Introduction to Property-Casualty Insurance 3 Flashcards

1
Q

A group of policies withe a common characteristic, such as territory or type of coverage, or all policies written by a particular insurer or agency.

A

Book of Business

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2
Q

In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.

A

Adverse Selection

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3
Q

The amount of business an insurer is able to write, usually based on a comparison of the insurer’s written premiums to its policyholders’ surplus.

A

Capacity

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4
Q

Under statutory accounting principles (SAP), an insurer’s total admitted assets minus its total liabilities.

A

Policyholder’s Surplus

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5
Q

Computer software programs that supplement the underwriter decision-making process. These systems ask for the information necessary to make an underwriting decision, ensuring that no information is overlooked.

A

Expert Systems, or Knowledge-based Systems

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6
Q

A process in which historical data based on behaviors and events are blended with multiple variables and used to construct models of anticipated future outcomes.

A

Predictive Modeling

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7
Q

A condition that increases the frequency or severity of a loss.

A

Hazard

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8
Q

A portion of a covered loss that is not paid by the insurer.

A

Deductible

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9
Q

The price per exposure unit for insurance coverage.

A

Rate

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10
Q

A resource for classifying accounts and developing premiums for given types of insurance; includes necessary rules, factors, and guidelines to apply those rates.

A

Rate Manual

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11
Q

The unit of measure (for example, area, gross receipts, payroll) used to determine an insurance policy premium.

A

Exposure Unit (Unit of Exposure)

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12
Q

The process insurers use to calculate insurance rates, which are a premium component.

A

Ratemaking

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13
Q

A person who uses mathematical methods to analyze loss data and develop insurance rates.

A

Actuary

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14
Q

The price per exposure unit by adjusting the prospective loss costs for expenses, profits, and contingencies.

A

Insurance Rating System

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15
Q

The portion of the rate that covers projected claim payments and loss adjusting expenses.

A

Loss Costs

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16
Q

An independent corporation that works with and on behalf of insurers that purchase or subscribe to their services, which include developing prospective loss costs and standard policy forms.

A

Insurance Advisory Organization

17
Q

A mathematical principle stating that as the number of similar but independent exposure units increases, the relative accuracy of predictions about future outcomes (losses) also increases.

A

Law of Large Numbers

18
Q

Loss data that are modified by loss development trending, and credibility processes, but without considerations for profit and expenses.

A

Prospective Loss Costs

19
Q

A provision in an insurance rate for losses that could not be anticipated in the loss data.

A

Contingencies

20
Q

A rating approach that uses rates reflecting that average probability of loss for businesses within large groups of similar risks; the predominant method used for rating commercial properties.

A

Class Rating

21
Q

A type of insurance rate that reflects the unique characteristics of an insured of the insured’s property.

A

Individual Rate, or Specific Rate

22
Q

Rating used by underwriters to rate one-of-a-kind risks.

A

Judgment Rating

23
Q

The price per exposure unit determined by adjusting the prospective loss costs for expenses, profits, and contingencies.

A

Final Rate

24
Q

A ratio that measures losses and loss adjustment expenses against earned premiums and that reflects the percentage of premiums being consumed by losses.

A

Loss Ratio

25
The portion of written premiums that corresponds to coverage that has already been provided.
Earned Premiums
26
The sum of the paid losses and loss and loss adjustment expense reserves.
Incurred Losses
27
The expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy.
Loss Adjustment Expense (LAE)
28
An insurer's incurred underwriting expenses for a given period divided by its written premiums for the same period.
Expense Ratio
29
The total premium on all policies written (put into effect) during a particular period.
Written Premiums
30
Costs incurred by an insurer for operations, taxes, fees, and the acquisition of new policies.
Underwriting Expenses
31
A profitability ratio that indicates whether an insurer has made an underwriting loss or gain.
Combined Ratio
32
An insurer's loss incurred when losses and expenses for a given period are greater than its premium earned for the same period.
Underwriting Loss
33
Income an insurer earns from premiums paid by policyholders minus incurred losses and underwriting expenses.
Underwriting Profit
34
Any product or service that results from a work process.
Output
35
The percentage of insurance policies renewed
Retention Ratio
36
The ratio of insurance policies written to those that have been quoted to applicants for insurance.
Success Ratio
37
Premium Equation
Rate per unit x # of exposures
38
Number of Exposure Units
Insured Value / Unit Size
39
Price
Rate Per Unit x Number of Units