Burnham - Keywords Flashcards
Cause of Loss
is a force that causes a loss; is a peril
Peril
is another term for cause of loss
Hazard
is anything that increases the frequency or severity of loss
Moral hazard
involves active inducement of loss
Morale hazard
involves passive indifference to loss
Physical hazard
is a physical condition of the insured object or its environment
Legal hazard
is the chance that judge can’t read the policy or the jury can’t render a rational verdict
Insurance
is a contractual agreement to transfer risk of financial loss from te insured to the insurer in exchange for payment of the insurance premium
Law of large numbers
states that when the number of similar, independent, exposure units (cars, homes, lives) increases, the relative accuracy of loss predictions also increases.
Indemnification
restores a party who has had an insured loss to the same financial position he had before the loss occurred.
Exposure base
is the variable chosen to approximate the loss potential for a particular line of insurance.
Exposure unit
is the unit of measurement of the exposure base
Rate
is the price per unit of insurance
Premium
equals the rate times the number of exposure units
Rating plan
creates an objective system for calculating insurance premiums by defining the exposure base and specifying the rate per exposure unit.
Total losses
equals the average loss frequency times the average loss severity; increases as the number of exposure units increases
Expense loading
is the expense component plus the allowance for profit and contingencies component of an insurance rate.
Pure premium
equals the dollar amount of losses incurred during the experience period divided by the number of earned units of exposure.
Gross rate
equals the pure premium divided by the expected loss percentage.
Expected loss percentage
equals 100 percent minus the expense loading percentage.
Manual rate
is the rate found in a rating manual or on a rate table.
Manual premium
equals the manual rate times the number of exposure uinits.
Credibility factor
is a measure of the actuary’s confidence in the past loss data as indication of future losses.
Trend factor
adjusts individual insured’s rates for a future period based on its loss experience in a prior period.
Retrospective rating plan
adjusts the insured’s premium for a given period based on its experience during that same period.
Schedule rating plan
adjusts the insured’s premium to reflect characteristics not reflected in its experience rating.
Mandatory rate law
has a state agency set rates and require compliance by all licensed insurers.
Prior approval law
has the state insurance department approve all rates before they are used.
File-and-use law
has insurers use rate changes within a band of percentages without prior approval.
Open competition system
does not require insurers to file rates with the insurance department, but the department retains the authority to monitor competition and to dissaprove rates.
Insurance advisory organization
is an independent corporation that performs services for its member companies and subscribers
Deviation filing
is a request to deviate from bureau rates.
National Counsil on Compensation Insurance (NCCI)
is an advisory organization for workers’ compensation and employer’s liability insurance.
Insurance Services Office (ISO)
is a miltiple-line rating bureau for property and liability insurance except workers’ compensation, ocean marine, aviation, and surety bonds.
American Association of Insurance Services (AAIS)
develops policy forms, manual rules, and rating information for property casualty insurers.
AAIS
abbreviates American Association of Insurance Services
NCCI
abbreviates National Counsel on Compensation Insurance
ISO
abbreviates Insurance Services Office.
State rating bureau
is a state government agency or insurer-owned bureau that provides services to property-casualty insurers in one state.
McCarran-Ferguson Act
exempts the insurance industry from federal antitrust laws to the extent that our industry is regulated by the states.
Gramm-Leach-Mliley Act (GLB)
allows a single corporation to offer combined banking, insurance, and securities products and services and raised the notion of creating a national insurer licensing system if states did not adopt uniform licensing laws.
GLB Act
abbreviates Gramm-Leach-Bliley Act.
State Modernization and Regulatory Transparency (SMART) Act
would require state insurance regulators to enforce uniform standards to a wide array of insurance issues and preempt state regulation of insurance rates.
SMART Act
abbreviates State Modernization and Regulatory Transparency Act.
