PSI Ohio Insurance Practice Exam

What immediately begins after an application is submitted and the initial premium is paid?

1. The payout process

2. The underwriting process

3. The claims process

4. The cancellation process

The correct answer is: The underwriting process

Once an application is submitted and the initial premium is paid, the underwriting process immediately begins. Underwriting is a critical step in the insurance process where the insurer evaluates the risk associated with the applicant. This involves assessing the information provided on the application, reviewing medical histories, evaluating lifestyle factors, and determining the likelihood of a claim being made. The goal of underwriting is to ensure that the insurance company accurately assesses the risk and sets appropriate premiums based on that risk. Other processes, such as the payout, claims, or cancellation processes, do not initiate immediately upon application submission and premium payment. The payout process only starts when a claim is filed, while the claims process involves actions taken after a loss occurs, and the cancellation process deals with ending coverage, which is not relevant immediately after the application stage. Understanding the sequence of these processes is crucial to grasp the overall function of insurance operations.