Insurance - Study Mode
[#566] Why do insurers arrange for survey and inspection of the property before acceptance of a risk?
Correct Answer
(A) To assess the risk for rating purposes
Explanation
Solution: To assess the risk for rating purposes. Before acceptance of a risk, the insurer arranges a survey and inspection of the property. Risk transfer through risk pooling is called insurance. Loss prevention measures reduce the chance of occurrence of risk. Insurance provides peace of mind and helps one plan his business effectively.
[#567] To make accurate statistical estimates, insurance risks must be handled as per the law of
Correct Answer
(B) Large numbers
Explanation
Solution: To make accurate statistical estimates, insurance risks must be handled as per the law of large numbers. In the insurance industry, the law of large numbers produces its own axiom. As the number of exposure units, or policyholders, increases, the probability is higher that the actual loss per exposure unit will equal the expected loss per exposure unit.
[#568] Which of the following is the most common underwriting decision?
Correct Answer
(D) To accept at an ordinary rate
Explanation
Solution: The most common underwriting decision is to accept at an ordinary rate. Acceptance at ordinary rates (OR) is the most common decision. This rating indicates that the risk is accepted at the same rate of premium as would apply to an ordinary or standard life.
[#569] Who is primary underwriter or field underwriter?
Correct Answer
(C) Agent
Explanation
Solution: Agent is known as primary underwriter. He or she is in the best position to ascertain if the facts being presented are true, since he or she is in the direct contact with the proposed life.
[#570] In traditional life insurance policies, the investment risk is borne by the _________, while in unit linked plans, the investment risk is borne by the _________.
Correct Answer
(B) Insurance company, unitholder
Explanation
Solution: In traditional life insurance policies, the investment risk is borne by the insurance company, while in unit linked plans, the investment risk is borne by the unitholder.