cpcu 520 ch4 review notes Flashcards
uw function purposes to achieve profit
guarding against adverse selection
ensuring adequate surplus
enforcing uw guidelines
line underwriting responsibilities
select insureds classify and price accts recommend or provide covg manage a book of business support producers & customers coordinate w/ marketing efforts
production underwriter
blended responsibilities of special agents and line underwriters
staff underwriting activities
research market formulate uw policy/philosophy revise UW guidelines evaluate loss experience research and develop coverage forms review and revise pricing plans Arrange treaty reinsurance assist others w/ complex accts conduct UW audits participate in industry associations conduct education/training
factors constraining what UW policy can accomplish
financial capacity, regulation, personnel, reinsurance
capacity
relationship btwn prem written and size of policyholder surplus (net worth)
activities helping to realize maximization of return on equity
setting return thresholds
redirecting focus on target business classes
adjusting uw policy based on juristiction
return on equity
measure of insurer profitability, relates net operating gain after taxes as percentage of prior year capital/surplus, stock insurers calcualte both SAP and GAPP, mutual insurers only SAP
UW guideline purposes
Provide for structured decisions, ensure uniformity and consistency, syntheseize insights and experience, distinguish btwn routine and non-routine decisions, avoid duplication of efforts, ensure adherence to reinsurance treatires and planned rate levels, support policy prep and compliance, provide basis for predictive models
routine decisions
line underwriter clearly has authority to make according to UW guidelines
non-routine decisions
subs that fall outside uw’s authority
Underwriting policy should support an insurer’s
mission
Steps in UW process
Evaluate submission (weigh the need for info, gather the necessary info) Develop UW alternatives Select UW alternative Determine appropriate premium Implement UW decision Monitor UW Decision
Sources of UW info
Producers (more than any other) applications inspection reports gov't records financial rating services loss data
Production records
records on producers indicating loss ratio, prem volume, mix of busienss, etc
major types of uw modifications
require risk control measures, change rates/rating plans/policy limits, amend policy terms/conditions, use faculative reinsurance
consideration before selecting UW alternative
Underwriting authority, supporting business, mix of business, producer relationships, regulatory restrictions
steps in implementing UW decisions
Communicate decision
Issue documents
record information
Nonfinancial measures indicating insurer profitability
Selection, product or line of business mix, pricing, accomodated accounts, retention ratio, hit/success ratio, service to producers, premium to underwriter
retention measurements
policy count, prem volume, or both
high hit ratio inicates
competition easing, rates inadequate/lower than others, covg broader than others, uw has skill set for production uw, uw selction criteria deteriorating, good relationship btwn insurer/producer
low hit ratio indications
competition increasing, rates higher than others, cog or forms too restrictive, uw does not have skill set for production uw, selection criteria too stringent, service poor, poor relationship btwn insurer/producer
policyholder surplus
under SAP, insurer’s total admitted assets minus total liabilities
capacity
total amt of busines insurer able to write, based on comparison of written prem to policyholder surplus
