Group Life Insurance Underwriting Requirements
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Questions and Answers

What is the tendency of an insurer to write more bad risks than acceptable risks known as?

  • Insurance gap
  • Moral hazard
  • Adverse selection (correct)
  • Risk pooling

    • Why do people with more significant risk tend to seek insurance coverage more than those with little risk?

  • Because they are more likely to be rejected
  • Because insurance is mandatory for them
  • Because they are more likely to need insurance benefits (correct)
  • Because they are more risk-averse

    • What is the law of large numbers, in the context of group life insurance?

  • A principle that states that the smaller the group, the more predictable the risk
  • A principle that states that the larger the group, the more predictable the risk (correct)
  • A principle that states that the larger the group, the higher the risk
  • A principle that states that the smaller the group, the higher the risk

    • Why do insurers require proof of insurability for smaller groups?

    <p>Because smaller groups have a higher potential for adverse selection</p> Signup and view all the answers

    What is the main benefit of writing large groups of individuals in terms of adverse selection?

    <p>It reduces the impact of adverse selection</p> Signup and view all the answers

    What is the offset of high versus low risk in group life insurance known as?

    <p>Spreading the risk</p> Signup and view all the answers

    What is the primary reason why the law of large numbers does not apply to a group life insurance policy for ten insureds?

    <p>The group is too small to accurately predict the risk</p> Signup and view all the answers

    Why would an insurer be hesitant to write a group life insurance policy for a group of employees with a physical impairment?

    <p>The group is formed primarily to secure life insurance coverage</p> Signup and view all the answers

    What is the primary purpose of a business that is eligible to purchase group insurance?

    <p>To produce a product and earn a profit</p> Signup and view all the answers

    What is policy persistency in the context of insurance?

    <p>The percentage of active policies in force</p> Signup and view all the answers

    Why is policy persistency important for an insurer?

    <p>It affects the stability and success of the insurer</p> Signup and view all the answers

    Why would an insurer shy away from writing a group life insurance policy for a group that changes insurers regularly?

    <p>The insurer feels that writing such groups does not represent an acceptable risk</p> Signup and view all the answers

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