General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The primary purpose of underwriting in life insurance is to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Underwriting evaluates each applicant's risk and places them in a class — preferred, standard, or substandard — so the premium reflects the probability of loss. This risk selection protects the pool: if poor risks paid standard rates, good risks would subsidize them and adverse selection would push rates upward. Underwriting exists to keep the insured group reasonably homogeneous and the premium structure sound over the long term.
Why the other options are wrong
- B) Investment yield is the concern of the investment department; underwriting deals with mortality risk selection.
- C) Selling more policies regardless of risk would create adverse selection and underpricing; underwriting is the gatekeeper.
- D) Beneficiary designation validity is a policy administration matter, not an underwriting function.
Memory hook
Underwriting = picking and pricing the risk so the good risks do not pay for the bad.