Washington Life Producer Practice Exam

What is a significant concern an insurance company may have when underwriting?

1. The level of education of the applicant

2. The applicant's previous insurance claims

3. The applicant's travel history

4. The applicant's hobbies and interests

The correct answer is: The applicant's previous insurance claims

In underwriting, an insurance company's significant concern revolves around the applicant's previous insurance claims. This is crucial because past claims can indicate the applicant's risk level. If an individual has a history of frequent or high-cost claims, it may suggest a higher likelihood of future claims, which could lead to increased financial risk for the insurance provider. Underwriters analyze this information to evaluate the applicant's overall risk profile and to determine appropriate premium rates. A record of multiple claims could raise a red flag, prompting the insurer to scrutinize the application more closely or establish higher premiums to mitigate potential losses. In contrast, while factors like the applicant's education, travel history, and hobbies can be relevant in certain contexts, they are generally not as directly impactful on the underwriting process as previous claims history. Education may influence considerations related to income or stability but is less predictive of risk than past claims. Travel history and hobbies, while they might suggest certain risks, do not have as strong of a correlation with the likelihood of filing claims compared to the applicant’s actual claims history.