Examkin

Question

Difficulty: MediumReinsurance, Co-insurance, and Underwriting Concepts

A commercial bank applies for ₦2 billion property insurance coverage for its nationwide vault network. Meridian Assurance evaluates the financial risk involved, determines the premium rate, and sets the policy terms before issuing the cover. Which of the following functions is Meridian Assurance performing in this process?

  1. UnderwritingAnswer
  2. B
    Co-insurance
  3. C
    Reinsurance
  4. D
    Indemnity

Answer

Underwriting
Underwriting is the fundamental insurance procedure wherein an insurer examines a proposed risk, evaluates the likelihood of a claim, determines terms and conditions, and calculates the appropriate premium before agreeing to cover the risk.

Step-by-Step Solution

1
Analyze the action performed by Meridian Assurance in the scenario.
Meridian Assurance is evaluating the risk, determining the premium rate, and setting policy conditions for the applicant.
Identifying the core operational activity described in the stem is required to select the correct insurance concept.
2
Match the identified activity to the standard insurance definitions.
The process of assessing risk, deciding on acceptability, and fixing premium terms is defined as underwriting.
Underwriting directly describes the evaluation and pricing phase conducted by an insurer prior to issuing coverage.

Key Concept

Underwriting
Rate this question

Topics

Reinsurance, Co-insurance, and Underwriting Concepts

More questions from this topic