PSI Life Exam Practice Test

When underwriting group life insurance, the underwriter typically evaluates what?

1. The individual risks in the group

2. The group as a whole

3. The claims history of previous policies

4. The amount of coverage needed by each individual

The correct answer is: The group as a whole

In the context of underwriting group life insurance, the underwriter's primary focus is on evaluating the group as a whole rather than the individual risks within it. This approach allows the underwriter to assess the overall risk profile of the group, which can often be more favorable than assessing individual members because risks can be diversified across the entire group. By analyzing demographic factors, health statistics, and participation levels, the underwriter can make a determination about the insurability of the group and set appropriate premium rates. This method relies on the principle of group underwriting, which acknowledges that while individual members may pose certain risks, the collective characteristics of the group can mitigate those risks. This evaluation can include factors such as the average age, occupation types, and overall health of the group. In contrast, focusing solely on individual risks, claims history of previous policies, or the specific coverage needs of each member does not align with the group underwriting philosophy, which prioritizes the collective assessment to streamline the underwriting process and achieve a balanced risk evaluation.