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15 Cards in this Set

  • Front
  • Back
Basic underwriting principles
1. Select prospective insureds according to the company’s underwriting standards
2. Achieve a proper balance within each rate classification
3. Maintain equity among the policyholders
The Underwriting Process
1. Field underwriting (done by the agent)
2. Company underwriting
3. The underwriting decision
Types of claims adjustors
1. Agent
2. Company adjustors
3. Independent adjustors (hired by insurer)
4. Adjustment bureau (hired by insurer)
5. Public adjustor (hired by insured)
The claims process
1. Notice of loss
2. Investigation of claim
3. Proof of loss (sworn statement, police report, receipts, etc.)
4. Decision (regarding coverage and amount)
an arrangement by which the primary insurer that initially writes the insurance transfers to another insurer part or all of the potential losses associated with such insurance
Reinsurance
The primary insurer is the
ceding company
The insurer that accepts the insurance from the ceding company is
reinsurer
The amount of insurance retained by the ceding company is
retention limit
The amount of insurance ceded to the reinsurer is known as
cession
If the reinsurer in turn transfers some of the risk to another reinsurer, this is called
retrocession
Reasons for reinsurance
o Increase underwriting capacity
o Stabilize profits
o Provide protection against a catastrophic loss
o Retire from a line of insurance or a territory
o Obtain underwriting advice on a line for which the insurer has little experience
Case-by-case method that is used when the ceding company receives an application for insurance that exceeds its desired retention limit
Facultative reinsurance
Primary insurer agrees in advance to cede certain insurance to the reinsurer, and the reinsurer agrees to accept the business
Treaty reinsurance
Role of investment income in insurance
1. Because premiums are paid in advance, they can be invested until needed to pay claims and expenses
2. Investment income reduces premiums
3. Investment income is critical to insurer profitability
4. Insurer investments provide substantial capital for the economy
5. Life insurers: General account assets mostly in bonds, mortgages and real estate
6. P&C insurers: Assets mostly in bonds and stocks
Other insurance company functions
1. Electronic data processing
2. Accounting
3. Legal
4. Loss control