Question

Why does the underwriter need to ensure that the premium charged to the policyholder is sufficient to cover the risk associated with the policyholder?

a.

To collect more premiums from policyholders

b.

To avoid accepting high-risk policyholders

c.

To ensure that claims can be paid from the common pool

d.

None of the above

Posted under IC22 Life Insurance Underwriting

Answer: (c).To ensure that claims can be paid from the common pool Explanation:The premium charged by the insurance company becomes a part of a common pool from which claims are paid. If the premium charged to an individual is lower than the risk they present, the insurance company may have to suffer a loss or under-estimation of the risk. Therefore, the underwriter needs to ensure that the premium charged to the policyholder is sufficient to cover the risk associated with the policyholder.

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Q. Why does the underwriter need to ensure that the premium charged to the policyholder is sufficient to cover the risk associated with the policyholder?
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