refers to the pricing of insurance

O total premiums charged must be adequate for paying all claims and expenses during the policy period

Rates and premiums are determined by an ______, using the company's past loss experience and industry statistics

is the price per unit of insurance

is the unit of measurement used in

insurance pricing, e.g., a car‐year

is the portion of the rate needed to pay losses and loss adjustment expenses

is the amount that must be added to the pure

premium for other expenses, profit, and a margin for contingencies

consists of the pure premium and loading

paid by the insured consists of the gross rate multiplied by the number of exposure units

means that each exposure is individually evaluated, and the rate is determined largely by the judgment of the

underwriter

means that exposures with similar characteristics are placed in the same underwriting class, and each is charged the same rate

is a rating plan by which class rates are adjusted upward or downward based on individual loss experience

there is an adjustment to the manual rate for insureds who meet certain requirements

 preferred risk – discounted premium

 substandard risk – extra premium

each exposure is individually rated.

 A basis rate is determined for each exposure, which is then modified by debits or credits depending on the physical characteristics of the exposure

commonly used in commercial property insurance

the class or manual rate is

adjusted upward or downward based on past loss experience

o the insured’s past loss experience is used to determine the premium for the next policy period

plan, the insured’s loss experience during the current policy period determines the actual premium paid for that

period

o a provisional premium is paid at the beginning of the policy period; the final premium is calculated at the end of the policy period

o Commonly used in workers compensation insurance

use a mortality table or individual company experience to determine the

probability of death at each attained age

‐the annual expected value of death claims equals the probability of death times the amount the insurer must pay if death occurs

refers to the process of selecting, classifying, and

pricing applicants for insurance

o the objective is to produce a profitable book of business

establishes

policies that are consistent with the company’s objectives, such as :

o acceptable classes of business

o amounts of insurance that can be written

makes daily decisions concerning the acceptance or rejection of business

o The underwriter must select prospective insureds according to the company’s

underwriting standards

o Underwriting should achieve a proper balance within each rate classification

o Underwriting should maintain equity among the policyholders

O the application

o The agent’s report

o an inspection report

o Physical inspection

o a physical examination and attending physician’s report

o MIB (medical information bureau) report

O accept the application

o Accept the application subject to restrictions or modifications

o reject the application 

refers to the sales and marketing activities of insurers

O verification of a covered loss

O fair and prompt payment of claims

O personal assistance to the insured

determines if a covered loss has occurred and the amount of the loss

‐ may require a proof of loss before the claim is paid

‐ decides if the claim should be paid or denied

o Policy provisions address how disputes may be resolved

 is 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

The primary insurer 

The insurer that accepts the insurance form the ceding company 

is the amount of insurance

retained by the ceding company

The amount of insurance ceded to the reinsurer 

O increase underwriting capacity

o Stabilize profits

o provide protection against a catastrophic loss

o Retire from business or from a line of insurance or territory

o obtain underwriting advice on a line for which the insurer has little experience

is an optional, case‐by case method that is used when the ceding company receives an application for

insurance that exceeds its retention limit

means the primary insurer has agreed to cede insurance to the reinsurer, and the reinsurer has agreed to accept

the business

area maintains information on premiums, claim, loss ratios, investments, and underwriting results

accounting

department prepares financial statements and develops budgets

department, attorneys are used in advanced

underwriting and estate planning

Property and liability insurers provide numerous _____________ services