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Flashcards in cpcu 520 ch4 review notes Deck (34)
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1
Q

uw function purposes to achieve profit

A

guarding against adverse selection
ensuring adequate surplus
enforcing uw guidelines

2
Q

line underwriting responsibilities

A
select insureds
classify and price accts
recommend or provide covg
manage a book of business
support producers & customers
coordinate w/ marketing efforts
3
Q

production underwriter

A

blended responsibilities of special agents and line underwriters

4
Q

staff underwriting activities

A
research market
formulate uw policy/philosophy
revise UW guidelines
evaluate loss experience
research and develop coverage forms
review and revise pricing plans
Arrange treaty reinsurance
assist others w/ complex accts
conduct UW audits
participate in industry associations
conduct education/training
5
Q

factors constraining what UW policy can accomplish

A

financial capacity, regulation, personnel, reinsurance

6
Q

capacity

A

relationship btwn prem written and size of policyholder surplus (net worth)

7
Q

activities helping to realize maximization of return on equity

A

setting return thresholds
redirecting focus on target business classes
adjusting uw policy based on juristiction

8
Q

return on equity

A

measure of insurer profitability, relates net operating gain after taxes as percentage of prior year capital/surplus, stock insurers calcualte both SAP and GAPP, mutual insurers only SAP

9
Q

UW guideline purposes

A

Provide for structured decisions, ensure uniformity and consistency, syntheseize insights and experience, distinguish btwn routine and non-routine decisions, avoid duplication of efforts, ensure adherence to reinsurance treatires and planned rate levels, support policy prep and compliance, provide basis for predictive models

10
Q

routine decisions

A

line underwriter clearly has authority to make according to UW guidelines

11
Q

non-routine decisions

A

subs that fall outside uw’s authority

12
Q

Underwriting policy should support an insurer’s

A

mission

13
Q

Steps in UW process

A
Evaluate submission (weigh the need for info, gather the necessary info)
Develop UW alternatives
Select UW alternative
Determine appropriate premium
Implement UW decision
Monitor UW Decision
14
Q

Sources of UW info

A
Producers (more than any other)
applications
inspection reports
gov't records
financial rating services
loss data
15
Q

Production records

A

records on producers indicating loss ratio, prem volume, mix of busienss, etc

16
Q

major types of uw modifications

A

require risk control measures, change rates/rating plans/policy limits, amend policy terms/conditions, use faculative reinsurance

17
Q

consideration before selecting UW alternative

A

Underwriting authority, supporting business, mix of business, producer relationships, regulatory restrictions

18
Q

steps in implementing UW decisions

A

Communicate decision
Issue documents
record information

19
Q

Nonfinancial measures indicating insurer profitability

A

Selection, product or line of business mix, pricing, accomodated accounts, retention ratio, hit/success ratio, service to producers, premium to underwriter

20
Q

retention measurements

A

policy count, prem volume, or both

21
Q

high hit ratio inicates

A

competition easing, rates inadequate/lower than others, covg broader than others, uw has skill set for production uw, uw selction criteria deteriorating, good relationship btwn insurer/producer

22
Q

low hit ratio indications

A

competition increasing, rates higher than others, cog or forms too restrictive, uw does not have skill set for production uw, selection criteria too stringent, service poor, poor relationship btwn insurer/producer

23
Q

policyholder surplus

A

under SAP, insurer’s total admitted assets minus total liabilities

24
Q

capacity

A

total amt of busines insurer able to write, based on comparison of written prem to policyholder surplus

25
Q

prem to surplus ratio/capacity ratio

A

indicates insurer’s financial strength by relating net written prem to policholder surplus

26
Q

return on equity

A

prof ratio expresed as percentage by div net income by net worth (book value)

27
Q

market conduct exam

A

analysis of insurer practices in sales/advertising, uw, ratemaking, claim handling

28
Q

info efficiency

A

balance btwn hazards presented by acct and info needed to uw it

29
Q

a rate class

A

classes provided by ISO comm lines manual describing operations w/ unique characteristics or for which inadequate statistical experience exists

30
Q

estiamted loss potentials

A

rate development factors used for operations w/ unique characteristics or for which inadequate statistical exp exists. Multiplied by loss cost multipliers to develop rates

31
Q

unfair trade practices

A

methods of competition that tend to deprive public of info necessary to make informed decisions

32
Q

combined ratio

A

profitability ratio used to indicate whether insurer has made uw loss or gain

33
Q

production uw

A

performing uw functions in insurer office as wella s traveling to visit and maintain rapport w/ agents and clients

34
Q

hit ratio

A

ratio of ins polcies written to those quoted to applicants for ins