AAM Phase 1 Practice Exam

Leverage trend is used in underwriting to reflect the impact of what on premiums?

Administrative costs Patient adherence Pharmacy rebates Medical inflation on large claims

Correct Answer:

Medical inflation on large claims

Explanation:

Leverage trend reflects how medical cost inflation specifically affects large claims, and that impact is what underpins premium changes. Large claims carry outsized weight in overall costs, so when medical prices rise, the cost of those high‑cost cases tends to grow more than average. By isolating this effect, underwriters price premiums to cover the expected inflation-driven growth in big‑ticket claims, which can push premiums higher even if general cost trends seem modest. Administrative costs, patient adherence, and rebates influence costs in different ways, but they’re not the factor focused on here—the idea is capturing the inflation impact on large claims.

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