AU 60 Course flash cards
Book of business
A group of policies with a common characteristic, such as territory or type of coverage, or all policies written by a particular insurer or agency.
Underwriting
The process of selecting insureds, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decisions made.
Adverse selection
In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.
Policyholders’ surplus
Under statutory accounting principles (SAP), an insurer’s total admitted assets minus its total liabilities.
Underwriting guidelines (underwriting guide)
A written manual that communicates an insurer’s underwriting policy and that specifies the attributes of an account that an insurer is willing to insure.
Predictive modeling
A process in which historical data based on behaviors and events is blended with multiple variables and used to construct models of anticipated future outcomes.
Catastrophe model
A type of computer program that estimates losses from future potential catastrophic events.
Telematics
The use of technological devices to transmit data via wireless communication and GPS tracking.
Capacity
The amount of business an insurer is able to write, usually based on a comparison of the insurer’s written premiums to its policyholders’ surplus.
Manuscript policy or manuscript endorsement
An insurance policy or endorsement that is specifically drafted according to terms negotiated between a specific insured (or group of insureds) and an insurer.
Big data
Sets of data that are too large to be gathered and analyzed by traditional methods.
Smart product
An innovative item that uses sensors; wireless sensor networks; and data collection, transmission, and analysis to further enable the item to be faster, more useful, or otherwise improved.
Internet of Things (IoT)
A network of objects that transmit data to each other and to central hubs through the internet.
Artificial intelligence (AI)
Computer processing or output that simulates human reasoning or knowledge.
Machine learning
Artificial intelligence in which computers continually teach themselves to make better decisions based on previous results and new data.
Deep learning
Insights into data use and processing gained by combining artificial intelligence and machine learning. It is based on algorithms derived from artificial neural networks.
Data mining
The analysis of large amounts of data to find new relationships and patterns that will assist in developing business solutions.
Unfair discrimination
Applying different standards or methods of treatment to insureds who have the same basic characteristics and loss potential, such as charging higher-than-normal rates for an auto insurance applicant based solely on the applicant’s race, religion, or ethnic background.
Declination
An insurer’s refusal to provide coverage to an applicant who has made a written request to the insurer or its producer, or a producer’s refusal to forward such a written request to an insurer.
Termination
An insurer’s cancellation of a policy during the policy term or nonrenewal of coverage at the end of a policy term.
Notification requirements
Regulatory requirements relating to the timing and contents of an insurer’s notice to an insured of the declination, termination, and nonrenewal of insurance coverage.
Market conduct examination
An analysis of an insurer’s practices in four operational areas: sales and advertising, underwriting, ratemaking, and claims handling.
Premium-to-surplus ratio, or capacity ratio
A capacity ratio that indicates an insurer’s financial strength by relating net written premiums to policyholders’ surplus.
Application
A legal document that provides information obtained directly from an applicant requesting insurance and that an insurer can use for underwriting and claims handling purposes.
Loss history
A listing of past claims, including the date of occurrence, the line of business, the type or description of the claim, the date of the claim, the amount paid, the amount reserved, and the claim’s current status.
Experience rating plan
A rating plan that increases or reduces the premium for a future period based on the insured’s own loss experience for a period in the recent past.
Fee for service company
An independent contractor who specializes in loss control work and who is paid for each loss control survey performed.
Actual cash value
A method in valuing property that is calculated as the cost to replace or repair property minus depreciation, the fair market value, or a valuation determined by the broad evidence rule.
Replacement cost
The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.
Common-size statement
A financial statement in which amounts are reported as a percentage of a base figure.
Generally accepted accounting principles (GAAP)
A common set of accounting standards and procedures used in the preparation of financial statements to ensure consistency of presentation and reported results.
Fixed assets
Resources that cannot be expected to be sold or consumed within the business’s normal operating cycle and that are usually considered to be long lived.