R.M. Ch. 6

Question 1

Underwriting

Answer 1

the process of selecting, classifying, and pricing applicants for insurance

goal: to produce a profitable book of business

Question 2

Basic Underwriting Principles

Answer 2

• Attain an underwriting profit
• Select prospective insureds according to the company’s underwriting standards
• provide equity among the policyowners

Question 3

Underwriting Process

Answer 3

• Field Underwriting
• Company Underwriting
• The Underwriting Decision

Question 4

Field Underwriting

Answer 4

done by the agent and the agent is told what types of applicants are acceptable, borderline, or prohibited

Question 5

Company Underwriting

Answer 5

• the application
• the agent’s report
• physical inspection
• a physical examination and attending physician’s report

Question 6

The Underwriting Decision

Answer 6

• Accept the application
• Accept the application subject to restrictions or modifications
• Reject the application

Question 7

Types of Claims Adjustors

Answer 7

• Agent
• Company Adjustors
• Independent Adjusters
• Public Adjusters

Question 8

Insurance Agent

Answer 8

has authority to settle small first-party claims up to some maximum limit

• it is speedy, reduces adjustment expenses and it preserves the policyowner’s good will

Question 9

Company Adjuster

Answer 9

can settle a claim

• after notice of the loss is received, the company adjuster will investigate the claim, determine the amount of loss, and arrange for payment

Question 10

Independent Adjuster

Answer 10

is an organization or individual that adjusts claims for a fee. Independent contractors hired by insurer.

Question 11

Public Adjuster

Answer 11

represents the insured rather than the insurance company and is paid a fee based on the amount of claim settlement. Independent contractors hired by insured.

Question 12

Reason for Reinsurance

Answer 12

• Increase underwriting capacity
• Stabilize Profits
• Reduce the unearned premium reserve
• Provide protection against a catastrophic loss

Question 13

Two major forms of reinsurance

Answer 13

• Facultative Reinsurance

- Treaty Reinsurance

Question 14

Facultative Reinsurance

Answer 14

is an optional, case-by-case method that is used when the ceding company receives an application for insurance that exceeds its retention limit

Question 15

Treaty Reinsurance

Answer 15

means the primary insurer has agreed to cede insurance to the reinsurer, and the reinsurer has agreed to accept the business.

Question 16

Loss adjustors

Answer 16

Role: To determine whether a claim is covered and, if so, how much should be paid

Question 17

Objectives of Loss adjustors

Answer 17

• Proper determination of coverage
• Fair and prompt payment of claims (no under- or overpaying)
• Personal assistance to the insured