Chapter 5: Risk Control And Premium Auditing Flashcards
1
Q
Insurer Risk Control Goals
A
- Earn a profit
- Meet customer needs
- Comply with legal requirements
- Fulfill duty to society
2
Q
Earn a Profit
A
- Improve underwriting decisions
- Improve premium volume
- Encourage insureds to improve risk control
- Reduce insureds’ loss
- Provide and additional revenue source
- Reduce errors and omissions claims against the insurer
3
Q
Risk Control Services Provided by Insurers
A
- Conducting physical surveys
- Performing risk analysis and improvement
- Developing safety management programs
4
Q
Factors Affecting Risk Control Service Levels
A
- Line of insurance (may not be worth providing risk control services for simple personal insurance)
- Commercial insured size
- Types of loss exposure insured (more complex loss exposures may require more sophisticated risk control services, if insurer decides to offer)
- Potential legal liability
5
Q
Cooperation Between Risk Control and Other Insurer Functions
A
- Underwriting
- Marketing and sales
- Premium auditing
- Claims
- Producers
6
Q
Reasons for Premium Auditing
A
- To determine correct premiums
- To collect ratemaking data
- To meet regulatory requirements
- To deter and detect fraud
- To reinforce confidence of insureds
- To obtain additional information
Necessary since some insurance policies have adjustable premiums
7
Q
Premium Auditing Process
A
- Planning
- Reviewing operations
- Determining employment relationships
- Finding and evaluating books and records
- Auditing the books and records
- Analyzing and verifying premium-related data
- Reporting the findings
8
Q
Importance of Accurate Premium Audits for the Insurer
A
- Financial position
- Customer retention
- Goodwill
- Efficiency
- Collections
9
Q
Premium Auditing Contributions
A
- Underwriting
- Marketing and sales
- Claims
- Risk control
