AU 60 - ASSIGNMENT 2 -
UNDERWRITING REGULATION
QUESTIONS & ANSWERS (RATED
A+)
Unfair discrimination - ANSWERApplying different standards or methods of
treatment to insureds who have the same basic characteristics and loss potential,
such as charging higher-than-normal rates for an auto insurance applicant based
solely on the applicant's race, religion, or ethnic background.
Insolvency - ANSWERTo protect insureds and encourage a stable economy,
governments impose regulations to prevent insurer ____.
Termination - ANSWERAn insurer's cancellation of a policy during the policy term or
nonrenewal of coverage at the end of a policy term.
Notification requirements - ANSWERRegulatory requirements relating to the timing
and contents of an insurer's notice to an insured of the declination, termination, and
nonrenewal of insurance coverage.
Prior approval - ANSWERAn insurance rating law in which the rate and supporting
rules must be filed with and approved by the state insurance department before they
can be used.
File and use - ANSWERAn insurance rating law in which the insurer must file rates
and supporting rules with the state insurance department prior to their use, but the
rates can then be used immediately without specific approval.
True - ANSWER(T/F) Insurers are allowed to discriminate among different groups of
insureds.
Underwriting Regulation - ANSWERThe goals of ____ are to prevent insurer
insolvency and to prevent unfair discrimination.
Underwriting Regulation - ANSWER____ require approval of rates, underwriting
rules, and policy forms; constrain insurers' ability to accept, modify, or decline loss
exposures; limit allowable classifications of exposures; and restrict the timing and A.
Misclassification can result in inadequate premiums and drain an insurer's surplus. -
ANSWERUnderwriting regulations seek to ensure correct classification of insureds
because
, A. Misclassification can result in inadequate premiums and drain an insurer's
surplus.
B. Correct classification prevents unfair discrimination against insureds or applicants.
C. It is impractical to attempt to regulate rates, rules or policy forms.
D. Correct classification generally reduces an insurer's overall claims payments.
conditions of coverage cancellations and nonrenewals.
A. Applying different standards or methods of treatment to insureds who have the
same basic characteristics and loss potential - ANSWERWhich one of the following
best describes what underwriting regulation seeks to prevent?
A. Applying different standards or methods of treatment to insureds who have the
same basic characteristics and loss potential
B. Categorizing insurance applicants based on past experience in order to establish
premiums for a future period
C. Using different rates, rules, or forms for individual applicants based on purely
statistical evidence
D. Treating insurance applicants differently, or charging different rates based on
race, religion, ethnic background, or loss potential
B. To prevent insureds from being left without coverage and suffering great financial
loss - ANSWERWhich one of the following is the primary reason that governments
seek to prevent insurer insolvency through underwriting regulation?
A. To encourage competition thereby preventing any single insurer from becoming
too large
B. To prevent insureds from being left without coverage and suffering great financial
loss
C. To ensure that insurers pay all required state taxes and fees
D. To protect the financial security of insurers' investors and shareholders
B. Unfair discrimination - ANSWERInsurance underwriter Luis refuses to insure any
teenage driver who appears to be discourteous or unkempt. Luis believes those
behaviors will lead to greater losses under the policies he underwrites. Which one of
the following practices, which underwriting regulations aim to prevent, is Luis using?
A. Intimidation
B. Unfair discrimination
C. Exclusive underwriting
D. Boycott
D. Regulations allow the insurer to charge more for insureds with poor driving
experience. - ANSWERAn insurer receives two automobile insurance applications.
The first applicant is age 35, male, and has a clean driving record. The second
applicant is age 35, female, has had three speeding violations and a prior accident.
The insurer accepts both risks, but charges the second applicant a higher premium.
Which one of the following statements about this scenario is correct?
A. Whether or not the insurer is unfairly discriminating depends on the type of vehicle
each applicant drives.
UNDERWRITING REGULATION
QUESTIONS & ANSWERS (RATED
A+)
Unfair discrimination - ANSWERApplying different standards or methods of
treatment to insureds who have the same basic characteristics and loss potential,
such as charging higher-than-normal rates for an auto insurance applicant based
solely on the applicant's race, religion, or ethnic background.
Insolvency - ANSWERTo protect insureds and encourage a stable economy,
governments impose regulations to prevent insurer ____.
Termination - ANSWERAn insurer's cancellation of a policy during the policy term or
nonrenewal of coverage at the end of a policy term.
Notification requirements - ANSWERRegulatory requirements relating to the timing
and contents of an insurer's notice to an insured of the declination, termination, and
nonrenewal of insurance coverage.
Prior approval - ANSWERAn insurance rating law in which the rate and supporting
rules must be filed with and approved by the state insurance department before they
can be used.
File and use - ANSWERAn insurance rating law in which the insurer must file rates
and supporting rules with the state insurance department prior to their use, but the
rates can then be used immediately without specific approval.
True - ANSWER(T/F) Insurers are allowed to discriminate among different groups of
insureds.
Underwriting Regulation - ANSWERThe goals of ____ are to prevent insurer
insolvency and to prevent unfair discrimination.
Underwriting Regulation - ANSWER____ require approval of rates, underwriting
rules, and policy forms; constrain insurers' ability to accept, modify, or decline loss
exposures; limit allowable classifications of exposures; and restrict the timing and A.
Misclassification can result in inadequate premiums and drain an insurer's surplus. -
ANSWERUnderwriting regulations seek to ensure correct classification of insureds
because
, A. Misclassification can result in inadequate premiums and drain an insurer's
surplus.
B. Correct classification prevents unfair discrimination against insureds or applicants.
C. It is impractical to attempt to regulate rates, rules or policy forms.
D. Correct classification generally reduces an insurer's overall claims payments.
conditions of coverage cancellations and nonrenewals.
A. Applying different standards or methods of treatment to insureds who have the
same basic characteristics and loss potential - ANSWERWhich one of the following
best describes what underwriting regulation seeks to prevent?
A. Applying different standards or methods of treatment to insureds who have the
same basic characteristics and loss potential
B. Categorizing insurance applicants based on past experience in order to establish
premiums for a future period
C. Using different rates, rules, or forms for individual applicants based on purely
statistical evidence
D. Treating insurance applicants differently, or charging different rates based on
race, religion, ethnic background, or loss potential
B. To prevent insureds from being left without coverage and suffering great financial
loss - ANSWERWhich one of the following is the primary reason that governments
seek to prevent insurer insolvency through underwriting regulation?
A. To encourage competition thereby preventing any single insurer from becoming
too large
B. To prevent insureds from being left without coverage and suffering great financial
loss
C. To ensure that insurers pay all required state taxes and fees
D. To protect the financial security of insurers' investors and shareholders
B. Unfair discrimination - ANSWERInsurance underwriter Luis refuses to insure any
teenage driver who appears to be discourteous or unkempt. Luis believes those
behaviors will lead to greater losses under the policies he underwrites. Which one of
the following practices, which underwriting regulations aim to prevent, is Luis using?
A. Intimidation
B. Unfair discrimination
C. Exclusive underwriting
D. Boycott
D. Regulations allow the insurer to charge more for insureds with poor driving
experience. - ANSWERAn insurer receives two automobile insurance applications.
The first applicant is age 35, male, and has a clean driving record. The second
applicant is age 35, female, has had three speeding violations and a prior accident.
The insurer accepts both risks, but charges the second applicant a higher premium.
Which one of the following statements about this scenario is correct?
A. Whether or not the insurer is unfairly discriminating depends on the type of vehicle
each applicant drives.
