Assignment 5

Certificate of insurance

A brief description of insurance coverage prepared by an insurer or its agent and commonly used by policyholders to provide evidence of insurance.

insurance advisory organization

An independent corporation that works with and on behalf of insurers that purchase or subscribe to their services, which include developing prospective loss costs and standard policy forms.

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.

Machine learning

artificial intelligence in which computers continually teach themselves to make better decisions based on previous results and new data

trending

A statistical technique for analyzing environmental changes and projecting such changes into the future.

Catastrophe Model

A type of computer program that estimates losses from future potential catastrophic events.

individual rate, or specific rate

A type of insurance rate that reflects the unique characteristics of an insured or the insured's property.

Underwriting Guidelines (underwriting guide)

A written manual that communicates an insurer's underwriting policy and that specifies the attributes of an account that an insurer is willing to insure.

Adverse selection

in general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.

Staff underwriter

underwriter who assists underwriting management with making and implementing underwriting policy.

Judgment Rating

Rating used by underwriters to rate one of a kind risks.

Underwriting policy (underwriting philosophy)

A guide to individual and aggregate policy selection that supports an insurer's mission statement.

Predictive Modeling

A process in which historical data based on behaviors and events are blended with multiple variables and used to construct models of anticipated future outcomes.

Contingencies

A provision in an insurance rate for losses that could not be anticipated in the loss data.

Class rating

A rating approach that uses rates reflecting the average probability of loss for businesses within large groups of similar risks; the predominant method used for rating commercial properties.

Retrospective rating plan

A rating plan that adjusts the insured's premium for the current policy period based on the insured's loss experience during the current period; paid losses or incurred losses may be used to determine loss experience.

Experience Rating

A rating plan that adjusts the premium for the current policy period to recognize the loss experience of the insured organization during the past policy periods.

Schedule Rating

A rating plan that awards debits and credits based on specific categories, such as the care and condition of the premises or the training and selection of employees, to modify the final premium to reflect factors that the class rate does not include.

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.

Loss Run

A report detailing an insured's history of claims that have occurred over a specific period, valued as of a specific date.

Rate Manual

A resource for classifying accounts and developing premiums for given types of insurance; includes necessary rules, factors, and guidelines to apply those rates.

Loss exposure

Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs.

Prospective loss costs

Loss data that are modified by loss development, trending, and credibility processes, but without considerations for profit and expenses.

Facultative reinsurance

Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer, and the reinsurer can accept or reject any loss exposures submitted.

Predictive analytics

Statistical and analytical techniques used to develop models that predict future events or behaviors.

Information efficiency

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

Loss costs

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

Final Rate

The price per exposure unit determined by adjusting the prospective loss costs for expenses, profits, and contingencies.

Rate

The price per exposure unit for insurance coverage

ratemaking

The process insurers use to calculate insurance rates, which are a premium component.

Exposure unit (unit of exposure)

The unit of measure (for example, area, gross receipts, payroll) used to determine an insurance policy premium.

Line underwriter

Underwriter who is primarily responsible for implementing the steps in the underwriting process.

Hazard

a condition that increases the frequency or severity of a loss

Actuary

a person who uses mathematical methods to analyze insurance data for various purposes, such as to develop insurance rates or set claim reserves.

Underwriting Audit

a review of underwriting files to ensure that individual underwriters are adhering to underwriting guidelines.

Policyholders' surplus

an insurer's assets minus its liabilities, which represents its net worth

Loss Development

the increase or decrease of incurred losses over time.

Underwriting Authority

the scope of decisions that an underwriter can make without receiving approval from someone at a higher level