AU 60 - Complete Set

What are some examples of adverse selection and how can commercial underwriters minimize the effects of it? 1.3 - answer-1. Business owners in areas prone to coastal storms purchase windstorm coverage or increase their limits only before hurricane season—when they expect severe losses. 2. A disproportionate percentage of business owners in an earthquake-prone zone purchase earthquake insurance, compared with other business owners. **Underwriters minimize the effects of adverse selection by carefully selecting applicants to insure, charging appropriate premiums for the accepted loss exposures, and monitoring applications and books of business for unusual patterns of policy growth or loss and making any needed adjustments. Book of Business 1.3 - answer-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. Underwriting 1.3 - answer-The process of selecting insureds, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decisions made. ** Underwriters are an insurer's guard against adverse selection Adverse Selection 1.3 - answer-In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance. Policyholders' Surplus 1.3 - answer-Under statutory accounting principles (SAP), an insurer's total admitted assets minus its total liabilities. Catastrophe Model 1.4 and 1.14 - answer-A type of computer program that estimates losses from future potential catastrophic events ** These models help insurers determine whether they are charging appropriate premiums for property exposures, have adequate surplus to handle claims from property losses, and should purchase reinsurance. Capacity 1.4 - answer-The amount of business an insurer is able to write, usually based on a comparison of the insurer's written premiums to its policyholders' surplus. Field/line underwriters vs. corporate underwriters 1.5 - answer-Underwriters in the field evaluate individual insurance applications and policy renewals and manage their own books of business. They are responsible for much of the day-to-day operation of the insurer's underwriting process and are, in many ways, the public face of the Underwriting Department. Meanwhile, underwriters at the corporate level make large-scale decisions about coverage, pricing, lines of business, and the overall risk selection process. They typically work with underwriters in the field and other departments to manage the insurance product. 6 things that field underwriters do 1.5-1.6 - answer-1. Select insureds 2. Ensure accurate classification and pricing 3. Recommend or provide coverage 4. Manage a book of business 5. Support producers and insureds 6. Support marketing objectives 9 things that corporate underwriters do 1.6-1.8 - answer-1. Research the market 2. Formulate UND policy 3. Revise UND guidelines 4. Research and develop coverage forms 5. Review rates 6. Educate and train 7. Arrange reinsurance 8. Assist others with complex accounts 9. Conduct UND audits Manuscript Policy (or manuscript endorsement) 1.8 - answer-An insurance policy that is specifically drafted according to terms negotiated between a specific insured (or group of insureds) and an insurer Big Data 1.9 - answer-Sets of data that are too large to be gathered and analyzed by traditional methods. Smart Product 1.9 - answer-An innovative item that uses sensors; wireless sensor networks; and data collection, transmission, and analysis to further enable the item to be faster, more useful, or otherwise improved. Internet of Things (IoT) 1.9 - answer-A network of objects that transmit data to each other and to central hubs through the internet. What are some sources of big data used by commercial underwriters? 1.9 - answer-1. Smart products 2. Internet of Things 3. Telematics devices 4. Insurer's own loss exposure & pricing data 5. Regulators 6. Government orgs 7. Industry associations 8. Agents & brokers 9. Third-party databases 10. Social media 11. Internet Artificial Intelligence (AI) 1.10 - answer-Computer processing or output that simulates human reasoning or knowledge - powered by machine learning and deep learning tech ** Helpful by automating simple tasks, assessing and recommending risk selection, predicting and processing claims, and detecting fraud Machine Learning 1.10 - answer-Artificial intelligence in which computers continually teach themselves to