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AINS 21 Chapter Five Exam Review Questions With 100% Correct And Verified Answers
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AINS 21 Chapter Five Exam Review Questions With 100% Correct And Verified Answers
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AINS 21 Chapter Five Exam Review Questions With 100% Correct And Verified AnswersDescribe the approaches underwriters take to minimize the effects of adverse selection.
- Correct Answer-To minimize the effects of adverse selection, underwriters carefully select the applicants whose loss exposures they are willing to insure, charge premiums that accurately reflect the loss exposures for those applicants they select, and monitor applications and books of business for unusual patterns of policy growth or loss.
Describe the approaches underwriters take to ensure the adequacy of policyholders' surplus. - Correct Answer-Underwriters ensure the adequacy of policyholders' surplus by adhering to underwriting guidelines, making certain that all loss exposures are correctly identified, and charging adequate premiums for the applications that are accepted.
Describe the approaches underwriters take to ensure that the policies of accepted applicants adhere to underwriter guidelines. - Correct Answer-If loss exposures, risks, or policy limits on an application exceed an underwriter's authority, he or she will seek approval through supervisory and management tanks within the underwriting department.
Describe the goals of effective account selection by line underwriters. - Correct Answer-
Effective account selection by line underwriters is essential to attaining these goals: (1) Avoiding adverse selection; (2) Charging adequate premiums for accounts with a higher-than-average chance of loss; (3) Selecting better-than-average accounts for which the premium charged will be more than adequate; (4) Rationing an insurer's available capacity to obtain an optimum spread of loss exposures by location, class, size of risk, and line of business
Describe the line underwriter responsibility of account classification. - Correct Answer-
Line underwriters are responsible for account classification, which is the process of grouping accounts with similar attributes so that they can be priced appropriately.
How do line underwriters respond to requests from producers and applicants who want to know how coverage will respond to a particular type of loss? - Correct Answer-Line underwriters respond to requests from producers and applicants who want to know how coverage will respond to a particular type of loss by explaining the types of losses the coverage forms are designed to cover and the endorsements that must be added to provide the coverage desired.
Identify examples of goals for a book of business that a line underwriter works to help achieve. - Correct Answer-The line underwriter works to ensure that each book of business achieves established goals, such as product mix, loss ratio, and written premium.
Explain why line underwriters have an active interest ensuring that producers' and insureds' needs are met. - Correct Answer-Line underwriters have an active interest in ensuring that producers' and insureds' needs are met because customer service activities and underwriting are often interwoven.
Provide examples of items for which staff underwriters engage in ongoing research to evaluate. - Correct Answer-Items for which staff underwriters engage in ongoing research to evaluate include these: (1) Effect of adding or deleting entire lines of business; (2) Effect of expanding into additional states or retiring from states presently serviced; (3) Optimal product mix in the book of business; (4) Premium volume goals.
Identify examples of items that may be included in underwriting guidelines. - Correct Answer-Some underwriting guidelines include systematic instructions for handling particular classes of commercial accounts. Such guidelines may identify specific hazards to evaluate, alternative to consider, criteria to use when making the final decision, ways to implement the decision, and methods to monitor the decision. The guidelines may also provide pricing instructions and reinsurance-related information.
When evaluating an insurer's loss experience, what products do staff underwriters usually target for analysts? - Correct Answer-When evaluating an insurer's loss experience, staff underwriters usually target for analysis insurance products that have losses greater than those anticipated.
Explain how staff underwriters are involved in the development of coverage forms. - Correct Answer-Staff underwriters work cooperatively with the actuarial and legal departments to develop new coverage forms and to modify existing coverage forms (those developed by advisory organizations or the insurer).
Identify factors that influence staff underwriters to update rates and rating plans. - Correct Answer-Staff underwriters review and update rates and rating plans continually, subject to regulatory constraints, to respond to changes in loss experience, competition,
and inflation.
Identify items on which underwriting audits focus. - Correct Answer-Underwriting audits focus on proper documentation, adherence to procedure and classification and rating practices, and conformity of selection decisions to the underwriting guide and bulletins.
What are the steps in the underwriting process? - Correct Answer-The underwriting process entails six steps: (1) Evaluate the submission; (2) Develop underwriting alternatives; (3) Select an underwriting alternative; (4) Determine an appropriate premium; (5) Implement the underwriting decision; (6) Monitor the underwriting decision.
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