Caib 2 Exam Questions & Answers Graded A
Explain what an submission is and identify three types of information - ANSWER-A
proposal for insurance which is presented to an underwriter for consideration. It can
include an application, additional verbal info, additional written info.
Identify three purposes served by survey forms - ANSWER-Assists to indenting loss
exposures, helps eliminate the purchases of coverages the business doesn't need,
assists in the development of underwriting information needed by insurers.
State three advantages of using a property checklist with your client - ANSWER-Alerts
brokers to possible loss exposures, ensures that needed coverages are not
forgotten/ignored, helps reduce the potential for an errors or omissions claims
When determining eligibility for coverage, the insurer will request certain information.
There are 5 types of building construction used in buildings having commercial
occupancy. Which is the likely to produce the highest rate? Which is likely to produce
the lowest rate? - ANSWER-Frame-highest rate
Fire resistive-lowest rate
When the building to be insured exceeds a certain age, the insurer will request
information concerning recent renovations or upgrading
A) approximately how old does a building have to be for the insurer to request this
additional information?
B) identify 5 kinds of upgrades to the building likely to be of most interest to insurers? -
ANSWER-A) 25 years old
B) roof, wiring, plumbing, cover current protection, heating
Identify 5 hazards common to the majority of commercial risks. - ANSWER-Heating,
electrical services, detachment, protection, occupancy
Why is the distance or detachment from other commercial risks an important rating
consideration for insurers? - ANSWER-Detachment is important to note because the
proximity to other commercial buildings can increase the risk (ex bakery)
Identify the 2 kinds of protection which insurers consider when establishing the rate or
premium charged. - ANSWER-Private protection- what the insured has done internally
to prevent or reduce loss
Public protection- refers to the external protection provided to insured property (ex
availability of fire fighting services)
Fire resistive - ANSWER-Building which has met minimum standards in terms of hours
it will withstand a specific, carefully controlled test fire.
, Non-combustible - ANSWER-All structural members including floors, roofs, and their
supports are constructed of steel, iron, concrete or other non-combustible constructible
materials. Exterior also required to be of non combustible construction. Falls just short
of classifying as a fire resistive
Common hazards - ANSWER-Conditions common to all buildings which influence their
potential for loss
Detachment - ANSWER-Refers to the proximity of the building insurers or containing
the property insured to other commercially rated buildings
One of the duties as an underwriter is to select as many good risks as possible for the
insurer. All underwriters are concerned against the potential for being selected against.
Explain what is meant by adverse selection and how it can impact upon an insurers loss
experience. - ANSWER-Adverse selection is the ones who are most likely to suffer a
loss and are most likely to purchase the insurance. (In the us people having a baby are
more likely to purchase health insurance) Too many of these insureds will increase the
overall claims of the insurer.
Explain what is meant by risk classification and individual risk underwriting - ANSWER-
Risk classification is the grouping or classification of risks according to established
criteria based largely on their probability for loss as a class
Individual risk underwriting considers individual submissions on their own merits,
regardless of the class to which they belong
Identify 2 factors which can cause premiums charged by insurers to change -
ANSWER-Rising claim costs due to inflation
Changes in interest rates being paid on investments
Identify the characteristics associated with (a) soft market; and (b) hard market -
ANSWER-Soft market- is a characterized by intense competition between competitors.
As a result, rates tend to be low.
Hard market- occurs when low profit margins forced out some of the competition. As a
result, insurers use a more disciplined underwriting approach. The insured normally
receives little or nothing in the way of rate discounts
Evaluation of hazard- define each of the physical, moral and morale Hazards and
provide examples of each. - ANSWER-Physical hazards- a condition relating to the use
of tangible property which could cause a peril to occur. Can be characteristics of the risk
itself or of the environment in which it is located (ex type of construction, occupancy,
housekeeping, external exposures)
Moral hazard- refers to the subjective characteristics of the applicant that could cause a
peril to occur. Indicators or moral hazard include financial condition, associates and
moral character. Indifference to loss and poor management.
Morale hazard- refers to the attitude of the client. Indicators of morale hazard are
indifference to loss and poor management.
Explain what an submission is and identify three types of information - ANSWER-A
proposal for insurance which is presented to an underwriter for consideration. It can
include an application, additional verbal info, additional written info.
Identify three purposes served by survey forms - ANSWER-Assists to indenting loss
exposures, helps eliminate the purchases of coverages the business doesn't need,
assists in the development of underwriting information needed by insurers.
State three advantages of using a property checklist with your client - ANSWER-Alerts
brokers to possible loss exposures, ensures that needed coverages are not
forgotten/ignored, helps reduce the potential for an errors or omissions claims
When determining eligibility for coverage, the insurer will request certain information.
There are 5 types of building construction used in buildings having commercial
occupancy. Which is the likely to produce the highest rate? Which is likely to produce
the lowest rate? - ANSWER-Frame-highest rate
Fire resistive-lowest rate
When the building to be insured exceeds a certain age, the insurer will request
information concerning recent renovations or upgrading
A) approximately how old does a building have to be for the insurer to request this
additional information?
B) identify 5 kinds of upgrades to the building likely to be of most interest to insurers? -
ANSWER-A) 25 years old
B) roof, wiring, plumbing, cover current protection, heating
Identify 5 hazards common to the majority of commercial risks. - ANSWER-Heating,
electrical services, detachment, protection, occupancy
Why is the distance or detachment from other commercial risks an important rating
consideration for insurers? - ANSWER-Detachment is important to note because the
proximity to other commercial buildings can increase the risk (ex bakery)
Identify the 2 kinds of protection which insurers consider when establishing the rate or
premium charged. - ANSWER-Private protection- what the insured has done internally
to prevent or reduce loss
Public protection- refers to the external protection provided to insured property (ex
availability of fire fighting services)
Fire resistive - ANSWER-Building which has met minimum standards in terms of hours
it will withstand a specific, carefully controlled test fire.
, Non-combustible - ANSWER-All structural members including floors, roofs, and their
supports are constructed of steel, iron, concrete or other non-combustible constructible
materials. Exterior also required to be of non combustible construction. Falls just short
of classifying as a fire resistive
Common hazards - ANSWER-Conditions common to all buildings which influence their
potential for loss
Detachment - ANSWER-Refers to the proximity of the building insurers or containing
the property insured to other commercially rated buildings
One of the duties as an underwriter is to select as many good risks as possible for the
insurer. All underwriters are concerned against the potential for being selected against.
Explain what is meant by adverse selection and how it can impact upon an insurers loss
experience. - ANSWER-Adverse selection is the ones who are most likely to suffer a
loss and are most likely to purchase the insurance. (In the us people having a baby are
more likely to purchase health insurance) Too many of these insureds will increase the
overall claims of the insurer.
Explain what is meant by risk classification and individual risk underwriting - ANSWER-
Risk classification is the grouping or classification of risks according to established
criteria based largely on their probability for loss as a class
Individual risk underwriting considers individual submissions on their own merits,
regardless of the class to which they belong
Identify 2 factors which can cause premiums charged by insurers to change -
ANSWER-Rising claim costs due to inflation
Changes in interest rates being paid on investments
Identify the characteristics associated with (a) soft market; and (b) hard market -
ANSWER-Soft market- is a characterized by intense competition between competitors.
As a result, rates tend to be low.
Hard market- occurs when low profit margins forced out some of the competition. As a
result, insurers use a more disciplined underwriting approach. The insured normally
receives little or nothing in the way of rate discounts
Evaluation of hazard- define each of the physical, moral and morale Hazards and
provide examples of each. - ANSWER-Physical hazards- a condition relating to the use
of tangible property which could cause a peril to occur. Can be characteristics of the risk
itself or of the environment in which it is located (ex type of construction, occupancy,
housekeeping, external exposures)
Moral hazard- refers to the subjective characteristics of the applicant that could cause a
peril to occur. Indicators or moral hazard include financial condition, associates and
moral character. Indifference to loss and poor management.
Morale hazard- refers to the attitude of the client. Indicators of morale hazard are
indifference to loss and poor management.
