General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Hazards are important to health insurers primarily because they:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A hazard is a condition that increases the chance or severity of a loss, so hazards directly affect how likely an applicant is to file claims. Underwriters evaluate physical, moral, and morale hazards to classify the applicant and set a premium that reflects the expected cost of losses in that risk class. Understanding hazards is therefore central to the underwriting function, because they are the factors that make some risks more expensive than others.
Why the other options are wrong
- B) The beneficiary is chosen by the policyowner and is unrelated to the hazards affecting the insured's risk of loss.
- C) The free-look period is a statutory cancellation right under CIC Sections 10127.9 and 10127.10; hazards have nothing to do with it.
- D) Claims reporting obligations are imposed by statute and regulation, not determined by the hazards present in a particular risk.
Memory hook
Hazards move the odds; the odds move the premium. That is why underwriters care.