Study Application Questions Flashcards
Miriam is an underwriter at Coverage Plus Insurance Company. She receives an automobile insurance application from Ricardo, a potential new client. The application has been flagged for Miriam to review manually rather than being automatically rated using Coverage Plus’s computer rating system. When Miriam reviews the file, she notices three windshield damage claims within the past three years.
a. Describe the type of information required to be included in the automobile insurance application. (5 marks)
a. Information required on an insurance application (any five of the following)
• Named insured: who the applicant is and who the named insured is
• Policy term: the effective and expiry dates to determine how long insurance will be in force
• Subject of insurance: the description of the automobile being insured, what it will be used for, who
will use it, where it will be used
• Loss payees: a party other than the insured that will receive proceeds from the policy (for cars,
this would be lienholders, such as a bank if Ricardo purchases the car using a car loan)
• Loss history: the history of past claims (Ricardo has three past windshield claims)
• Prior insurance: prior insurers’ names, policy numbers, and policy expiry dates
• Broker’s report: may contain a note from Ricardo’s broker about other relevant details
• Signatures: if this is a hardcopy application, it will be signed (as required by law); if it is an
electronic application, it may not be signed
Miriam is an underwriter at Coverage Plus Insurance Company. She receives an automobile insurance application from Ricardo, a potential new client. The application has been flagged for Miriam to review manually rather than being automatically rated using Coverage Plus’s computer rating system. When Miriam reviews the file, she notices three windshield damage claims within the past three years.
b. Discuss Miriam’s role as an underwriter for this application and why the file was flagged for her review rather than being automatically rated using Coverage Plus’s computer system. (5 marks)
b. Manual review of the file
• It is the underwriter’s responsibility to decide whether to accept the risk, accept the risk subject to
certain conditions, or reject the risk
• Once the underwriter has determined a risk is acceptable to insure, the next step is to determine
the proper cost to insure it
• Some classes of business are rated individually using manual rating because of their complexity
and the need for judgment (rather than using computer programs)
• Due to Ricardo’s past claims, his file requires a manual review and the need for an underwriter to
make a judgment call about whether to accept the risk or accept it with conditions
• Sometimes if there are multiple windshield claims, an underwriter may insist on a higher
deductible for this type of coverage
Miriam is an underwriter at Coverage Plus Insurance Company. She receives an automobile insurance application from Ricardo, a potential new client. The application has been flagged for Miriam to review manually rather than being automatically rated using Coverage Plus’s computer rating system. When Miriam reviews the file, she notices three windshield damage claims within the past three years.
c. Explain whether the high frequency of windshield claims would be an issue to accepting this risk, and identify possible ways to improve this risk by decreasing the possibility of future windshield claims. (5 marks)
c. Risk acceptance (allow marks for other valid answers)
• Based on his loss history, Ricardo presents a higher-than-average risk of future windshield
claims, but windshield claims alone are not a reason to decline to write automobile insurance for
Ricardo
• Perhaps Ricardo lived on a gravel road, increasing the chance of a claim; the underwriter can review his address and see if he still lives on a gravel road, and, if he does not, then the risk may
have already improved
• If he is still at the same address on the gravel road, the underwriter can still write the risk but add
conditions to the coverage
• Some conditions for coverage can be adding a higher deductible for windshield claims—for any claims below the deductible, Ricardo will cover himself
• The policy could be written with an exclusion for windshield claims, eliminating the risk of future windshield claims
