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RMIN 4000 Exam 2 Edmunds|84 Questions with Verified Solutions
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RMIN 4000 Exam 2 Edmunds|84 Questions with Verified Solutions
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RMIN 4000 Exam 2 Edmunds|84Questions with Verified Solutions
What is ratemaking? - -The pricing of insurance and the calculation of
insurance premiums
- Actuary - -a person who uses complex statistical methods and technology
to analyze loss and other data to determine rates and premiums
- Underwiter - -The process of selecting, classifying, and pricing applcants
for insurance.
- Who makes the decision to accept or deny an insurance application? - -
Underwriter
- What is an underwriting guide? - -States the company's underwriting
policy
- Underwriting Principles? - --Attain an underwriting profit
-Select prospective insureds according to the company's underwriting
standards
-Provide equity among the policyholders
- Possible underwriting decisions: - -Accept, reject, or modify the policy
- What is production? - -The sales and marketing activities of insurers.
- Agents/ brokers who sell insurance are often called producers
- What is expected of a broker/ agent? - -Professional, Lots of knowledge,
client first, ethical
- What is Claim Adjustment? - -The process of determining coverage, legal
liability and damages, and finally settling the claim
- What is a "First Party" Claim? - -A claim submitted by the insured to the
insurer.
- Ex: Fire, theft, hail, etc.
- What is a "Third Party" Claim? - -Claim submitted against a negligent
insured for bodily injury, physical damage, death, personal injury, etc.
- Insurer pays damages that were caused by their insured to the injured third
party
, - What can an agent do for settling claims? - -Settles only small first party
claims
- Staff Claims: Salaried Employee - -investigates a claim, determines the
amount of loss, issues payment
- Independent adjusters - -individual or organization that adjusts the claim
for a contracted fee (very common after catastrophes)
- Public Adjuster - -represents the insured and is paid a fee based on the
amount of the claim settlement
- Reinsurance - -an arrangement by which the primary insurer that initially
writes the insurance transfers to another insurer part or all of the potential
losses associated with such insurance
- Investments - -VERY IMPORTANT:
Insurance premiums are invested for the time period between the receipt of
the premium and the payment of a claim. Lowers the cost of insurance to
policy owners and offsetting an unfavorable underwriting experience
- What types of investments? - --State laws restrict the riskiness of the
portfolio
-Typically invested in "safe" investments, mostly bonds
-Life insurance is a long-term exposure so premiums can be invested in long-
term assets including real estate
-P&C is a short-term exposure (usually one year or less) so premiums are
invested in marketable securities such as high-quality bonds and stocks
- CHAPTER 6: - -.
- Ratemaking - -the pricing of insurance and the calculation of insurance
premiums
- What is LAE? - -Loss adjustment expenses
- Exposure units? - -the unit of measurement used in insurance pricing
- Gross Premium - -Gross Rate Multiplies by the # of exposure units
- Pure Premium Method - -Incurred Losses + LAE/ # of Exposure Units
- Loss Ratio Method - -(Incurred losses + LAE)/Earned premium
- Merit Rating - --Rates are adjusted upward or downward based on
experience
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