Chapter 8 Flashcards
(19 cards)
Applications
A request from the insurer to the insured for insurance.
Purpose of an application
Pull out material facts
Applicants must have utmost good faith.
Broker of Record
The broker who is going to receive commission for handling the policy.
Representation
A statement or conduct that is made to an insurer that will results in rejecting or accepting the application.
Disclosure
The process when all the questions are asked.
Oral and Written
Applications can be oral or written - either one.
Benefits of written application
Less errors
Better customer service
Documentation when law requires
Proof questions asked
Legal and privacy disclosures -PIPEA
Internet and the application process
Covid 19 changed the way we do business.
AI will also change - adding chat boxes
General questions asked during the application process
Named insured - who is the person/business who has insurance interest.
Policy term - effective and expiry date.
Subject of insurance - tangible or intangible. House, ring, auto.
Loss payee
Loss history - any claims
Prior Insurance - who did you have insurance with in the past.
Agent and broker
Signatures - depending on the line of insurance. Some don’t need to be signed.
Once there is an sig there is a declaration signed.
Ratemaking - actuaries at work
Actuaries, financial genius.
They find the rate
Rate
The rate is the price of a unit of insurance for one year.
Premium
The rate X the amount of insurance purchased. It is the total cost of an insurance policy or a portion of a policy.
Determine the Rate
The actuary determines the rate.
Classify the risks - look at hazards/exposures
Gather statistics on past losses
Calculate pure premium - just the amount to pay out the claim.
Determine total premium including loadings.
Calculate the rate or unit cost.
Loadings
Additions charges
Expenses, inflation, repair costs, accident trends, overhead
Statistics
Time period of a sample - look at previous years.
Size of a sample - not too big or too small
Conditions of past equal to the future
The problem of climate change
Makes it harder to determine a rate because of climate change.
More precipitation
Higher water levels
Wildfires
Permafrost
Melting ice caps - earth is warming
Frequency and severity for storms.
Underwriter - jack of all trades
Understand product knowledge of the product one sells.
Industry knowledge
Claims knowledge
Underwriters
Accept the Risk
Accept the risk subject to certain risks.
Reject the risk
