Study 3 - Underwriting the Applicant Flashcards Preview

C120 Underwriting Essentials (2018) > Study 3 - Underwriting the Applicant > Flashcards

Flashcards in Study 3 - Underwriting the Applicant Deck (18)
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Define application

A request by an insured for insurance. Applications may be done verbally, in writing, or online. The insured provides information relating to the subject for insurance. The insurer then assess this information and decides whether to accept the risk for insurance and on the terms of such acceptance


What two parts does the underwriter analyze?

The subject and the object


What items of are interest to an underwriter in the typical application?

Applicant's name
Broker or agent
Applicant's phone contact numbers
Desired effective and expiry date
Applicant's occupation
Applicant's loss experience
Whether the applicant has been cancelled by any previous insurers
Whether the applicant qualifies for any premium discounts
Who signed the application and how it was signed


Define named insued

Person or party designated in the policy as the insured, as opposed to someone who may be covered by the policy but is not specifically insured


Define homeowners policy

A multi-peril insurance policy for dwelling risks, combining coverages for fire and extended coverages, including theft & liability


Define personal-lines insurance

Insurance for individuals and families, such as private passenger auto insurance and homeowners policies


Define business insurance

A broad name for different coverage available to a business owner to protect against losses and to insure the continuing operation of the business. Business insurance includes business property, life, accident and sickness including that for key employees, liability and fleet of automobile


Define additional insured

A person other than the named insured who is protected by the terms of the policy. Most automobile policies, for example, insure a specific individual as an insured but also insure anyone driving with that insured's consent. The additional insured may be "named" or "unnamed"


Define additional named insured

Any party other than the original named insureds, identified as an insured in the policy declarations, more rights & responsibilities than additional insured


What is a mortgage on personal property (not buildings) typically called?

Chattel mortgage


What can an underwriter discover when consulting a broker or agent?

- The source of the business and the proximity to the broker
- How the broker made contact with this risk
- What the broker's relationship is to the risk - to its principals or executives
- Whether the broker's relationship to the risk creates any conflict of interest
- Number of brokers who have handled the risk before the current broker submitted the application to the insurer for the applicant
- The extent of the application
- Whether the broker is submitting the entire risk or just the less attractive more difficult to insure aspects


Define back-dated policy

A policy that will become effective retroactively after the applicant applies for it


Why may it be a problem if an application is unsigned?

Privacy legislation requires that there must be a signed application for insurance to be obtained from the following:

- ISD (Insurance Services Division) or ICPB (Insurance Crime Prevention Bureau), part of IBC
- Government motor vehicle records (MVR)
- A credit reporter, such as Equifax or D&B


How may employment status affect a moral hazard?

Unemployed; may be unable to pay premium, might deliberately cause a loss

Self-employed; may be used to disguise a struggling or non existant business, or may be legitimate

Vague; ie. "businessperson" or "manager", more details would be required

Full time; if not very long, could be warning sign, job stability is something to review

Occupancy vs TIV


What is TIV?

Total Insurable Valuable


What are the two critical points about loss experience?

- Losses are not the same as claims
- The amount of the loss is less important than the circumstances of a loss


Who else may be insured on a homeowners policy?

Spouses, family members, people under the age of 21 or students away from home


Why is it important to know about the applicant's loss experience?

• The underwriter’s decision is an assessment of the likelihood that the insurer will suffer a
loss if the underwriter accepts the risk
• Past losses are important indicators of losses the applicant might incur in the future
• Past losses also provide a clearer picture of the object of insurance
• Past losses also reveals information about the applicant—about their attitude regarding
safety that may have allowed the loss to occur
• Most importantly, it may reveal the likelihood of similar losses happening in the future if
preventative measures are not taken