Which of the following statements about underwriting standards is (are)true?
I.One purpose of underwriting standards is to reduce adverse selection against the insurer.
II.Equitable rates should be charged so that each group of policyowners pays its own way in terms of losses and expenses.
A)I only
B)II only
C)both I and II
D)neither I nor II

Question

Quizplus · Accepted Answer

I is true as underwriting standards aim to select policyholders who are less likely to have a claim, thereby reducing adverse selection against the insurer. II is also true, as underwriting standards should ensure that rates are equitable and each group of policyholders pays their own way in terms of losses and expenses.

Which of the Following Statements About Underwriting Standards Is (Are)true