Question

81. All of the following are TRUE statements regarding the agent responsibilities in connection with the completion of the application EXCEPT

(Choose from the following options)
1. The agent may complete the application personally or the applicant may complete the application under the agent's watchful eye.
2. The agent must probe beyond the stated questions in the application if he/she has reason to believe the applicant is misrepresenting or concealing information.
3. It is the insurer's responsibility to make certain that the application is filled out completely, correctly, and to the best of their knowledge.
4. If the agent feels that there could be some misrepresentation, he/she must inform the insurance company.

Answer 1

Option 3 is incorrect because it's the insurer's duty to ensure the insurance application is complete and accurate. An agent should assist in the process and report misrepresentations to the insurance company. An insurance premium is a payment made for coverage, and moral hazard refers to increased risk-taking due to the presence of insurance.

Step-by-step explanation:

The student question concerns the responsibilities of an insurance agent when completing an application for a client. The correct answer to the question is option 3: It is the insurer's responsibility to ensure the completion of the insurance application. While an agent should assist and oversee the application process, ultimately the insurer must verify that the application is complete, accurate, and thorough. The agent does have a responsibility to provide complete and accurate information and to report any potential misrepresentations to the insurance company.

Furthermore, when someone is looking for a loan, they can reassure the bank that they will repay by providing a strong credit history, offering collateral, showing stable income, and having a co-signer if necessary. An insurance premium is the money paid periodically to the insurance company by the insured for coverage. An actuarially fair insurance policy implies that the premium equals the expected payouts. The problem of moral hazard arises when the behavior of the insured party is affected by the existence of insurance, leading them to take greater risks because they do not bear the full cost of their actions.