Documente Academic
Documente Profesional
Documente Cultură
Purpose Of Underwriting
Underwriting has multiple purposes. The overarching purpose is to make profitable book of business for the insurer.
Book of Business: A group of policies with a common characteristic, such as territory or type
of coverage, or all policies written by a particular insurer or agency. To achieve profitability, the underwriting function serves additional purposes: a) Guarding against adverse selection b) Ensuring adequate policyholders surplus c) Enforcing underwriting guidelines
Capacity: The amount of business an insurer is able to write, usually based on a comparison
of the insurers written premium to its policyholders surplus.
Underwriting Authority: The scope of decisions that an underwriter can make without
receiving approval from someone at a higher level. Underwriting ensures that applicants accepted adhere to underwriting guidelines.
UNDERWRITNG ACTIVITIES
In insurance organization, underwriting responsibilities are delegated by members of senior management to line and staff underwriters.
Line Underwriter: Underwriter who is primarily responsible for implementing the steps in
the underwriting process. The focus of line underwriters is evaluating new submissions and performing renewal underwriting. Line underwriters work directly with insurance producers and applicants.
Staff Underwriters: Underwriter who is usually located in the home office and who assists
underwriting management with making and implementing underwriting policy. The focus of staff underwriters is managing the risk selection process. Staff underwriters work with line underwriters and coordinate decisions with other departments to manage the insurance product, pricing, and guidelines.
Line Underwriters
Select Insureds Classify and price accounts
Staff Underwriters
Research the market Formulate underwriting policy
Recommend or provide coverage Manage a book of business Support producers and insureds Coordinate with marketing efforts
Revise underwriting guidelines Evaluate loss experience Research and develop coverage forms Review and revise pricing plans Arrange treaty insurance Assist others with complex accounts Conduct underwriting audits Participate in industry associations Conduct education and training
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.
Loss Development: The increase or decrease of incurred losses over time. Treaty Insurance: A reinsurance agreement that covers an entire class or portfolio of loss
exposures and provides that the primary insurers individual loss exposures that fall within the treaty are automatically reinsured.