A.2. Policy Purchasing Process

Question 1

What are Underwriting Guidelines

Answer 1

Criteria used by each insurer in their decision of offering coverage to a potential insured.

Examples: decisions to accept, decline, or refer
Company tier placement
Schedule Rating

Question 2

How Premium is Computed

Answer 2

Use the rating algorithm and apply applicable rates to the rating variables

Question 3

What are rating manuals?

Answer 3

Documentation of an insurer’s rates, rules, and rating algorithm. Used for internal documentation, rate & rule change filings with DOIs, agent use

Question 4

Linear interpolation formula between 2 rates in coverage table

Answer 4

Rate = Low rate + (difference in rates) x (Cov - Low Cov) / (Cov high - Cov low)

Question 5

What is the purpose of a minimum premium?

Answer 5

To ensure insurer is collecting enough premium to cover expected policy costs