Which of the following statements regarding insurance underwriting is true?
A) Insurance underwriters perform any activity that reduces the chance that a loss will occur.
B) Insurance underwriters perform a process used to avoid an act that would create a risk.
C) Insurance underwriters help insurers determine the insurance needs of the potential insured.
D) Insurance underwriters lessen the severity of loss after it occurs.
E) Insurance underwriters design rate-classification schedules so that people pay premiums that reflect their chance of loss.

Question

Quizplus · Accepted Answer

Insurance underwriters are responsible for designing rate-classification schedules that accurately reflect the likelihood of loss for each potential insured. This helps ensure that people pay premiums that are proportional to their risk, and helps insurers avoid adverse selection (where high-risk individuals are more likely to seek insurance). Underwriters are not responsible for preventing losses from occurring or reducing the severity of losses after they occur. They also do not determine the insurance needs of potential insureds, as this is typically done by insurance agents or brokers.

Which of the Following Statements Regarding Insurance Underwriting Is True