Underwriting Practice and Risk Selection
Underwriting process
Understand the underwriting cycle, risk selection, rating factors, and the use of terms, conditions, deductibles, warranties and exclusions to control exposure. Know the difference between technical and market pricing, and the role of actuarial data, loss experience and exposure rating.
Risk selection
Candidates must understand moral hazard, adverse selection, anti-selection and the role of survey, inspection and loss control. Know how deductible structures and co-insurance align insured behaviour. Understand capacity, line size, and the role of facultative and treaty reinsurance in supporting underwriting decisions.
Traps
Questions often test whether a warranty reduces or excludes cover, or confuse a deductible with a franchise. A franchise means no payment below the threshold; a deductible means the insured bears the first portion. Another trap is treating a survey recommendation as a condition when it is merely advisory.
Worked example
A property with a poor fire-protection record is offered cover with a higher deductible and a condition requiring sprinkler installation. If the sprinkler is not installed, the insurer may decline or restrict cover. Rule of thumb: use terms and conditions to price and control risk, not just price.