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 9 of 12

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Q81.
What is adverse selection?

a.

The process of accepting individuals with sub-standard risks at standard rates

b.

The process of rejecting individuals with sub-standard risks

c.

The process of charging higher premiums for standard risks

d.

The process of refusing to provide coverage for high-risk individuals

Discuss
Answer: (a).The process of accepting individuals with sub-standard risks at standard rates Explanation:Adverse selection is the phenomenon where more individuals with sub-standard risks get insured because insurance companies do not differentiate between standard and sub-standard risks, resulting in losses for the insurance companies.
Q82.
Which of the following risks associated with an individual is high at the time of initial underwriting but decreases over a period?

a.

Increasing extra risk

b.

Constant extra risk

c.

Decreasing extra risk

d.

Falling extra risk

Discuss
Answer: (c).Decreasing extra risk Explanation:The type of risk that is high at the time of initial underwriting but decreases over a period, which is the definition of decreasing extra risk.
Q83.
What criteria can an underwriter use to make a decision on accepting a sub-standard risk?

a.

Type of risk

b.

Purpose for which insurance cover is sought

c.

Degree or extent of severity of the risk

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:An underwriter can make a decision on accepting a sub-standard risk based on the type of risk, purpose for which insurance cover is sought, and degree or extent of severity of the risk.
Q84.
What are the possible outcomes of the underwriting process?

a.

Accept the proposal with special or altered terms

b.

Postpone the proposal

c.

Decline the proposal

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The possible outcomes of the underwriting process are to accept the proposal with special or altered terms, postpone the proposal, or decline the proposal.
Q85.
In what situation might an insurance company charge extra premium over the standard rate for accepting a sub-standard risk?

a.

For increasing extra risk

b.

For constant extra risk

c.

For decreasing extra risk

d.

Both a and b

Discuss
Answer: (d).Both a and b Explanation:An insurance company may charge extra premium over the standard rate for accepting a sub-standard risk for both increasing extra risk and constant extra risk.
Q86.
What is the method of charging extra premium for accepting an increasing extra risk?

a.

A level extra premium is charged that remains the same throughout the policy term

b.

An average of the extra premium is made applicable to all lives

c.

An individual's health condition is monitored throughout the policy term

d.

None of the above

Discuss
Answer: (a).A level extra premium is charged that remains the same throughout the policy term Explanation:A level extra premium is charged that remains the same throughout the policy term for accepting an increasing extra risk.
Q87.
Why might it not be fair to charge a level extra premium to an individual throughout the policy term for a decreasing extra risk?

a.

The extra risk would have either diminished or ceased to exist over time

b.

The individual would be tempted to discontinue the policy

c.

It would be difficult to monitor the individual's health condition throughout the policy term

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:It might not be fair to charge a level extra premium to an individual throughout the policy term for a decreasing extra risk because the extra risk would have either diminished or ceased to exist over time, the individual would be tempted to discontinue the policy, and it would be difficult to monitor the individual's health condition throughout the policy term.
Q88.
How is a temporary extra premium charged for a decreasing extra risk?

a.

On a level basis throughout the policy term

b.

On a short-term basis until the extra risk would have either diminished or ceased to exist

c.

Based on an average of the extra premium applicable to all lives

d.

None of the above

Discuss
Answer: (b).On a short-term basis until the extra risk would have either diminished or ceased to exist Explanation:A temporary extra premium may be charged for a decreasing extra risk on a short pre-determined period until the time the extra risk would have either diminished or ceased to exist.
Q89.
How does an insurance company handle sub-standard risk?

a.

Accept the risk with no special terms

b.

Decline the proposal outright

c.

Accept the risk with special or altered terms

d.

None of the above

Discuss
Answer: (c).Accept the risk with special or altered terms Explanation:An insurance company can decide to accept sub-standard risk with special or altered terms, such as charging extra premium for the extra risk.
Q90.
How does an insurance company charge extra premium for the extra risk associated with an individual?

a.

By charging a level extra premium throughout the policy term

b.

By charging a temporary extra premium for a short pre-determined period

c.

By monitoring the health of each individual over the term of the policy

d.

Either a or b

Discuss
Answer: (d).Either a or b Explanation:An insurance company may charge extra premium for the extra risk associated with an individual by either charging a level extra premium throughout the policy term or by charging a temporary extra premium for a short pre-determined period.
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