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Underwriting
The process of selecting insureds, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decisions made.
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Underwriter
An insurer employee who evaluates applicants for insurance, selects those that are acceptable to the insurer, prices coverage, and determines policy terms and conditions.
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Adverse selection
In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.
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Standard form
A preprinted insurance form developed by an insurance advisory organization.
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Individual rate, or specific rate
A type of insurance rate that reflects the unique characteristics of an insured or the insured's property.
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Class rate
A type of insurance rate that applies to all insureds in the same rating category or rating class.
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Manual rate
The rate found in a rating manual of a computerized rate table.
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Merit rating plan
A rating plan that modifies class rates to reflect loss characteristics of a particular insured.
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Judgement rate
A type of individual rate that is used to develop a premium for a unique exposure for which there is no established rate.
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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.
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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.
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Underwriting authority
The scope of decisions that an underwriter can make without receiving approval from someone at a higher level.
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Underwriting audit
A review of underwriting files to ensure that individual underwriters are adhering to underwriting guidelines.
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Hazard
A condition that increases the frequency or severity of a loss.
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Book of business
A group of policies with a common characteristics, such as territory or type of coverage, or all policies written by a particular insurer or agency.
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Portfolio
A group of policies with common characteristics, such as type of coverage or territory.
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Expert systems, or knowledge-based systems
Computer software programs that supplement the underwriter decision-making process. These systems ask for the information necessary to make an underwriting decision, ensuring that no information is overlooked.
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Moral hazard
A condition that increases the likehood that a person will intentionally cause or exaggerate a loss.
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