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UNDERWRITING PROCESS
PREMIUM DETERMINATION
STAFF UNDERWRITING FUNCTIONS
UNDERWRITING ACTIVITIES
RATING SYSTEMS
100
Group of policies with a common characteristic, such as a territory or type of coverage
What is "book of business"?
100
The price per exposure unit for insurance coverage
What is "rate"?
100
Underwriter who is usually located in the home office and who assists underwriting management with making and implementing underwriting.
What is "Staff Underwriter"?
100
A resource for classifying accounts and developing premiums for given types of insurance; includes necessary rules, factors, and guidelines to apply those rates.
What is a "Rate Manual"?
200
Underwriter who is primarily responsible for implementing the steps in the underwriting process.
What is Line Underwriter
200
The unit of measure (for example: area, gross receipts, payroll) used to determine an insurance policy premium.
What is "Exposure unit"?
200
Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer, and the reinsurer can accept or reject any loss exposures submitted.
What is Facultative reinsurance?
200
Agents that have underwriting authority for initial underwriting decisions.
What is a "Front-Line underwriter"?
200
The process insurers use to calculate insurance rates, which are a premium component.
What is "Ratemaking"
300
A guide to individual and aggregate policy selection that supports an insurer’s mission statement.
What is Underwriting Policy (philosophy)?
300
Rate per unit X Number of Exposure Units =
What is "Premium"?
300
A statistical technique for analyzing environmental changes and projecting such changes into the future.
What is "Trending"?
300
A proposal an offeree makes to an offeror that varies in some material way from the original offer, resulting in rejection of the original offer and constituting a new offer.
What is a "Counteroffer"?
300
A rating plan that awards debits and credits based on specific categories, such as the care and condition of the premises or the training and selection of employees, to modify the final premium to reflect factors that the class rate does not include.
What is "Schedule Rating"?
400
Tendancy for people with the greatest probability of loss to be the ones most likely to purchase insurance.
What is Adverse Selection?
400
A rating approach that uses rates reflecting the average probability of loss for businesses within large groups of similar risks; the predominant method used for rating commercial properties.
What is "Class rating"?
400
- Adding or deleting entire lines of business - Optimal product mix of book of business - Premium volume goals
What is "Research the Market"?
400
Computer software programs that supplement the underwriting decision-making process. These systems ask for the information necessary to make an underwriting decision, ensuring that no information is overlooked.
What is "Expert systems, or knowledge-based systems"?
400
A ratemaking technique that adjusts the insured’s premium for the upcoming policy period based on the insured’s experience for the current period.
What is "Experience Rating"?
500
- Avoid adverse selection - Charge adequate premium - Select better-than-average accounts - Maintain optimum spread of risk and class of business
What are the activities of "Selecting Insureds"
500
A provision in an insurance rate for losses that could not be anticipated in the loss data.
What is Contingencies?
500
An independent organization that works with and on behalf of the insurers that purchase or subscribe to its services.
What are "Advisory organizations"?
500
A process of evaluation used by state insurance departments to determine that an insurer's practices and procedures are in compliance with regulations of that state.
What is "Market Conduct Examinations"?
500
A ratemaking technique that adjusts the insured’s premium for the current policy period based on the insured’s loss experience during the current period; paid losses or incurred losses may be used to determine loss experience.
What is "Retrospective rating"?