Steps in the Underwriting Process

Underwriter

An insurer employee who evaluates applicants for insurance, selects those that are acceptable to the insurer, prices coverage, and determines policy terms and conditions

Hazard

A condition that increases the frequency or severity of a loss

Counteroffer

A proposal an offeree makes to an offeror that varies in some material way from the original offer, resulting in rejection of the original offer and constituting a new offer

Treaty reinsurance

A reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer's individual loss exposures that fall within the treaty are automatically reinsured

Rating plan

A set of directions that specify criteria of the exposure base, the exposure unit, and rate per exposure unit to determine premiums for a particular line of insurance

Premium audit

Methodical examination of a policyholder's operations, records, and books of account to determine the actual exposure units and premium for insurance coverages already provided

Information efficiency

The balance that underwriters must maintain between the hazards presented by the account and the information needed to underwrite it

Mix of business

The distribution of individual policies that compose the book of business of a producer, territory, state, or region among the various lines and classifications

Loss costs

The portion of the rate that covers projected claim payments and loss adjusting expenses

Underwriting submission

Underwriting information for an initial application, or a substantive policy midterm or renewal change