OTL EXAM CHAPTER 6 QUESTIONS
AND ANSWERS
Why would an underwriter reject a risk? - Answer-The risk is substandard.
Why do insurers ask for prior insurance on an application? - Answer-Confirm loss
history and identify any gaps in coverage
How can an underwriter reduce risk after the insurer has written the policy? -
Answer-Reinsure the risk
What is fundamental to maintaining utmost good faith in all insurance transactions? -
Answer-Duty of disclosure
Who is designated as covered by the policy? - Answer-Named insured
Why is loss history related to the subject of insurance requested on the insurance
application? - Answer-This information is analyzed to determine risk acceptability,
coverage terms and conditions
Why might individuals apply for a new insurance policy? - Answer-Evaluate
intermediary services as they are not currently satisfied
In the first step of the ratemaking process (classify risks) what clasification criteria is
used? - Answer-Types of objects insured and hazards of exposure
Which section of an insurance application asks the applicant to list or describe the
'thing' that is being insured? - Answer-Subject of insurance
Who uses data to create rates geared toward different classes of risk to ensure
fairness in calculating premiums? - Answer-Actuaries
The degree of uncertainty of a prediction is reduced as the size of the sample is
increased is one of the reliability factors in which concept? - Answer-Law of large
numbers
What is an insurer's retention? - Answer-The maximum amount that the insurer can
insure
What does an underwriter watch for when there are more than one loss payees
named on an insurance application? - Answer-Financial hardship, poor property
maintenance, and temptation for fraud
Why do those who want to purchase insurance complete and submit an application?
- Answer-To provide information for risk assessment and premium calculation
AND ANSWERS
Why would an underwriter reject a risk? - Answer-The risk is substandard.
Why do insurers ask for prior insurance on an application? - Answer-Confirm loss
history and identify any gaps in coverage
How can an underwriter reduce risk after the insurer has written the policy? -
Answer-Reinsure the risk
What is fundamental to maintaining utmost good faith in all insurance transactions? -
Answer-Duty of disclosure
Who is designated as covered by the policy? - Answer-Named insured
Why is loss history related to the subject of insurance requested on the insurance
application? - Answer-This information is analyzed to determine risk acceptability,
coverage terms and conditions
Why might individuals apply for a new insurance policy? - Answer-Evaluate
intermediary services as they are not currently satisfied
In the first step of the ratemaking process (classify risks) what clasification criteria is
used? - Answer-Types of objects insured and hazards of exposure
Which section of an insurance application asks the applicant to list or describe the
'thing' that is being insured? - Answer-Subject of insurance
Who uses data to create rates geared toward different classes of risk to ensure
fairness in calculating premiums? - Answer-Actuaries
The degree of uncertainty of a prediction is reduced as the size of the sample is
increased is one of the reliability factors in which concept? - Answer-Law of large
numbers
What is an insurer's retention? - Answer-The maximum amount that the insurer can
insure
What does an underwriter watch for when there are more than one loss payees
named on an insurance application? - Answer-Financial hardship, poor property
maintenance, and temptation for fraud
Why do those who want to purchase insurance complete and submit an application?
- Answer-To provide information for risk assessment and premium calculation
