Chartered Life Underwriter Exam 2025 – 400 Free Practice Questions to Pass the Exam

The main reason for higher premiums is often linked to increased fraud in the industry. When fraudulent claims are more prevalent, insurance companies face higher costs as they need to pay out for claims that are not valid. This increase in costs translates into higher premiums for all policyholders, as insurers adjust pricing to compensate for potential losses. Furthermore, the presence of fraud can lead to a greater need for thorough investigations and risk assessments, thereby increasing operational costs that are also passed on to customers in the form of higher premiums.

While other factors listed could potentially influence premium rates, they do not have the same direct and systemic impact on the insurance industry’s pricing strategies. For instance, insufficient marketing may affect the visibility of insurance products but does not inherently increase the financial risks that lead to raised premiums. Insufficient underwriting may lead to issues with policy accuracy but is more about risk evaluation and management rather than increasing costs due to fraud. Volatile investment markets can impact insurers' profitability and capital reserves, but these fluctuations are often managed through various investment strategies rather than directly leading to consistent premium increases.