All of the Following Are Arguments in Favor of Using

question 6

Multiple Choice

All of the following are arguments in favor of using an applicant's credit record in personal lines underwriting EXCEPT

• A)Most consumers have good credit records and benefit when credit history is used as a rating factor.
• B)Use of credit data in underwriting and rating eliminates price discrimination against minority groups when they purchase insurance.
• C)Underwriting and rating may be more consistent if applicants' credit histories are considered.
• D)There is high correlation between an applicant's credit record and future claims experience.

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Definitions:

Total Cost

The complete sum of expenses incurred by a business in producing goods or services, including manufacturing, labor, and overhead costs.

Direct and Indirect Materials

Direct materials are raw materials that can be directly attributed to the production of goods, whereas indirect materials are secondary supplies not directly part of the final product.

Economies of Scale

The cost advantage organizations achieve due to an increase in scale of production, leading to a reduction in the per-unit cost.

Indirect Materials

Items that are used during the production process but do not become part of the final product, such as lubricants for machinery or cleaning supplies.