Busy. Please wait.
Log in with Clever

show password
Forgot Password?

Don't have an account?  Sign up 
Sign up using Clever

Username is available taken
show password

Make sure to remember your password. If you forget it there is no way for StudyStack to send you a reset link. You would need to create a new account.
Your email address is only used to allow you to reset your password. See our Privacy Policy and Terms of Service.

Already a StudyStack user? Log In

Reset Password
Enter the associated with your account, and we'll email you a link to reset your password.
Didn't know it?
click below
Knew it?
click below
Don't Know
Remaining cards (0)
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.

  Normal Size     Small Size show me how

CPCU 520 Chapter 4

CPCU 520 Chapter 4 The Underwriting Function

Line underwriter primarily responsible for implementing the steps in the underwriting process
Staff underwriter assists underwriting management with making and implementing underwriting policy
Policyholders' surplus an insurer's assets minus its liabilities, which represent its net worth
Underwriting policy (philosophy) a guide to individual and aggregate policy selection that supports an insurer's mission statement
Prospective loss costs loss data that are modified by loss development, trending and credibility processes, but without considerations for profit and expenses
Trending a statistical technique for analyzing environmental changes and projecting such changes into the future.
Premium-to-surplus ratio, or capacity ratio a capacity ratio that indicates an insurer’s financial strength by relating net written premiums to policyholders’ surplus. Too high when it exceeds 300% or 3 to 1
Statutory Accounting Principles (SAP) the accounting principles and practices that are prescribed or permitted by an insurer’s domiciliary state and that insurers must follow.
Return on Equity (ROE) a profitability ratio expressed as a percentage by dividing a company’s net income by its net worth (book value.) Depending on the context, net worth is sometimes called shareholders’ equity, owners’ equity, or policyholders’ surplus
Market Conduct Examination an analysis of an insurer’s practices in four operational areas: sales and advertising, underwriting, ratemaking, and claims handling.
Predictive modeling a process in which historical data based on behaviors and events is blended with multiple variables and used for construct models of anticipated future outcomes
Information efficiency the balance that underwriters must maintain between the hazards presented by the account and the information needed to underwrite it
Premium audit methodical examination of a policyholder’s operations, records and books of account to determine the actual exposure units and premium for insurance coverage already provided
Underwriting audit income an insurer earns from premiums paid by policyholders minus incurred losses and underwriting expenses
Rating plan a set of directions that specify criteria of the exposure base, the exposure unit and rate per exposure unit to determine premiums for a particular line of insurance
Retrospective rating a ratemaking technique that adjusts the insured’s premium for the current policy period based on the insured’s loss experience during the current period; paid losses or incurred losses may be used to determine loss experience
Facultative reinsurance reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer, and the reinsurer can accept or reject any loss exposures submitted
Treaty reinsurance a reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer’s individual loss exposures that fall within the treaty are automatically reinsured
Account underwriting a method of underwriting in which all of the business from a particular applicant is evaluated as a whole
Loss costs the portion of the rate that covers projected claim payments and loss adjusting expenses
Combined ratio a profitability ratio that indicates whether an insurer has made an underwriting loss or gain
Production underwriting performing underwriting functions in an insurer’s office as well as traveling to visit and maintain rapport with agents and sometimes clients
Hit ratio the ratio of insurance policies written to those that have been quoted to applications for insurance
Line underwriter activities selecting insureds, classifying and pricing accounts, recommending or providing coverage, managing book of business, supporting producers and customers, and coordinating with marketing efforts
Staff underwriter activities performing market research, formulating underwriting policy, revising underwriting guidelines, evaluating loss experience, researching/developing forms, reviewing & revising pricing plans, assisting on complex accounts, conducting underwriting audits
Constraints in establishing underwriting policy Financial capacity, regulation, personnel and reinsurance
Activities to help realize maximization of Return on Equity setting return thresholds, redirecting focus on target business classes, adjusting underwriting policy based on jurisdiction
Ways regulation affects underwriting policy licensed to write in each state they write insurance; rates, rules & forms must be filed with state regulators; underwriting guidelines may be filed; and if consumer groups believe certain areas not served, regulators can require coverage to be extended
Purpose of underwriting audits monitor adherence to practices/procedures; achieve uniformity and consistency; monitor statistics for books of business; provides staff underwriters with info on effectiveness of u/w guidelines
Steps in the underwriting process evaluate the submission; develop underwriting alternatives; select an underwriting alternative; determine appropriate premium; implement the decision; monitor underwriting decisions
Underwriting performance standards selection; product or line of business mix; pricing; accommodated accounts; retention ratio; hit ratio; service to producers; premium to underwriter
Created by: CHahnCPCU
Popular Insurance sets




Use these flashcards to help memorize information. Look at the large card and try to recall what is on the other side. Then click the card to flip it. If you knew the answer, click the green Know box. Otherwise, click the red Don't know box.

When you've placed seven or more cards in the Don't know box, click "retry" to try those cards again.

If you've accidentally put the card in the wrong box, just click on the card to take it out of the box.

You can also use your keyboard to move the cards as follows:

If you are logged in to your account, this website will remember which cards you know and don't know so that they are in the same box the next time you log in.

When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out.

To see how well you know the information, try the Quiz or Test activity.

Pass complete!
"Know" box contains:
Time elapsed:
restart all cards