Life Underwriting Principles and Concepts Part 1 MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Life Underwriting Principles and Concepts Part 1, a fundamental topic in the field of IC22 Life Insurance Underwriting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Life Underwriting Principles and Concepts Part 1 MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Life Underwriting Principles and Concepts Part 1 mcq questions that explore various aspects of Life Underwriting Principles and Concepts Part 1 problems. Each MCQ is crafted to challenge your understanding of Life Underwriting Principles and Concepts Part 1 principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC22 Life Insurance Underwriting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Life Underwriting Principles and Concepts Part 1 MCQs are your pathway to success in mastering this essential IC22 Life Insurance Underwriting topic.

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Life Underwriting Principles and Concepts Part 1 MCQs | Page 8 of 12

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Q71.
Why do insurance companies differentiate between standard and sub-standard risks?

a.

To ensure fair treatment of policyholders

b.

To avoid losses from adverse selection

c.

To charge higher premiums for sub-standard risks

d.

To limit the number of individuals with sub-standard risks who get insured

Discuss
Answer: (b).To avoid losses from adverse selection Explanation:If insurance companies do not differentiate between "standard" and "sub-standard"' risks, there will be a case of adverse selection, where more individuals with sub-standard risks will get insured, as a result of which insurance companies would have to suffer losses.
Q72.
What is the underwriter's role in risk assessment?

a.

To charge higher premiums for risks

b.

To ensure fair treatment of policyholders

c.

To match actuarial assumptions

d.

None of the above

Discuss
Answer: (c).To match actuarial assumptions Explanation:The insurance company has to assess the information on individuals for risks associated with them in such a way that the mortality experiences of those who have been accepted at ordinary rates match the actuarial assumptions. The underwriter's role is to ensure that the terms offered to the sub-standard lives are reasonable and fair, not only to the proposer but also to the other policyholders and the insurer, to the extent possible.
Q73.
What is the fundamental principle of life assurance?

a.

Sub-standard risk

b.

Utmost good faith

c.

Standard risk

d.

Adverse selection

Discuss
Answer: (b).Utmost good faith Explanation:Life assurance is guided on the fundamental principle of "utmost good faith".
Q74.
What are the two classifications of risk associated with an individual?

a.

Low risk and high risk

b.

Increasing extra risk and decreasing extra risk

c.

Standard risk and sub-standard risk

d.

Constant extra risk and variable extra risk

Discuss
Answer: (c).Standard risk and sub-standard risk Explanation:The risk associated with an individual can be classified as standard risk and sub-standard risk.
Q75.
If an individual is considered low risk and insurable at standard premium rates by insurance companies, what type of risk is associated with the individual?

a.

Standard risk

b.

Sub-standard risk

c.

Increasing extra risk

d.

Decreasing extra risk

Discuss
Answer: (a).Standard risk Explanation:If the risk associated with an individual is considered to be low and insurable at standard premium rates by insurance companies, then it is known as standard risk.
Q76.
What is increasing extra risk?

a.

When the risk associated with an individual is low at the time of commencement of policy, but there is a chance of that risk becoming high after a certain period

b.

When the risk associated with an individual is high at the time of initial underwriting but decreases over a period of time as time elapses

c.

When the risk associated with an individual is considered to remain constant over the period

d.

When the risk associated with an individual is slightly sub-standard to substantially sub-standard

Discuss
Answer: (a).When the risk associated with an individual is low at the time of commencement of policy, but there is a chance of that risk becoming high after a certain period Explanation:Increasing extra risk is when the risk associated with an individual is considered to be low at the time of commencement of policy, but there is a chance of that risk becoming high after a certain period.
Q77.
What is decreasing extra risk?

a.

When the risk associated with an individual is low at the time of commencement of policy, but there is a chance of that risk becoming high after a certain period

b.

When the risk associated with an individual is high at the time of initial underwriting but decreases over a period of time as time elapses

c.

When the risk associated with an individual is considered to remain constant over the period

d.

When the risk associated with an individual is slightly sub-standard to substantially sub-standard

Discuss
Answer: (b).When the risk associated with an individual is high at the time of initial underwriting but decreases over a period of time as time elapses Explanation:Decreasing extra risk is the opposite of increasing extra risk. The risk associated with an individual is high at the time of initial underwriting but decreases over a period of time as time elapses.
Q78.
What is constant extra risk?

a.

When the risk associated with an individual is low at the time of commencement of policy, but there is a chance of that risk becoming high after a certain period

b.

When the risk associated with an individual is high at the time of initial underwriting but decreases over a period of time as time elapses

c.

When the risk associated with an individual is considered to remain constant over the period

d.

When the risk associated with an individual is slightly sub-standard to substantially sub-standard

Discuss
Answer: (c).When the risk associated with an individual is considered to remain constant over the period Explanation:If the risk associated with an individual is considered to remain constant over the period, then it is known as constant extra risk.
Q79.
What is an example of constant extra risk?

a.

An obese person who is considered low risk at the time of underwriting, but with the advancement of age is prone to certain diseases such as high blood pressure, diabetes, or heart disease

b.

An individual who has been diagnosed with tuberculosis at the time of underwriting, but gets better with medical treatment and rest, and becomes perfectly healthy again, without any symptoms.

c.

A pilot, as there is always a chance of an accident in their occupation.

d.

None of the above.

Discuss
Answer: (c).A pilot, as there is always a chance of an accident in their occupation. Explanation:In constant extra risk, the mortality risk remains the same throughout the duration of time for which the life assured is exposed to the risk. For example, if an individual is a pilot, the risk associated with him will remain constant even in the future as long as his occupation is a pilot, as there is always a chance of an accident.
Q80.
What is standard risk?

a.

High risk associated with an individual

b.

Low risk associated with an individual

c.

Risk associated with a person who is not insurable

d.

Risk associated with a person who is not eligible for standard premium rates

Discuss
Answer: (b).Low risk associated with an individual Explanation:Standard risk is the type of risk associated with an individual that is considered to be low and insurable at standard premium rates by insurance companies.
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