Casualty Actuarial Society (CAS) Practice Exam

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Prepare for the Casualty Actuarial Society Exam with our quiz. Use flashcards and multiple-choice questions, each accompanied by hints and explanations. Ace the exam with confidence!

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Why must underwriters operate within assigned levels of underwriting authority?

To maintain market competitiveness
To ensure consistency with underwriting policy
To allow for quicker claim resolutions
To increase the volume of policies written

The correct answer is: To ensure consistency with underwriting policy

Underwriters must operate within assigned levels of underwriting authority primarily to ensure consistency with underwriting policy. This approach allows insurance companies to maintain a uniform risk assessment process across their operations, aligning individual underwriting decisions with the overall organizational strategy. When underwriters adhere to established guidelines and authority limits, it fosters a stable underwriting environment where risks are evaluated based on the same criteria and standards. This consistency not only helps in maintaining the integrity of the underwriting process but also aids in effective risk management, where the company can monitor and control its overall exposure to loss. While maintaining market competitiveness, allowing quicker claim resolutions, and increasing the volume of policies may be beneficial outcomes of proper underwriting practices, they do not directly address the fundamental need for a structured and policy-compliant underwriting authority, which is crucial for the long-term sustainability of the insurance business.