Chapter 19 Glossary Flashcards
Allocated loss adjustment expenses
American for claims handling expenses
Burning cost
The actual cost of claims paid or incurred during a past period of years expressed as an annual rate per unit of exposure. This is sometimes used (after adjustment for inflation, incurred but not reported (IBNR) claims and so on) as a method of calculating premiums or monitoring experience for certain types of risks, for example, motor fleets and non-proportional reinsurance.
Deep pocket syndrome
A situation where claims are made based on the ability of the defendant to pay rather than on share of blame. An injured party will try to blame the party with the greatest wealth (that is, deepest pocket) where there is more than one potential defendant.
Exposure rating
A method of calculating the premium that is based on external data or benchmarks. The risk profile (exposure) of every insured from the products in question is examined. Scenarios of losses of various sizes are analysed and the impact on the policies is determined.
From the ground up
A statement of an original insurer’s experience of a class business offered for reinsurance is said to be from the ground up when it shows the number and distribution by amount of all claims however small, even though reinsurance is required for large claims only (above retention levels or other contract lower limits).
Generalised linear model
In statistics, the generalised linear model (GLM) is a flexible generalisation of ordinary least square regression. The GLM generalises linear regression by allowing the linear model to be related to the response variable via a link function and by allowing the magnitude of the variance of each measurement to be a function of its predicted value.
Increased limit factors
These are factors which estimate the cost for a new limit as a multiple of the basic (original) limit.
Per-claim basis
A per-claim basis means that original loss curves are based on the amounts that will be paid to each individual claimant (plaintiff) for losses that arise from one incident
Per - occurence basis
A per-occurence basis means that original loss curves are based on the total amounts paid to all plaintiffs for losses that arise from one incident.
Points rating system
A system for calculating the office premium by relating it to points associated with each cell within a rating factor; the higher the risk associated with the cell, the higher the points and the higher the premium. For example, a driver aged 20 would be associated with many more points and, all other things being equal, a higher premium, than a driver aged 40.
