C05 Underwriting and Rating MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on C05 Underwriting and Rating, a fundamental topic in the field of IC38 Life Insurance Agent Exam. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our C05 Underwriting and Rating 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 C05 Underwriting and Rating mcq questions that explore various aspects of C05 Underwriting and Rating problems. Each MCQ is crafted to challenge your understanding of C05 Underwriting and Rating principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC38 Life Insurance Agent Exam tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our C05 Underwriting and Rating MCQs are your pathway to success in mastering this essential IC38 Life Insurance Agent Exam topic.

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C05 Underwriting and Rating MCQs | Page 1 of 4

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Q1.
What is the primary goal of underwriting in insurance?

a.

Assessing and evaluating the frequency of losses

b.

Pooling premiums from various individuals and organizations

c.

Determining acceptable risks and setting rates and conditions

d.

Calculating the total number of policyholders

Discuss
Answer: (c).Determining acceptable risks and setting rates and conditions Explanation:Underwriting involves assessing risks to determine whether they are acceptable for insurance and, if so, setting the appropriate rates and conditions.
Q2.
Which of the following is NOT part of the underwriting process?

a.

Formulating policy coverage and terms

b.

Deciding on premium rates

c.

Calculating the total pool of premiums

d.

Assessing and evaluating hazards and risks

Discuss
Answer: (c).Calculating the total pool of premiums Explanation:The underwriting process involves assessing and evaluating risks, formulating policy coverage and terms, and deciding on premium rates. It does not involve calculating the total pool of premiums.
Q3.
What does a health insurance underwriter need to consider when assessing risks?

a.

Port and road conditions

b.

Frequency and severity of losses

c.

Medical aspects, age, fitness levels, and family history

d.

Climate and geography

Discuss
Answer: (c).Medical aspects, age, fitness levels, and family history Explanation:A health insurance underwriter needs to consider factors such as medical aspects, age, fitness levels, and family history when assessing risks.
Q4.
Which step comes after deciding whether or not to accept a risk in the underwriting process?

a.

Assessing and evaluating hazards and risks

b.

Formulating policy coverage and terms

c.

Fixing premium rates

d.

Calculating the total pool of premiums

Discuss
Answer: (c).Fixing premium rates Explanation:After deciding whether or not to accept a risk, the next step in the underwriting process is to fix premium rates.
Q5.
What is the key purpose of underwriting in insurance?

a.

Predicting the exact frequency of losses

b.

Setting the highest possible premium rates

c.

Identifying and classifying risks and determining their acceptability

d.

Creating a separate pool for each policyholder

Discuss
Answer: (c).Identifying and classifying risks and determining their acceptability Explanation:Underwriting aims to identify and classify risks while determining whether they are acceptable for insurance. It does not aim to predict the exact frequency of losses or create separate pools for each policyholder.
Q6.
What is the primary purpose of gathering information for underwriting in insurance?

a.

To ensure that all risks are equal

b.

To set equal premiums for all policyholders

c.

To assess risks accurately and determine suitable premiums

d.

To maintain business sustainability

Discuss
Answer: (c).To assess risks accurately and determine suitable premiums Explanation:Gathering information for underwriting helps assess risks accurately and determine appropriate premiums based on the likelihood of loss occurrence and severity.
Q7.
Which of the following is NOT a source of information for underwriting?

a.

Proposal form or underwriting presentation

b.

Risk surveys

c.

Claims experience data

d.

Premium payment history

Discuss
Answer: (d).Premium payment history Explanation:Premium payment history is not typically considered a direct source of information for underwriting.
Q8.
Why is careful underwriting and risk classification essential in insurance?

a.

To make all risks equal

b.

To lower the premium for all policyholders

c.

Because all risks are not equal, and each risk needs proper assessment

d.

To simplify the underwriting process

Discuss
Answer: (c).Because all risks are not equal, and each risk needs proper assessment Explanation:Careful underwriting and risk classification are essential in insurance because all risks are not equal, and each risk needs to be assessed and priced appropriately.
Q9.
What is the purpose of underwriting when it comes to classifying risks?

a.

To set the highest possible premium for all risks

b.

To ensure that risk evaluation is not done properly

c.

To classify risks based on their characteristics and degree of risk

d.

To ask all those to be insured to pay equal premiums

Discuss
Answer: (c).To classify risks based on their characteristics and degree of risk Explanation:Underwriting aims to classify risks based on their characteristics and degree of risk posed, allowing for appropriate premium rates.
Q10.
How are the objectives of underwriting achieved?

a.

By charging the same premium for all policyholders

b.

By setting the premium too high to cover the risk

c.

By deciding the level of acceptability, adequacy of premium, and other terms

d.

By eliminating the need for risk evaluation

Discuss
Answer: (c).By deciding the level of acceptability, adequacy of premium, and other terms Explanation:The objectives of underwriting are achieved by deciding the level of acceptability, adequacy of premium, and other terms based on risk assessment.
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