Assignment 15 - The Underwriting Cycle
Which one of the following is an insurer response to a soft market?
New products
Return on equity influences the underwriting cycle because
When the majority of insurers raise rates to generate higher returns, the cycle turns
The fact that price changes have little or no influence on decisions to purchase insurance required by statute indicates that
Demand for mandatory insurance is more inelastic than for many other products
Which one of the following statements is true?
An increase in supply will soften the market
Which one of the following statements regarding characteristics of the underwriting cycle is true?
An increased supply has a softening effect on the market
Profit cycles in insurance and in agriculture
Are supply driven
The insurance industry has been experiencing increased competition, widely available coverage, low premiums and decreased profitability. One strategy for an insurance company to maintain market share regardless of the effect on underwriting profitability is to
Decrease prices
Which one of the following statements about the underwriting cycle is true?
During a soft market, insurance pricing reflects the desire to hold market share
Which one of the following statements about a hard market is true?
Insurance premiums rise during a hard market
The underwriting cycle is made up of two phases. Which one of the following best describes the soft market phase?
Intense competition in the market and decreased profitability
What has been the primary influence of investment income on the underwriting cycle in the period from 1978 to 2004?
Offset underwriting losses
In a soft market, insurers that loosen underwriting standards to increase insurance sales could be highly susceptible to harm from
Reductions in investment income
Which one of the following is most likely to cause insurance demand to be inelastic?
Required coverage
Underreserving losses ultimately has this effect on insurance supply
Supply ultimately decreases
When an insurer continues to write new insurance without addition to capital in order to compete in a soft market,
The premium-to-surplus ratio is eroded
Return on equity influences the underwriting cycle because
When rates are raised to generate higher returns, the cycle turns
