Texas General Lines — Property and CasualtyGeneral InsuranceHard
A client is seeking to purchase a new homeowner's insurance policy. The client has a history of several small, non-catastrophic claims in the past five years. During the underwriting process, the insurer's underwriter decides to offer the policy but with a higher deductible and requires the installation of a central alarm system. Which underwriting decision is this an example of?
- AAccept (standard)
- BDecline
- CAccept (modified)
- DBind (temporary coverage)
Show answer & explanationAnswer & explanation
Correct answer: C. Accept (modified)
The underwriter is not declining the risk, nor accepting it without any changes. Instead, they are offering the policy with specific modifications (higher deductible, alarm system requirement) to make the risk acceptable. This is an example of an 'Accept (modified)' underwriting decision.
Why the other options are wrong
- A. Accept (standard) would mean offering the policy without any changes to terms or conditions.
- B. Decline means refusing to offer coverage at all.
- D. Bind refers to providing temporary coverage, which is a stage in the process, not a final underwriting decision regarding the terms of the policy.
Underwriting Decisions
The final determination made by an underwriter regarding whether to accept or reject an insurance application, and on what terms.
- Can be Accept (standard), Accept (modified), or Decline.
- Based on risk assessment and company guidelines.
- A modified acceptance involves changes like higher deductibles or special conditions.
- Aims to ensure profitability and solvency for the insurer.
Memory trick: Underwriters decide: Green light, yellow light, or red light.