Pennsylvania Life and Health Insurance Exam Practice Question
The process by which an insurer decides to whom to issue a policy is known as
Correct Answer: B
Rationale: Underwriting is the process where insurers evaluate the risk of insuring a potential policyholder, determining the terms and conditions of coverage. This involves assessing factors such as health, lifestyle, and financial stability.
Adverse selection refers to the tendency of those at higher risk to seek insurance more often, which can lead to imbalanced risk pools. Assignment involves transferring a policy from one party to another, not the initial decision-making process. Risk classification is a part of underwriting, where risks are categorized, but it does not encompass the entire decision-making process of issuing a policy.
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