
- A competitive market that allows all applicants to afford adequate coverage
Question 37 of 42

37. Question
Which of the following is NOT a method used by the states to set property and casualty rates?
- Flex-rating laws
- Flex-and-file laws
- Prior approval laws
- Open competition laws
Question 38 of 42

38. Question
What is the general term for transferring a portion or all of the insurance written by one insurer to another insurer?
- Discrimination
- A surplus treaty
- Reinsurance
- An excess-loss treaty
Question 39 of 42

39. Question
Which of the following is true of treaty reinsurance?
- None of the answers supplied are correct.
- It is the least common form of reinsurance.
- It is the oldest form of reinsurance.
- It is an ongoing agreement between the insurer and the reinsurer.
Question 40 of 42

40. Question
Only one reinsurance option was discussed for disability income insurers, which of the following is that reinsurance type?
- The excess of time reinsurance method
- The surplus treaty
- The coinsurance approach
- The reinsurance pool
Question 41 of 42

41. Question
Which of the following current technological advancements looks like it will have a significant effect of discrimination laws?
- Electric cars
- Renewable energy
- Genetic information mapping
- Space travel
Question 42 of 42

42. Question
How do applications for individual insurance policies compare to applications for group insurance policies?
- Individual insurance applications are usually simpler.
- Individual insurance applications ask less questions.
- Group insurance applications are much more complicated.
- Group insurance applications are usually simpler.

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