Underwriting Flashcards

1
Q

What is an underwriters job?

A

To calculate premiums and ensure there is sufficient capital in the pool to pay claims.

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2
Q

What are underwriters responsible for in the design of a policy contract?

A

Knowing what’s included and not, dictating how you can behave through conditions.

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3
Q

What are underwriters responsible for?

A

Selection and classification

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4
Q

Classification

A

Assigning the insured a group to which they have the same risk profile and loss probability’s as the other members.

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5
Q

Pooling

A

The premium paid by each insured is sufficient to cover the risk they bring to the pool.

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6
Q

What are the principal’s insurance is based on?

A

Solidarity and equity

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7
Q

Describe the principle of solidarity

A

Everybody shares the cost and benefits of everybody else. The many compensate the few

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8
Q

How is solidarity maintained?

A

Discriminating people based on risk

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9
Q

Describe the principle of risk defined equity

A

The contribution is in line with the persons’ risk level

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10
Q

When assessing multiple risk factors, what must you consider?

A

How they relate and together they may be worse than their individual parts.

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11
Q

What are pools based on?

A

Risk profiles

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12
Q

What tools do underwriters use to assess risk

A

Morbidity tables, mortality tables

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13
Q

Mortality tables

A

Chance of death based on age

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14
Q

Morbidity tables

A

Chance of getting sick, accounts for recovery

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15
Q

What is the difference between equity and fairness

A

Fairness is subjective, equity is where everybody pays what is right

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16
Q

What are the consequences of social fairness aspersions

A

Not discriminating against certain groups that leads to higher premiums is unfair but it creates equity.

17
Q

How does adverse selection affect premiums?

A

You a higher risk but are paying less than you should for that risk

18
Q

What are the 2 forms of adverse selection?

A

Non-disclosure, misleading

19
Q

How do insurers protect against adverse selection?

A

Proposal form and laws that require you to disclose material facts.

20
Q

What can you ask for in underwriting

A

Age, Medical conditions, smoking, personal history, family history, occupation, Alcohol and drug use, hazardous spots AIDS risk, aviation, residence

21
Q

What can you not ask for in underwriting (4)

A

Sex, Race, Sexuality, genetic test results

22
Q

What are the 2 systems of underwriting?

A

Judgement and numerical

23
Q

When is the judgement method used?

A

When there is not sufficient data