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Chapter Five :check: - Coggle Diagram
Chapter Five :check:
Basic :check: Company Functions :
A. Ratemaking
B. Underwriting
C. Production
D. Claim Settlement
E. Reinsurance
F. Investments
G. Accounting
H. Legal Function
I. Loss Control Services
J. Information Technology
3.Underwriting : :forbidden:
Refers to the process of selecting and classifying applicants for insurance
Underwriting Policy
importance of a clear statement of underwriting policy
Underwriting policy followed spelled out in the underwriting guide
Basic Underwriting Principles
Seeking an underwriting profit
Providing equity among policyholders
Steps in Underwriting
Agent as the first underwriter
sources of underwriting information
a. Application
b. Agent’s report
c. Inspection report
d. Physical inspection
e. Attending physician’s report and physical examination
f. Medical Information Bureau (MIB) report
Making an underwriting decision
Other Underwriting Considerations
Rate adequacy
Reinsurance and underwriting
Renewal underwriting
6.Reinsurance : :recycle:
Key Definitions
Reinsurance—primary insurer transfers to the reinsurer part or all of the potential losses associated with such insurance
Ceding company—insurer that initially writes the business
Reinsurer—firm that accepts insurance from the ceding insurer
Net retention—the amount of insurance kept by the ceding company
Retrocession—reinsurer obtains reinsurance
Reasons for Reinsurance
To increase underwriting capacity
To stabilize profits
To reduce drain on surplus because of the unearned premium reserve
To protect against a catastrophic loss
Types of Reinsurance
Facultative reinsurance
Treaty reinsurance
Advantages
Types of automatic treaties
(1) Quota share
(2) Surplus share
(3) Excess of loss
(4) Reinsurance pool
Alternatives to Traditional Reinsurance
securitization of risk
Catastrophe bonds
8.Other :star: Insurance Company Functions
Information Systems
Accounting
Internal controls
Preparation of reports to management
Preparation of tax returns
Preparation of financial statements for review by regulators
Legal Function
Loss Control Services
4.Production :warning:
A. General Nature
B. Agency Department
C. Professionalism in Selling
The professional’s approach
Professional designations—Chartered Life Underwriter (CLU), Chartered Property Casualty Underwriter (CPCU), Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), Certified Insurance Counselor (CIC)
5.Claims Settlement :check:
Basic Objectives
Verification that a covered loss has occurred
Fair and prompt payment of claims
Providing personal assistance to the insured
Types of Claims Adjustors
Agent—usually authorized to handle small first-party claims
Company adjustor—salaried employee of the company who handles the investigation negotiation, and payment of both first- and third-party claims
independent adjustor—often used when a catastrophic loss produces a large number of claims in a geographical area; also used in areas where a company does not have enough volume to warrant setting up an office and also where special technical skills are needed
Public adjustor—represents the insured
Steps in Settlement of a Claim
Notice of loss to the company
Investigation of the claim
Filing a proof of loss
Decision concerning payment
2.Rate Making :no_entry:
How Insurance Pricing Differs from Pricing of Other Products
Activities of Actuaries
.7.Investments :no_entry:
Life Insurance Investments
Primary objective is safety of principal.
Yield is also important because it lowers the cost of life insurance.
Investments have considerable economic and social impact on the economy.
Property and Casualty Insurance Investments
Liquidity is more important than in life insurance because the contract is for a shorter period of time and claims are settled quickly.
nvestment income is important because it can offset any unfavorable underwriting results.