AINS 101 - Chapter 3 - How Does
Underwriting Work? Correctly answered
What do underwriters do? - correct answer ✔✔Select insureds
Price Coverage
Evaluate risks
Determine policy terms/conditions
Monitor underwriting decisions
What is the primary purpose of underwriting? - correct answer ✔✔Help an insurer develop and
maintain a growing profitable book of business.
What are the three key activities of an underwriter? - correct answer ✔✔- Minimize adverse
selection
- Ensure adequate policy holders' surplus
- Enforce underwriting guidelines
What are insurer's guards against adverse selection? - correct answer ✔✔Underwriters
What does adverse selection do? - correct answer ✔✔Generate unprofitable business by
allowing an individual or business with high probability of loss to obtain insurance at a lower
cost than the insurer would normally charge for that risk, because the insurer wasnt aware of
actual risk involved.
How do underwriters minimize adverse selection and unprofitable business? - correct answer
✔✔- Carefully selecting applicants with loss exposures they are willing to insure.
- Charging appropriate premiums
, -Monitoring applications and books of business for unusual patterns of policy growth or losses
How does a policyholders' surplus increase? - correct answer ✔✔When an insurer's
underwriting practices generate policy premiums that exceed losses and expenses.
How does a policyholders' surplus increase protect insureds? - correct answer ✔✔By making
sure there's enough money to pay their claims and increase capacity to write new business.
How do underwriters ensure adequate policyholder surplus? - correct answer ✔✔- following
underwriting guidelines
- effectively evaluating and selecting loss exposures
- charging adequate premiums
What are underwriting guidelines? - correct answer ✔✔Specify the attributes of an account
that underwriters should look for before offering coverage.
What do underwriting guidelines include? - correct answer ✔✔Levels of underwriting authority
given to various underwriters, agents, and brokers.
Who makes sure the insurer's underwriting guidelines are adhered to? - correct answer
✔✔Underwriting Managers
When are underwriters most effective? - correct answer ✔✔When they collaborate with other
departments
Who provides underwriters with information to make better decisions? - correct answer
✔✔Risk control professionals and premium auditors
Underwriting Work? Correctly answered
What do underwriters do? - correct answer ✔✔Select insureds
Price Coverage
Evaluate risks
Determine policy terms/conditions
Monitor underwriting decisions
What is the primary purpose of underwriting? - correct answer ✔✔Help an insurer develop and
maintain a growing profitable book of business.
What are the three key activities of an underwriter? - correct answer ✔✔- Minimize adverse
selection
- Ensure adequate policy holders' surplus
- Enforce underwriting guidelines
What are insurer's guards against adverse selection? - correct answer ✔✔Underwriters
What does adverse selection do? - correct answer ✔✔Generate unprofitable business by
allowing an individual or business with high probability of loss to obtain insurance at a lower
cost than the insurer would normally charge for that risk, because the insurer wasnt aware of
actual risk involved.
How do underwriters minimize adverse selection and unprofitable business? - correct answer
✔✔- Carefully selecting applicants with loss exposures they are willing to insure.
- Charging appropriate premiums
, -Monitoring applications and books of business for unusual patterns of policy growth or losses
How does a policyholders' surplus increase? - correct answer ✔✔When an insurer's
underwriting practices generate policy premiums that exceed losses and expenses.
How does a policyholders' surplus increase protect insureds? - correct answer ✔✔By making
sure there's enough money to pay their claims and increase capacity to write new business.
How do underwriters ensure adequate policyholder surplus? - correct answer ✔✔- following
underwriting guidelines
- effectively evaluating and selecting loss exposures
- charging adequate premiums
What are underwriting guidelines? - correct answer ✔✔Specify the attributes of an account
that underwriters should look for before offering coverage.
What do underwriting guidelines include? - correct answer ✔✔Levels of underwriting authority
given to various underwriters, agents, and brokers.
Who makes sure the insurer's underwriting guidelines are adhered to? - correct answer
✔✔Underwriting Managers
When are underwriters most effective? - correct answer ✔✔When they collaborate with other
departments
Who provides underwriters with information to make better decisions? - correct answer
✔✔Risk control professionals and premium auditors
