FIL 355 Exam 2

In deciding which applicants they are willing to insure, insurance underwriters need to recognize the effects of adverse selection. Which one of the following is the best example of adverse selection?

After learning that a particularly active hurricane season is expected, several homeowners in a coastal community increase in the limits on their windstorm coverage.

Which one of the following is determined by a company's underwriting policy?

Composition of the insurer's book of business

Which one of the following financial components used to calculate the combined ratio?

Loss and loss adjustment expenses incurred, earned and written premiums, and underwriting expenses incurred.

Which one of the following rations is key for evaluation insurer insolvency?

Premium to surplus ratio

Which one of the following methods of prospecting is more likely to be used by an experienced producer than a new insurance producer?

Referrals from present clients

Which one of the following statements regarding underwriter responsibilities is correct?

Staff underwriters typically share responsibility for researching fundamental insurance issues with the actuarial and marketing departments

Which one of the following statements is true? #2

Surplus lines brokers can place coverage that is not available through standard market insurers

Which one of the following statements is correct with respect to selecting a distribution channel?

The types of insurance products and services to be delivered by the insurer must fit the marketing channel selected

The underwriter must evaluate each alternative carefully and select the optimal one under the circumstances. WHich one of the following is true regarding the selection of an alternative?

Underwriters should ensure that accepting a submission supports the insurer's goals for mix of business.

Which of the following is a major constraint of underwriting policy?

reinsurance

The percentage of insurance policies that an insurer has renewed is referred to as its

retention ratio

To achieve profitability, the underwriting function serves which one of the following additional purposes?

Guarding against adverse selection

Which one of the following statements is true?

A marketing plan identifies the product of service to be promoted and the customers to be targeted

Tania, an underwriting trainee for Keithly Insurance Co has received a new homeowners app for Nanami. The home is to be insured for $150,000. It is a frame house with a swimming pool and trampoline in the backyard. The grass needs trimming. Nanami has a marginal credit score. What is Tania's first step in the underwriting the policy?

Check to see if she has the underwriting authority to make the decision

Which one of the following cases illustrates how underwriting guidelines ensure uniformity and consistency?

Chloe and Elin are underwriting identical HO risks for Cromley Insurance Co. The applicants have the same protection class, construction, and coverage amount. After checking the underwriting guidelines, they come to the same underwriting decision.

Which one of the following premium collection methods is used in the majority of the personal insurance sales

Direct bill process

When a firm is selecting a distribution channel, which of the the following is an important consideration with regard to its operations?

Does the selected channel capitalize on its core capabilities?

Which one of the following would be a critical strength required for a personal lines insurer planning to expand geographically though web based distribution?

Financial Resources

The common distinction between line underwriters and staff underwriters is that line underwriters is that the line underwriters

Implements the steps in the underwriting process. Staff underwriters assist underwriting management with formulating underwriting policy.

Meeting countersignature law requirements for business in multiple states and obtaining access to an increased number of insurers are benefits of which one of the following insurance distributions channels?

Independent agent network

When an insurer is making a market segmentation selection, which one of the following is an important factor of external environment to consider?

Laws and regulations

Which one of the following statements is correct with respect to line underwriters?

Line underwriters can offer valuable technical assistance to an insured's risk manager and to the producer responsible for the account

The independent agency and brokerage marketing systems uses

Managing general agents

Which one of the following statements is correct?

Many producers offer consulting services for which they are paid on a fee basis

Which one of the following correctly describes a typical element of an insurance product marketing plan?

Marketing goals outline the proposed target market including detailed sales projections and how success markets will be measured

Which of the following correctly describes a typical element of an insurance product marketing plan?

Marketing goals outline the proposed target market including detailed sales projections and how success will be measured

The development of sales goals and projected outcomes is part of which one of the following marketing activities?

Marketing plan

Which one of the following insurance consumer groups would have the most risk financing alternatives available to them?

National accounts

Any insurer's marketing department is trying to forecast which group of property-casualty insurance customers is most likely to purchase all lines of insurance from the same insurer. Which one of the following methods of market research would be most effective?

Predictive analytics

Which one of the following functions is performed by virtually all insurance producers?

Prospecting

The most difficult time for an insurer to change distribution systems is when

Renewing an existing book of business

A commercial insurer has historically targeted small businesses. It is considering expanding its market to middle market organizations. To succeed, the insurer will need to develop a level of expertise in which one of the following areas?

Risk financing alernatives

A producer will generally review a company's loss run report while performing which one of the following functions?

Risk management review

The selection of a distribution channel for an insurer's products and services depends, partly, on customer preferences. Which one of the following statements is true regarding customer preferences that should be considered when selecting a distribution channel?

The channel should be consistent with the customer's expectations for service

Which one of the following statements is correct with respect to the insurance distribution system?

The expertise of current staff and producers must be sufficient to manage the selected system

All of the following statements are true regarding the factors affecting the formation on an insurer's underwriting policy except

The higher an insured's premium-to-surplus ration, the greater its ability to expand premium

Which one of the following statements is true with regard to distribution channels for selling insurance?

The objective of insurance portals is to deliver leads to the firms whose products they offer through their sites

The final and ongoing step in the UW process is monitoring underwriting decisions. Which one of the following statements is correct with respect to the process?

The underwriter is tasked with monitoring both individual policies and books of business to ensure that satisfactory results are achieved.

Which of the following is correct with respect to marketing plans?

They identify target customers, and the resources and strategies to be used to create, price, promote and sell the product

Which one of the following often leads to insurer insolvency, withdrawal from certain geographic markets & resinsurance shortages?

Unanticipated catastrophic losses

The first step in the underwriting process is evaluating the submission. Which one of the following statements is correct with respect to the evaluation?

Underwriting must understand the activities, operations and character of each applicant

Victor, the sales manager for Hallbinger's insurance Co, wants the company to grow in written premium. He wants his agents to write more auto and HO business. In order to do so, the company must have adequate capacity. Which one of the following impacts Victor's agents and the company the most concerning surplus and capacity?

Underwriting practices must generate policy premiums that exceed losses and expenses

An underwriter may accept a submission as is, reject the submission, or make a counteroffer subject to modifications. Which one of the following statements is correct with respect to these modifications?

Using a different rating plan can provide pricing flexibility so that the underwriter can properly price a submission

A group of policies with a common characteristic, such as type of coverage, or all policies written by a particular insurer, producer, or agency is referred to as a

book of business

Specialty insurers such as those offering surety bonds, aviation insurance, and livestock mortality insurance usually

centralize underwriting authority

The principal purpose of underwriting is to

develop and maintain a profitable book of business for the insurer

Though marketing plans are varied, they all serve the same fundamental purpose of...

providing the "road map" necessary to profitably and effectively acquaint sellers with potential buyers

Which one of the following statements regarding underwriter responsibilities is correct?

staff underwriters typically share responsibility for researching fundamental insurance issues with the actuarial and marketing departments

After investing significant resources to develop a web based system, a personal lines insurer has decided to expand its territory by assuming the role of a direct writer and using the internet as a distribution channel. What is the insurer's greatest concern with the existing book which used independent agents as the distribution system?

the agents own the expiration for the existing book

Which one of the following statements is correct with respect to insurers' use of the internet and insurance portals?

the internet provides lead-generation and cross-selling opportunities for all products

An agency bill process in which the producer is usually not required to pay the insurer until the premium is collected from the policyholder is known as

the item basis

underwriting authority requirements are usually communicated to an underwriter through

the underwriting guidelines

Because the underwriting guidelines usual specify the attributes of accounts that insurers are willing to insure, insurers consider them

trade secrets