Underwriting Flashcards
what are actuaries responsible or?
actuaries are responsible for analyzing data relying on law of large numbers to figure out what the losses will bein the future. from this, they can make predictions which are statistically credible,
using loss _______ and loss ______, actuaries determine the rates to be charged for a future and the amount of reserve required.
loss frequency, loss severity
what is loss frequency?
probability or likelihood of a loss occuring
what is loss severity?
how serious a potential loss could be (financially)
what is meant by a ‘reserve’?
a fund mandated by regulatory bodies to meet financial obligations
what does IBNR stand for/mean?
Incurred but Not Reported claims: we know that there are claims that clients havent reported. Actuaries must set aside money to be sure insurers have funds for IBNR claims
who is an underwriter?
an insurance professional who determines risk acceptance or rejection on behalf of an insurance company.
if a risk is accepted, what do underwriters establish?
-the terms and conditions that must apply, and the amount of premium required. premium must be commensurate with the risk
what is a ‘loading’?
an additional charge included in an insurance rate to reflect a hazard not contemplated in the base rate for the class of risk
what is the subject of insurance?
who is being insured
what is the object of insurance?
what is being insured
a loss ratio is….
the relationship between incurred losses and earned premium over a specified period, expressed as a percentage. a loss ratio allows enough premium over and above any reported loss costs to cover the costs of acquiring the business and other operational expenses. also allows enough extra premium to allow a profit
underwriting profit is realized when…
the amount of earned premium exceeds claims payment and expenses
