Connecticut Life Producer Practice exam

What is the primary role of underwriting in insurance?

1. To assess claims after they are made

2. To evaluate the agent's performance

3. To select and classify risks

4. To finalize policy terms

The correct answer is: To select and classify risks

The primary role of underwriting in insurance is to select and classify risks. Underwriting is a critical process where insurance companies evaluate potential policyholders to determine the level of risk they present. This involves analyzing various factors, such as the applicant's health history, lifestyle choices, occupation, and other relevant information that can impact the likelihood of a claim being made. By effectively classifying risks, underwriters can set appropriate premiums that reflect the risk level of insuring an individual or entity. In contrast, assessing claims after they are made pertains to the claims department rather than underwriting. Evaluating the agent's performance is related to the management and effectiveness of distribution rather than the risk assessment process. Finalizing policy terms may occur after underwriting concludes but is not the primary function of underwriting, which is focused solely on risk evaluation.