Mccloskey topic 7 cards

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Mccloskey topic 7 cards
2014-12-10 20:39:11
Mccloskey final exam

mccloskey topic 7 cards
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  1. cherry picking
    The process of determining what you are willing to insure, at what price and under what conditions.
  2. When underwriting it is important to_________ the good risks and leave the bad risks for your competitors
    cherry pick
  3. What are the two types of underwriting authorities?
    • centralized
    • decentralized
  4. Centralized authority
    type of underwriting authority where decisions are made centrally by the insurer
  5. decentralized authority
    a type of underwriting authority that is made out in the field by a MGA or E&S suppliers
  6. When is a non-centralized authority typically used?
    in lines that have good data and are more commodity priced
  7. types of policies typically underwritten using a decentralized authority?
    simple policies like auto or home
  8. what are the steps in the Underwriting process(6)
    • Evaluate loss exposures
    • determine underwriting alternatives
    • select an alternative
    • determine appropriate premium
    • Implement underwriting decision
    • Monitor exposure
  9. 1st step in the underwriting process
    Evaluate loss exposures
  10. 2nd step in the underwriting process
    determine underwriting alternatives
  11. 6th step in the underwriting process
    Monitor exposure
  12. 3rd step in the underwriting process
    select an alternative
  13. 4th step in the underwriting process
    determine appropriate premium
  14. 5th step in the underwriting process
    Implement underwriting decision
  15. Trade off(when performing an evaluation)
    cost and time to get data vs. time to do an evaluation
  16. types of hazards(4)
    • physical
    • moral
    • morale
    • legal
  17. physical hazard
    People, location and operations that increase the chance of loss
  18. Ways to gather info when performing an evaluation
    • producers
    • applications
    • inspection reports
    • government records
    • financial rating services
    • loss data
  19. 3 options when underwriting
    • accept
    • reject
    • accept with modification(counteroffer)
  20. Ways to modify a policy(3)
    • change rates
    • change ratings
    • change policy limits
  21. experience rating
    Using past loss experience for future rates
  22. How many years are usually experience rated?
  23. When using experience rating a ______ is applied.
    credibility factor
  24. What type of firms is experience rating more applicable for?
    larger firms
  25. types of rating changes(2)
    • schedule rating
    • retrospective rating
  26. schedule rating(how does it work?)
    • base rate used as a starting point
    • it is then adjusted for debits and credits
  27. How is a schedule rating adjusted?
    for debits and credits
  28. How much can a schedule rating change a rate?
    20 to 30%
  29. retrospective rating
    A underwriting rate modification technique where premium is deposited during the beginning of the term and is based on final loss experience during the coverage period
  30. In retrospective rating, what are rates based on?
    final loss experience during the coverage period
  31. After final loss experience is calculated during the coverage period, what happens to rates in retrospective rating?
    they are adjusted up or down
  32. ________ is subject to a minimum and maximum set at policy inception
    retrospective rating
  33. What types of firms typically use retrospective rating?
    large firms with large exposures
  34. How might an underwriter change policy terms and conditions?(4)
    • By adding exclusions
    • covering a high risk applicant with with another insurer
    • add a larger deductible
    • require more loss control
  35. Under what circumstances might an underwriter may be able to cover a high risk applicant with another insurer?
    The insurer may have multiple companies that are set up for standard risks, preferred risks, and sub-standard risks
  36. What things must be considered by an underwriter when making a decision whether or not to accept an applicant?(5)
    • (if not)How high up a risk is needed for approval?
    • time delays
    • how important is the relationship with the producer?
    • supporting business(ex. write bad wc to write profitable property policy)
    • What is the current mix of business?
  37. What is an example of an underwriter supporting business?
    writing a bad wc of a client to write a profitable property policy
  38. What is the ideal mix of business?(territory and class)
    • territory- not too much in one area
    • class- not too much of a particular group
  39. What is the ideal mix of business?(Class)
    not too much of a particular group
  40. What is the ideal mix of business?(territory)
    Not too much in one area
  41. What is needed for a premium to be appropriate?
    The premium must be high enough to pay for losses, but low enough to remain competitive.
  42. Having a(n)____________ ensures that the risk is properly classified.
    appropriate premium
  43. What must be done to implement an underwriting decision?(3)
    communicate the decision, put it into effect, document process that led to decision for future policies, claims issues or underwriting audit
  44. What will an er look at if a bad loss occurs?
  45. desirability
    • little measurement error
    • low data collection cost
  46. Separation of age as a rating variable in auto?good or bad? why?
    it is good, especially for risky early driving years
  47. Homogeneity of age as a rating variable in auto?(good or bad and why)
    • lousy
    • Because insurers sub classify age categories by gender and marital status
  48. Why is homogeneity of age as a rating variable lousy in auto?
    Because insurers sub classify age categories by gender and marital status
  49. Why is of age as a rating variable in auto good for separation?
    • the driving risk changes as you get older
    • especially risky in early years
    • diminishes in mid twenties
    • returns in mid to late 50's
  50. Is age as a rating variable admissible?
    it is okay, except in clear cut cases of age discrimination
  51. Is there incentive value for age as a rating variable?
  52. Is age as a rating variable reliable?
    it is low cost and very easy to collect data and verify
  53. _____ are used to determine whether underwriting guidelines are being met.
    Underwriting audits
  54. two types of underwriters
    staff and line
  55. What do underwriting audits usually involve?
    they usually involve home office visiting field offices
  56. retention ratio
    Describes how much of the business is retained
  57. What does the retention ratio require?
    yearly review of relevant rates and relevant trends
  58. ______ requires a yearly review of renewal rates and relevant trends.
    retention ratio
  59. What is another term for the success ratio?
    hit ratio
  60. What does the success ratio measure?
    business written to business quoted