Ace the Chartered Life Underwriter Challenge 2025 – Secure Your Success and Dominate the Exam!

If insurance fraud becomes widespread, it is likely that premiums will increase. This is because insurance companies incur significant costs to cover fraudulent claims, which can lead to substantial losses. When fraud prevalence rises, insurers must respond by raising premiums to maintain profitability and ensure they can cover valid claims for their policyholders. Additionally, increased fraud may lead to more stringent underwriting and higher administrative costs as insurance companies deploy resources to combat fraud. This scenario typically results in an overall increase in costs that is ultimately passed on to consumers in the form of higher premiums.

The other options do not account for the economic realities faced by insurance companies in the face of rising fraud. For example, suggesting that premiums might decrease significantly fails to recognize that higher fraud rates lead to increased claims and costs, which would necessitate higher premiums. As for remaining unchanged or being eliminated, these outcomes are impractical in a context where fraud is influencing financial stability in insurance providers.