Canadian Accredited Insurance Broker (CAIB) One Practice Exam

What is the primary role of an underwriter in the insurance industry?

1. Select risks that are most likely to be profitable for the insurer

2. Manage client relationships effectively

3. Set the premiums for policies

4. Resolve claims submitted by clients

The correct answer is: Select risks that are most likely to be profitable for the insurer

The primary role of an underwriter in the insurance industry is to select risks that are most likely to be profitable for the insurer. Underwriters evaluate applications for insurance coverage, assessing the potential risk that an applicant presents to the insurer. They analyze various factors, including the applicant's history, the nature of the risk, and relevant statistics, to determine the likelihood of loss. By identifying and selecting the right risks, underwriters help ensure the financial stability of the insurance company while also contributing to its profitability. This function is critical, as the underwriting process forms the foundation of how insurance products are developed and offered to clients. By carefully choosing which risks to accept and establishing the terms associated with those risks, underwriters play a pivotal role in balancing the insurer's portfolio and maintaining a profitable operation. Other roles mentioned, such as managing client relationships, setting premiums, and resolving claims, are also essential in the broader context of insurance operations. However, these responsibilities typically fall to other specialists within the insurance company. For example, while underwriters may influence premium rates based on risk assessments, the actual process of setting premiums often involves actuaries and marketers as well. Similarly, claims resolution is generally handled by claims adjusters and representatives whose focus is on assessing and processing claims