Alberta General Insurance Level 1 Practice Exam

During the underwriting process, various factors are systematically evaluated to determine the risk associated with insuring a policyholder and to set the terms and conditions of coverage. One of the primary goals of underwriting is to assess the likelihood of a claim being made, which involves a careful examination of relevant data.

The factor of personal preferences is typically not considered in the underwriting process. Underwriters focus on objective data that can inform them about the risk profile of the applicant. This includes prior claim history—previous claims can indicate future risk, the type and value of the property being insured—these affect potential liability and the cost of loss, and the applicant's credit score—often used as a measure of the applicant's financial responsibility.

In contrast, personal preferences—such as the insured's opinions or subjective desires—do not provide quantifiable information regarding risk and are therefore not relevant in the underwriting process. Underwriting is fundamentally data-driven, relying on factual, historical evidence and risk metrics rather than personal choices or opinions, which enhances the accuracy of risk assessments and policy decisions.