Chapter 9 Flashcards
What’s a centralized insurer?
Insurers who practice a centralized approach tend to retain the bulk of the underwriting authority in the head office or for supervisors or managers in the branch. Very detailed and structured line guides are created for Underwriters which allow for much less discretion when accepting risks or setting terms.
When is a potential challenge centralized approach may have?
A potential challenge of the centralized approach to underwriting may be accountability without authority. That is, Underwriters are generally held accountable for the premium volume and profitability of their assigned shares of the insurers book of business, yet they may be denied the authority or autonomy they need to meet their objectives
They may also be precluded from developing personal and expert relationships.
What is a decentralized approach for insurers
A decentralized injured gives much more autonomy and secretion to its underwriters. The line guide or procedure manual may be less detailed than that of a centralized insurer, which means Underwriters for decentralized insurers tend to refer decisions to their superiors less frequently then centralized counterparts. Even though there may be less rigidity to the decentralized underwriting structure, Underwriters are still required to refer risks that fall outside their authority to the appropriate supervisor.
A list drawbacks to the decentralized approach
What are the drawbacks to the decentralized approach stems from the very autonomy that defines it. Where there is two little direction or supervision, and insurer runs the risk of its underwriting team locking inconsistency in applying risk assessment and setting terms. This more entrepreneurial approach to underwriting may come at the expense of consistency and perhaps more predictable results. Further, the centralized insurers success depends more on the initiative and sound judgment of its individual underwriters. This is also a point to consider when discussing the relationship between insurers, underwriters, and their producers. If a producer comes becomes aware of Underwriters who don’t employ a consistent approach, it could strain the relationship and perhaps cause confrontation in the event a decision is not in their favor.
What are the effects of mergers and acquisitions in the insurance industry?
When a merger or an acquisition of entities has occurred it is important to considering different corporate cultures.
For example where the company’s involved are similar in corporate culture the merger May pose relatively few obstacles beyond the purely logistical task of eliminating and combining Branch offices and relocating staff.
Were the corporate culture of companies involved are different, underwriters may be less clear about the rules or expectations to meet. Resulting in lack of clarity
List 3 effects of mergers and acquisitions
Corporate culture
Sales and underwriting
The parent culture
What is a distinctive feature of the underwriters external environment?
One of the most distinctive features of the underwriters external environment is its speed. Rapid advancements in technology, social media, legislation, public demand for information, and over arching global landscape have all impacted how Underwriters do their job and how quickly they must respond to these changes.
How have Underwriters increased their access to information? List for ways
- White papers and articles about subjects generally of interest to an underwriter
- Journals, newsletters, blogs, discussion boards, and forms pertaining to the industry
- Data analytics and databases of large-scale aggregate information. This information can include and help determine patterns and trends, and even contain more detailed information about a risks physical details or business operations. This improves efficiency at the processing level, can help reduce fraud, and can even inform future policy making decisions
- Company circulated emails and updates to an intranet. Usually containing news regarding items such as results, developments, new initiatives, contest, and updates to policies
What is a danger of advancing technology?
There is the danger that the volume of information is too great to be properly digested in the time frame that an underwriter must make a decision. Due to information overload, that is, the feeling of being confronted with more information then they can absorb and the resultant stress that comes from feeling overwhelmed.
Global influences
Insurance is a global industry. Canadian-owned insurance company’s account for approximately 1/3 of the Canadian industries annual premium volume. The rest is divided in varying proportions among foreign insurers. Like many other industries of scale, the Canadian insurance industry is strongly influenced by its American counterparts, as well as those in europe.
How does social trends effect underwriters
Abroad social development for insurance is the aging population as a large portion of the current populace, such as baby boomer generation grows older, it requires more healthcare. This societal trend is relevant to Underwriters as they may expect to see more submissions for insurance on nursing homes and related risks as the population ages.
Another brought social development is assessing the hazards associated with liability insurance on risks such as religious institutions, they need to consider the increase in the prevalence of abuse related lawsuits. In some cases, the courts have required insurers to defend individuals being sued for sexual abuse who have liability coverage under their homeowners policies to pay for their defense, despite the standard exclusion of coverage for illegal acts.
In saying, Underwriters must stay current when it comes to the development and emergence of societal trends, as these are likely to have an impact on varied facets of how they will conduct business
Technology and increased privacy concerns. How does this concern underwriters?
concerns regarding violation, misused, or improper handling of data had led to several major lawsuits and thus are a major concern for the underwriter whose employer might ensure those parties. It is prudent for Underwriters to bear in mind that their files on a given account could be required as evidence on proceedings. Therefore, and underwriter should be careful with all notes about an account and ensure that nothing is written that might embarrass or under mean the insurer should the files ever have to be produced in court.
Why do Underwriters need to pay attention to judicial trends?
Underwriter should pay attention to judicial trends and Court decisions regarding novel situations, as they will not only set proceeded for future proceedings but also impact what Underwriters may need to consider when making decisions.
List three implications for what the courts decide in the cases brought before them concerning toxic mold
The policy forms under which claims are made
The willingness of insurers to provide coverage for people or businesses with an exposure to toxic mold
The terms under which insurers, though they’re underwriters, will offer coverage to such people or businesses
Thus Underwriters monitor Court decisions for developments that may affect the response to risk
Why should an underwriter keep up with economic trends?
When the economy is thriving, there are more merger and acquisition activity among businesses seeking the best use of their increased capital. That makes it important for the underwriter to investigate existing insurds on renewal to see whether an insured has merged or acquired another company during the just expired policy period
When the economy deteriorates, more people in businesses find themselves under financial pressure as their incomes drop. As a result more personal and business bankruptcies. Insurers often find that the frequency of claims increases in difficult economic times.
