III IC-22 Practice Questions - III IC-22 Life Insurance Underwriting Exam

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In the context of life insurance underwriting, what is the primary risk associated with "anti-selection" (adverse selection)?

The insurer underpricing risks due to errors in the actuarial tables. The reinsurer refusing to accept facultative risk shares. High-risk individuals purchasing insurance in larger proportions than standard-risk individuals. An increase in agent commissions leading to higher expense ratios.

Correct Answer:

High-risk individuals purchasing insurance in larger proportions than standard-risk individuals.

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