IMch23 - CHAPTER 23 Functions and Organization of Insurers...

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CHAPTER 23 Functions and Organization of Insurers FUNCTIONS OF INSURERS Production (Sales) Underwriting The Objective of Underwriting Services That Aid the Underwriter Policy Writing Conflict between Production and Underwriting Underwriting Associations Rate Making Makeup of the Premium Interest Earnings Rate-Making Guidelines Adequacy of the Rate Fair Allocation of Cost Burden Rate-Making Methods Manual or Class Rating (Pure) Method Loss Ratio Method Individual, or Merit Rating, Method Combination Method Credibility The Credibility Formula Rate-Making Associations Managing Claims and Losses Investing and Financing Financing Accounting Miscellaneous Functions Legal Advice Marketing Research Engineering Services Personnel Management REINSURANCE Uses and Advantages of Reinsurance Enlarging Financial Capacity Stabilizing Profits Reducing the Unearned Premium Reserve Retiring from Underwriting Types of Reinsurance Agreements Facultative Reinsurance Automatic Treaty Pro-Rata Treaties Excess-of-Loss Treaties KEY TERMS AND CONCEPTS Accounting Actual loss ratio Actuaries Automatic treaty Ceding company Cession 1
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Claims management Class rating method Credibility Excess line treaty or first surplus treaty Excess-of-loss treaties Expected loss ratio Fair Claim Settlement laws Financing Formal facultative agreement Frequency/severity Gross premium Independent adjuster Individual method Informal facultative agreement Investment department Line Loading Loss ratio Manual method Merit rating method Nonstandard risks Policy writing Pools or syndicates Preferred risks Production Pro-rata treaties Public adjuster Pure premium Quota share treaties Rate making Rate-making associations Rating bureaus Reinsurance exchange Reinsurance pool Reinsurer Retention Retrocession Schedule rating Special rating classes Spread-of-loss treaty Surplus treaties Treaties ANSWERS TO QUESTIONS FOR REVIEW AND DISCUSSION 1. The justification is that no product of insurance exists until it is sold to the customer. Thus, the act of selling creates the product, and it is reasonable to call selling an act of production. 2. A rate is the price per unit, and the premium is the rate times the number of units purchased. 3.
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IMch23 - CHAPTER 23 Functions and Organization of Insurers...

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