Commercial Underwriting Principles Test 8

Which one of the following statements is correct in the context of the communication process model?

Miscommunication can result if an underwriter's written or oral communication is ambiguous.

Any factor that results in a gap between the intended message and the perceived message is referred to as:

Noise.

Which one of the following statements is correct regarding underwriter and producer relationships?

Familiarity allows an individual to understand the other party's intentions, expectations, and motivations.

Which one of the following statements is correct regarding frame of reference?

A person's frame of reference is based on his or her background, past experiences, culture, and expectations.

In which one of the following do participants see negotiation as a contest between two opposing parties, each seeking to defeat the other, with each party's greatest concern being to obtain the best outcome for its side?

Accommodating

Jorge is an underwriter at ABC Insurance. Valerie, a long-term producer for ABC contacts Jorge about an account that has been with her brokerage for many years. The prior carrier has declined to renew the policy because the insured has had a fire loss in each of the past three years. The client is very upset about the nonrenewal and at Valerie's urging has agreed to install a sprinkler system. Valerie knows the client and believes this to be a good risk despite the recent fires. She wants to retain the account and asks Jorge to write the coverage at the same rate the insured had been paying with the prior carrier. After some discussion, Jorge agrees to accept the risk. This is an example of which one of the following negotiation styles?

Accommodating

Hugh, a commercial property underwriter, received a submission from a producer and elected to decline the business. Based on the application and Best's Underwriting Guide, Hugh determined that there was a higher-than-average fire risk associated with the applicant's operations. The producer has telephoned Hugh to discuss the file and to try to convince him to accept the business. While listening to the producer, which one of the following questions would Hugh be best to ask himself?

Am I really listening, or am I thinking about what I'll say next?

Which one of the following statements is correct regarding assertive relationships?

Assertive individuals stand up for their rights but do not violate the rights of others.

Allison is a commercial lines underwriter at ABC Insurance. She is meeting with a producer to discuss an insured's upcoming renewal. The account has suffered an increase in loss frequency over the past year, and Allison has several recommendations and requirements that she wants the producer to discuss with the insured prior to renewal. During the meeting, the producer keeps checking his watch and checking his cell phone. Allison becomes irritated, thinking that the producer is disinterested and does not appreciate the importance of the issues she wants to address. This is an example of which one of the following?

Attribution

An underwriter who has little concern either for obtaining the best outcome or for achieving rapport may be using which one of the following negotiation styles?

Avoiding

Which one of the following negotiation styles results in a lose-lose outcome?

Avoiding

Kyle is a producer at Regional Brokerage. One of his commercial clients, Juanita, owns and operates a retail clothing store. Juanita is very involved in the local community. She is active in several charities, belongs to a number of clubs, and has a high profile in the business community. Juanita knows a lot of people and has referred a large number of clients to Kyle. When Kyle submits an application on behalf of Juanita to ABC Insurance, he adds a note "This is a big account" meaning that it is an important account for him. When the underwriter at ABC reads the note, she thinks "Big? What does he mean? The limits and premium on this account are small to medium at best." This is an example of which one of the following?

Bypassing

Attempted communication where there is no understanding between the individuals communicating is referred to as:

Bypassing.

Brittany is an underwriter at ABC Insurance. One of ABC's insureds, Omicron Manufacturing, has had an increasing frequency of property losses over the past three years and Brittany has set the file to nonrenew. Tony, the producer, has called to discuss the nonrenewal. He explains that the insured is very concerned about the losses and has hired a new risk manager and implemented a variety of loss control measures in an attempt to bring the loss frequency under control. He has suggested increasing the deductible to the insured, and the insured has agreed. Tony feels Omicron is a good account that deserves a concession since it has been insured with ABC for ten years. While Tony talks, Brittany reads her email, not really listening. She feels she has made the proper decision and is not prepared to reconsider. Which one of the following is Brittany demonstrating?

Closed mindedness

Devon is a commercial lines producer at Regional Brokerage. He has been given the opportunity to quote the coverage for a large manufacturing account. Devon is unfamiliar with the exposures and coverage requirements of this type of manufacturing operation, but he wants to write the account. He invites Akhrat, an experienced and knowledgeable underwriter at ABC Insurance to visit the prospect's premises with him and meet with the company's manager. After an inspection tour and interview with the manager, Devon and Akhrat return to ABC's office to discuss the account. Working together they put together a coverage program and premium quote that they feel will meet the prospect's needs at a competitive premium. This is an example of which one of the following?

Collaborating

Mark is a commercial underwriter at ABC Insurance. Mariette, a producer, has submitted an application for a manufacturer. It is a large account that she has been working to get for some time, and it is important to her that she is able to place the account at a competitive rate. Mark has some concerns about several of the manufacturer's processing operations, but he is open to discussing the account with Mariette. Both Mark and Mariette wait to obtain the best outcome. They seek a solution that satisfies Mark's concerns and meets the needs of Mariette and the applicant. This is an example of which one of the following?

Collaborating

Which one of the following negotiating styles should underwriters always try to adopt whenever possible?

Collaborating

Which one of the following negotiation styles focuses only on short term goals and does not support the goal of building a long term relationship?

Competing

Marci is a personal lines producer at Regional Insurance Brokerage. One of her insureds has suffered three homeowners losses in the past year, and Marci is concerned that the insurer will decline to renew the policy. She calls the underwriter, John, to discuss the account. John had in fact set the file to nonrenew. Marci explains that this client is very influential in town and has referred many clients to her. She wants John to renew the account. After some discussion, John agrees to renew the account provided that Marci discusses the claims frequency with the insured and increases the deductible to $5,000. Marci agrees. This is an example of which one of the following negotiation styles?

Compromising

Randy is a personal lines underwriter at ABC Insurance. Wendy, a producer, has submitted a homeowners application. The home is frame, 120 years old, and the plumbing and wiring have not been updated since they were installed in the 1950s. Randy declines the application because it does not meet ABC's eligibility requirements. When Wendy receives the declination, she immediately telephones Randy. The applicant is a personal friend of hers and she is angry that Randy will not issue the policy. She insists that the risk is a good one and complains that she will be embarrassed if she has to tell her friend that ABC will not cover her house. Which one of the following should Randy do?

Explain why the age of the house, the plumbing, and the wiring make the risk unacceptable.

Viktor is a commercial property underwriter who is reviewing a submission on behalf of Omicron Manufacturing. The company is located in an older building, in a run-down commercial area. The company's operations include several higher-hazard processes and the prior loss history indicates an increasing frequency of losses. However, Omicron has recently hired a professional risk manager who has a very good reputation in the community. Viktor is acquainted with the risk manager and admires her skills very much. Based on this single factor, Viktor decides to write the account. This is an example of which one of the following?

Halo effect

Which one of the following statements is true regarding closed mindedness?

Having a closed mind is generally unacceptable in business.

The credibility of the sender is an important consideration in the communication process. Which one of the following depends partly on the individual underwriter's reputation and experience, and partly on the perceived status of the underwriting profession?

Initial credibility

Vanessa is a commercial lines underwriter at ABC Insurance. Vanessa and one of her producers, Arpad, have been discussing the renewal of one of ABC's larger accounts. The frequency and severity of the insured's losses has increased over the past three years, and Vanessa wants to nonrenew the account. Arpad feels that Vanessa should be more flexible given the size and importance of the account. Vanessa and Arpad have a good working relationship. Together they work to define the problem rather than simply the symptoms. Then they jointly search for a solution to the problem and reach a decision together as to what to do with the account. This is an example of which one of the following types of conflict resolution?

Integrative bargaining

Wayne is a commercial property underwriter. He has received a submission from a producer and has determined that he needs additional information to properly assess the risk. Which one of the following would Wayne be best to do first?

Make an outline of the information he needs.

Which one of the following is the term used to refer to an established frame of mind based on previous experience that hinders comprehension of new information?

Mental set

Which one of the following statements is correct regarding polarization?

Most risks are neither excellent nor completely unacceptable, but are somewhere in between.

Which one of the following statements is correct regarding perception?

People frequently rely on their subjective impressions of people, events, and situations.

Through which one of the following does an individual gather the data received via the senses and sort, evaluate, and analyze the data based on inherent knowledge, beliefs, and value systems?

Perception

Les is a commercial lines underwriter at ABC Insurance. One of the producers he deals with is Dave. Les feels Dave is far more interested in earning commissions than in placing business appropriately. He carefully scrutinizes all of Dave's submissions and assumes that the business Dave sends him is generally unattractive. He is quick to decline Dave's submissions for reasons that would not cause him to decline submissions from other producers. Which one of the following is Les demonstrating?

Polarization

Jackie is a senior commercial underwriter at ABC Insurance. She is a meticulous, detail-oriented person who always makes an effort to do a thorough job. Jackie is often irritated with several of the producers she deals with because they send in incomplete applications. They fail to provide additional comments or information when, from her perspective, there is an obvious question about an account that needs to be answered. She gets frustrated and feels that the producers are simply not caring and being sloppy. This is an example of which one of the following?

Projection

Which one of the following is the term used to refer to voluntarily sharing information about one's attitudes, perceptions, and needs that the receiver might be unable to learn from other sources?

Self-disclosure

Ian is a recently trained commercial property underwriter at ABC Insurance. Bob is one of the brokers that have been assigned to Ian. Bob has been a commercial producer for over 20 years and is considered to be very knowledgeable. Subsequent to reviewing a claim for one of Bob's large, long-term accounts, Ian ordered a loss control report. The results indicate that the general maintenance, upkeep, and housekeeping at the insured's premises have deteriorated significantly since the last inspection. Ian is concerned but is unsure what to do. Which one of the following approaches would be best for Ian to take under the circumstances?

Send a copy of the loss control report to Bob and call him to discuss how best to improve the situation.

Ellis is an underwriting manager at ABC Insurance. He is interviewing Tasha, a potential underwriting hire. During the interview, Ellis notices that Tasha speaks very softly, sits with her hands clasped tightly in her lap, and rarely makes eye contact. Which one of the following can Ellis reasonably infer about Tasha based on her behavior?

She is a nonassertive person.

Anita is a commercial lines underwriter at ABC Insurance. Prior to entering the insurance industry, Anita had served overseas in the armed forces. A producer submits an application for a chain of retail clothing stores owned and operated by an immigrant family. The producer knows the family and feels this is an excellent account. Anita spent three years stationed in the country from which the applicants emigrated. She believes the business culture there differs significantly from that in the U.S. and that the applicants are most likely untrustworthy and likely to submit fraudulent claims. As a result, Anita declines the account. This is an example of which one of the following?

Stereotyping

Larry is a commercial lines producer at Regional Insurance Brokerage. For several years he has been trying to win a major local account, Omicron Industries. This year, the manager at Omicron has given Larry the opportunity to quote on the company's coverage. Larry knows what the Omicron's current premiums are, and he feels he will need a premium that is at least five percent lower in order to win the account. Larry phones to present the account to Tanya, an underwriter at ABC Insurance. Tanya agrees that it is an attractive piece of business, but she feels that she cannot provide the same coverage that Omicron currently has at the five percent premium reduction Larry is looking for. Larry becomes frustrated, and the conversation begins to become confrontational. Which one of the following would be Tanya's best option under the circumstances?

Suggest deductible and coverage changes that would reduce the premium to the desired level.

Arpad is a commercial lines underwriter at ABC Insurance. He is reviewing a property insurance submission and notices that the producer has neglected to indicate the construction type of the building on the application. Which one of the following would be the best medium for Arpad to use to obtain the missing information?

Telephone the producer.

Which one of the following is one of the most essential skills for the receiver in the communication process model?

The ability to listen actively

Which one of the following statements is correct regarding underwriter and producer communication?

Understanding the attitudes of others is a necessary precondition to effective communication.

Which one of the following statements is true regarding stereotyping?

Underwriters should consider the actual characteristics of an applicant rather than a stereotype.

Which one of the following statements is correct regarding underwriting relationships?

Underwriting communication involves risk for both producer and underwriter.

John has his homeowners insurance through ABC Insurance. He has been insured for 12 years and has never submitted a claim. The annual premium for his coverage is $1,200. John has come to resent the fact that he has to pay insurance premiums annually for coverage that he never has had to use. John decides to falsify a claim. He moves a number of expensive articles from his home and places them in storage. Then he reports a $25,000 burglary loss to the police and the insurer. Which one of the following is the basis that allows John to behave in this way?

Value system

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

Verbal messages should have some demonstrable utility or relevance for the receiver.

Sue is a personal lines underwriter at ABC Insurance. She is reviewing a homeowners application from a new producer. The value of the home is only slightly below the maximum value that ABC typically writes, but because it was just built, the producer has provided the actual cost of construction. On the application, the producer has neglected to provide any indication as to whether the home has any sort of alarm system. Given the value of the house, this is information that Sue feels is essential. Which one of the following emails would be most effective for Sue to send to the producer?

We have several discounts for different types of alarm systems. Please advise if there is an alarm system in the house and what type of system it is.

Which one of the following statements is true regarding cooperative relationships?

When producers and underwriters have cooperative relationships, less time is spent underwriting accounts that do not meet the insurer's requirements.