All the Following Are True About Underwriting except

question 42

Multiple Choice

All the following are true about underwriting except:

• A) a major purpose of underwriting is to reduce adverse selection against the insurance company
• B) fair rates should be charged so that each group of insureds is not subsidized by other groups
• C) the underwriter should select only those insureds that are expected to have no losses
• D) the underwriter makes decisions based on criteria established by the company management

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Definitions:

Z-score

A statistical measure that describes a value's relationship to the mean of a group of values, measured in terms of standard deviations from the mean.

Finite Population Correction

An adjustment made to the standard formula for calculating sample size and variance when the sample size is a significant fraction of the total population.

Non-normal Probability Distribution

Describes a distribution of data that does not follow the normal distribution pattern, showing skewness or kurtosis different from a bell-shaped curve.

Central Limit Theorem

A fundamental statistical theory stating that, given a sufficiently large sample size from a population with a finite level of variance, the mean of all samples from the same population will be approximately equal to the mean of the population.