Study #10: Applications of Property Insurance: Underwriting and Claims Flashcards
Underwriter
1) The insurance company or group that underwrites or insures a particular risk.
2) The individual within an insurance company whose responsibility it is to accept or reject business in the particular line in which she specializes and, in this way, choose the risk her principals are prepared to underwrite.
Line Guide
A listing of the maximum amounts of exposure an insurance company is prepared to accept on various classes of risk.
Frequency of Loss
This is a measure of how often losses are likely to occur in the future. Assuming the average size of loss is consistent, the higher the loss frequency, the worse the loss experience.
Severity of Loss
This is the average size of the losses. The larger the average loss, the higher the loss severity is said to be. And assuming the loss frequency is consistent, the higher the loss severity, the worst the loss experience.
Rate
Amount charged to an insured that reflects the expectation of loss for a covered risk, insurance company expenses, and profit. In other words, it is the basis of premium calculation for the insurance provided for the exposure.
Actuary
One who specializes in the mathematics of insurance, mortality rates, and the like.
Ratemaking
The process of compiling and analyzing data to establish rates that accurately reflect the level of risk. Usually performed by actuaries.
Rating
The process by which underwriters apply the rates developed by actuaries to the information that underwriters have gathered to determine premium for individual risks.
Premium
The price of insurance protection four a specified risk for a specified period of time.
Adjuster
One who investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements.
