QuestionJuly 16, 2025

An underwriter's primary responsibility to an insurer is to protect against A. adverse selection B. risk selection C. natural selection D. inverse selection

An underwriter's primary responsibility to an insurer is to protect against A. adverse selection B. risk selection C. natural selection D. inverse selection
An underwriter's primary responsibility to an insurer is to protect against A. adverse selection B. risk selection C. natural selection D. inverse selection

Solution
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Answer

A. adverse selection Explanation 1. Identify the primary responsibility An underwriter's main role is to assess and select risks that an insurer will cover, ensuring that the pool of insured individuals is balanced and not overly risky. 2. Define adverse selection **Adverse selection** occurs when those most likely to make a claim are also the ones most eager to get insurance, potentially leading to higher-than-expected claims. 3. Match responsibility with term The underwriter's job is to prevent adverse selection by carefully evaluating applications to ensure a balanced risk pool.

Explanation

1. Identify the primary responsibility<br /> An underwriter's main role is to assess and select risks that an insurer will cover, ensuring that the pool of insured individuals is balanced and not overly risky.<br /><br />2. Define adverse selection<br /> **Adverse selection** occurs when those most likely to make a claim are also the ones most eager to get insurance, potentially leading to higher-than-expected claims.<br /><br />3. Match responsibility with term<br /> The underwriter's job is to prevent adverse selection by carefully evaluating applications to ensure a balanced risk pool.
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