Commercial Underwriting Practices Flashcards
7 cards from real CU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Commercial Underwriting Practices flashcards as text
When underwriting commercial umbrella liability, the underwriter's FIRST concern regarding the underlying policies is:
Answer: That underlying limits meet the umbrella's required minimum retained limits
Umbrella policies require underlying policies to carry specified minimum limits so the umbrella does not drop down to cover gaps the insured should self-retain.
Which underwriting tool allows a commercial lines underwriter to adjust the manual rate up or down based on individual risk characteristics within a pre-approved range?
Answer: Schedule rating
Schedule rating applies credits or debits to the manual premium for specific positive or negative risk characteristics within filed guidelines.
A commercial property underwriter is concerned about 'moral hazard.' Which scenario BEST exemplifies this concept?
Answer: An insured who inflates inventory values to collect excess claim proceeds
Moral hazard arises from the insured's intent to defraud or take undue advantage of coverage, such as over-insuring and then filing inflated claims.
In workers compensation underwriting, the payroll audit is critical because:
Answer: Workers compensation premiums are based on actual payroll by class code
WC premiums are calculated as a rate per $100 of payroll by classification, so accurate payroll figures directly determine final earned premium.
A commercial lines underwriter is reviewing a restaurant account. Which hazard is MOST unique to this class of business?
Answer: Products liability from food-borne illness
Food service operations carry a heightened products liability risk because contaminated food can injure multiple customers simultaneously.
The coinsurance clause in a commercial property policy primarily protects the insurer by:
Answer: Requiring the insured to carry limits equal to a specified percentage of property value
The coinsurance clause penalizes underinsurance by reducing claim payments proportionally if the insured carries less than the required percentage of value.
When an underwriter uses 'ISO loss costs' as a basis for commercial pricing, what are they using?
Answer: Industry-wide pure loss and LAE components filed by ISO for a given class
ISO loss costs represent the pure loss and loss adjustment expense component filed with state regulators, to which each carrier adds its own expense loading.