Core Underwriting Principles 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 Core Underwriting Principles flashcards as text
A prospective insured submits a completed application containing material misrepresentations. What remedy is typically available to the underwriter?
Answer: Void the policy from inception if the misrepresentation was material and relied upon
A material misrepresentation that induces the insurer to issue coverage it would not otherwise have issued gives the insurer the right to rescind the policy from its inception.
What is the difference between 'peril' and 'hazard' in underwriting terminology?
Answer: Peril is the cause of loss; hazard is a condition that increases the chance or severity of loss
A peril is the direct cause of a loss (e.g., fire, flood), while a hazard is a condition that increases the probability or magnitude of loss from a peril (e.g., faulty wiring).
Under an 'occurrence' policy form, coverage for a bodily injury claim is triggered by:
Answer: When the injury-causing event takes place, regardless of when the claim is made
Under occurrence-based coverage, the policy in effect when the injurious event occurred responds to the claim, even if the claim is filed years later under a different policy period.
What does 'moral hazard' specifically refer to in underwriting?
Answer: The risk that an insured will commit arson or fraud to collect insurance proceeds
Moral hazard is the risk that the existence of insurance will encourage dishonest or reckless behavior by the insured, including intentional loss, fraud, or inflated claims.
Which reinsurance arrangement provides coverage for an insurer's aggregate losses exceeding a set threshold across all policies in a given period?
Answer: Aggregate stop-loss (aggregate excess of loss)
Aggregate stop-loss reinsurance protects the ceding insurer when its total losses across all policies in the treaty exceed a specified aggregate retention, regardless of individual loss size.
In commercial lines underwriting, an 'ACORD form' primarily serves as:
Answer: A standardized application used to submit risk information to insurers
ACORD forms are standardized insurance application and information forms used across the industry to collect and transmit risk data consistently between agents, insureds, and insurers.
Which underwriting principle holds that the insured should not profit from an insurance loss?
Answer: Principle of indemnity
The principle of indemnity states that insurance should restore the insured to the same financial position as before the loss, not provide a windfall or financial gain.