Chapter 9 Flashcards
What are the three levels of the ‘information pyramid’ in a typical insurance company?
The three levels are:
• Board.
• Underwriting managers.
• Operational level.
What issues are considered at board level?
Issues considered at board level include: • growth of the company; • loss ratios; • underwriting margins; • mix of business; • accumulations; • competitive standing; • capital returns; • solvency.
What issues are considered at underwriting managers’ level?
Issues concerning underwriting management include growth by product, retention rates, loss ratios, claims trends, new business flow, underlying claims, large losses, weather-related losses, market share, accumulations, rate changes and commissions.
What is the relationship between the frequency and severity of risk?
The frequency of risk pertains to how often a risk happens, while severity of risk is concerned with when it does happen, how serious it is.
If company A had premium income of £75,000 and claims of £100,000, what would the claims loss ratio be on these figures?
The claims loss ratio would be:
133.33% (100,000 / 100)
75,000 1
What is the difference between a policy year and an underwriting year?
A policy year refers to the actual period of insurance covered by a particular policy, i.e. inception date to end date. An underwriting year refers to the year in which a policy incepts, i.e. if the start date of a policy is 1 July 2018, the underwriting year is 2018 (01/01/18–31/12/18).
What is the difference between a calendar year and an accounting year as monitoring periods?
With calendar year monitoring, a claim is allocated to an actual calendar year (1 January to 31 December) on the basis of the date of loss, i.e. if the date of loss was in 2018, it is allocated to the 2018 calendar year. An accounting year will be twelve months long, but will mirror the insurer’s accounting year which is not necessarily 1 January to 31 December of any year.
