CU Underwriting Pricing and Ratemaking

Question 1

Which component of insurance ratemaking represents the expected cost of claims per unit of exposure?

Accepted Answer

Pure premium

Answer

Expense loading

Answer

Loss ratio

Answer

Combined ratio

Question 2

An underwriter calculates a loss ratio of 72% and an expense ratio of 30%. What is the combined ratio?

Accepted Answer

102%

Answer

42%

Answer

72%

Answer

58%

Question 3

Which ratemaking method calculates rates by dividing incurred losses by earned premiums?

Accepted Answer

Loss ratio method

Answer

Pure premium method

Answer

Exposure rating method

Answer

Judgment rating method

Question 4

What does 'rate adequacy' mean in property and casualty insurance underwriting?

Accepted Answer

Rates are sufficient to cover losses, expenses, and provide a reasonable profit

Answer

Rates are set higher than competitors

Answer

Rates are approved by state regulators

Answer

Rates equal the industry average

Question 5

An underwriter uses 'credibility weighting' when calculating a risk's rate. What does this primarily address?

Accepted Answer

How much weight to give the risk's own loss experience versus industry data

Answer

The financial stability of the insured

Answer

Whether the risk qualifies for a preferred rate tier

Answer

The regulatory approval status of the rate filing

Question 6

Which type of rating plan adjusts the final premium based on the insured's actual loss experience during the policy period?

Accepted Answer

Retrospective rating

Answer

Schedule rating

Answer

Experience rating

Answer

Judgment rating

Question 7

What is the primary purpose of a 'trend factor' in insurance ratemaking?

Accepted Answer

To account for changes in loss costs between historical data and the future policy period

Answer

To adjust for geographic differences in loss frequency

Answer

To reflect the underwriter's individual judgment about a risk

Answer

To reduce the rate for long-term policyholders