Question

Question 1

Some insurance policies state that the initial premium charged is an estimate and that the final premium will be based on an evaluation of the insured's financials, books, records, etc. The process of evaluating the insured's financial records is most commonly referred as a(n):

		premium audit
		internal validation
		external validation
		rate review

Part 2: One concern insurers have is that higher-than-average risk individuals may attempt to purchase insurance at a standard rate. This is referred to as:

		involuntary disclosure
		exclusive commitment
		superficial information
		adverse selection

Answer 1

Answer 1:- Premium audit

Explanation:- When the policy was issued, the premium was an estimate of an exposure basis (usually payroll or sales) multiplied by a rate. The rate used is determined by how the exposure base is classified. The audit will examine your records to establish the actual exposure basis and make sure that the correct classification codes and rates are used in determining your final premium. Because the original premium was an estimate, the audit will most likely result in a change of premium and/or classifications for your business

Answer 2:- Adverse Selection

Explanation:- Adverse Selection is the social phenomenon whereby persons with a higher than average probability of loss seek greater insurance coverage than those with less risk and that too at a standard rate