Massachusetts Health & Accident Insurance Practice Exam

What does "Field Underwriting" aim to reduce?

1. insurance fraud

2. adverse selection

3. claims disputes

4. policy loans

The correct answer is: adverse selection

Field underwriting aims to reduce adverse selection, which occurs when an insurance company faces a higher risk of claims because of an uneven distribution of risk among policyholders. In the context of health and accident insurance, it involves the process by which agents or underwriters gather information about potential insured individuals at the time of application. By carefully assessing an applicant's health status, lifestyle choices, and other relevant factors, field underwriting helps insurers to identify high-risk applicants who may not be a good fit for coverage at standard rates. This helps the insurer effectively manage their risk pool, ensuring a balance between those who are likely to file claims and those who are less likely to do so. In doing so, field underwriting contributes to the overall financial health and sustainability of the insurance company. The other choices refer to important aspects of insurance but are not the primary focus of field underwriting. Insurance fraud pertains to intentional deception when filing claims, claims disputes relate to disagreements over policy terms and coverage, and policy loans involve taking out loans against the cash value of a life insurance policy, which is not directly related to the underwriting process.