Certified Financial Consultant (CFC) Practice Exam

What source is primarily consulted by an insurer during the underwriting process?

1. Medical history

2. Credit report

3. Application

4. Personal references

The correct answer is: Application

During the underwriting process, the application serves as the primary source of information for an insurer. This document provides essential details about the applicant, including their personal information, health history, lifestyle choices, and other relevant data that the insurer needs to assess risk and determine the appropriate coverage and premiums. The application is crucial because it gives underwriters a comprehensive view of the potential policyholder. It is filled out by the applicant and often includes questions designed to gauge the individual’s risk factors, such as age, occupation, health conditions, and past insurance claims. The accuracy and completeness of the information provided in the application are critical, as they inform the insurer’s decision-making process. While medical history, credit reports, and personal references may also be consulted during the underwriting process, these sources typically supplement the information obtained from the application rather than serve as the primary source. For instance, the medical history may be confirmed, but it is the application that first brings it to the underwriter's attention. Similarly, credit reports can provide insights into financial responsibility, and personal references might offer anecdotal support, but they do not replace the foundational data gathered in the application itself.