General Insurance

Question 1

What is a premium

Answer 1

The total cost for the amount of insurance purchased

Question 2

What is a rate?

Answer 2

The dollar amount for a particular unit of insurance

Question 3

What is a class rating?

Answer 3

A rate charged to a group or policyholders who have similar exposures and experience

Question 4

What is an experience rating?

Answer 4

A rate based on the policy holders actual loss history when compared to the loss history of similar risks

Question 5

What is an A rating or judgment rating

Answer 5

An individual rate that doesn’t use loss history as a component, and is derived largely from the underwriters evaluation of risk poses to the insurer

Question 6

What Is a Loss cost rating?

Answer 6

A rating organization provides insurers with the portion of a rate that does not include provisions for expenses

Question 7

What is a manual rating?

Answer 7

The use of rates contained in a manual published by the insurer or those of the rating organization of which it is a member

Question 8

What is a merit rating?

Answer 8

The use of rates that rewards a policy holder that takes measures to decrease the probability of loses by the implementation of safety programs and loss programs

Question 9

What is retrospective ratings?

Answer 9

Rates that adjust the policy premium to reflect the current loss experience of the policyholder. (Suject to minimums and maximums

Question 10

What is a schedule rating?

Answer 10

A method of rating property and liability risks by using charges and credits to modify a class rate based on the nature of the particular risk being q was rrated

Question 11

What is file and use?

Answer 11

Rates must be filed with the state insurance regulatory authority, and may be used as soon as they are filed

(Department of insurance)

Question 12

What Is prior approval?

Answer 12

Insurers cannot use rates until approved by the department of insurance, or until a specific time period has expired after the filing

Question 13

What are mandatory rates?

Answer 13

Some states require that mandatory rates be used for certain lines of insurance

Question 14

What is open competition?

Answer 14

A state relies on competition between insurers to produce fair and adequate rates.

Question 15

What are loss reserves?

Answer 15

The net premiums+interest reflects possible future contract obligations

An accounting measurement of an insurers future obligation to its policy holders

Question 16

What is a case reserve method

Answer 16

A loss reserve established fir each claim, when reported

Question 17

Average value method

Answer 17

A loss reserve established based on average settlements of particular claim types

Question 18

What is a loss rating method ?

Answer 18

A loss reserve formula based upon the expected losses for a particular class or line

Question 19

What Is the tabular method ?

Answer 19

A loss reserve based upon the estimated length of an insured’s or claimant’s life or expected disability

Question 20

What are the 3 financial ratios?

Answer 20

Loss ratio
Expense ratio
Combined ratio

Question 21

What Is a loss ratio?

Answer 21

Determined by dividing the sum of paid losses+ loss reserves by total earned premiums
Lr+pl÷ ep

Question 22

What is an expense ratio?

Answer 22

An expense ratio is determined by dividing an insurers total operating expenses by written premiums

Total operating expenses÷written premiums

Question 23

What is a combined ratio?

Answer 23

Sum of the loss ratio and expense ratio