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Unit_4_Insurance_Company_Operations_Students_Notes

Unit_4_Insurance_Company_Operations_Students_Notes -...

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UNIVERSITY OF TECHNOLOGY, JAMAICA FACULTY OF BUSINESS AND MANAGEMENT SCHOOL OF BUSINESS ADMINISTRATION INSURANCE UNIT4 - INSURANCE COMPANY OPERATIONS Objectives Explain the rate-making function of insurers Explain the steps in the underwriting process Describe the sales and marketing activities of insurers. Describe the steps in the process of settling a claim. Explain the reasons for reinsurance Explain the importance of insurance company investments. Rate making Rate making refers to the pricing of insurance Total premiums charged must be adequate for paying all claims and expenses during the policy period Rates and premiums are determined by an actuary , using the company’s past loss experience and industry statistics Underwriting Underwriting refers to the process of selecting, classifying, and pricing applicants for insurance The objective is to produce a profitable book of business A statement of underwriting policy establishes policies that are consistent with the company’s objectives, such as: Acceptable classes of business Amounts of insurance that can be written A line underwriter makes daily decisions concerning the acceptance or rejection of business
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Principles of Underwriting There are three important principles of underwriting: The underwriter must select prospective insureds according to the company’s underwriting standards Underwriting should achieve a proper balance within each rate classification In class underwriting , exposure units with similar loss-producing characteristics are grouped together and charged the same rate
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