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The Principles of Underwriting
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Flashcards
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Risk Assessment
The process of determining the level of risk associated with an applicant or entity.
Moral Hazard
The tendency of a person to take more risks because they are insured, thus affecting the likelihood of a claim.
Mortality Table
A statistical table showing the rate of death at each age in terms of the number of deaths per thousand.
Underwriting Profit
The difference between the premiums earned and the expenses and claims paid out.
Adverse Selection
A situation where the insurer is faced with the probability of loss due to risk not factored in at the time of sale.
Premium
The amount of money charged by an insurer to provide coverage under a policy for a certain period of time.
Exclusion
A policy provision that eliminates coverage for certain risks, people, property classes, or locations.
Deductible
The amount that a policyholder must pay out of pocket before the insurer pays a claim.
Underwriter
A professional who evaluates and analyzes the risks involved in insuring people or assets and establishes appropriate premium and coverage amounts.
Actuary
A financial expert who applies statistical and mathematical methods to assess risk in the insurance and finance industries.
Limit of Liability
The maximum amount an insurer will pay for a covered loss.
Reinsurance
The practice where an insurer transfers a portion of the potential financial risk to another insurer to lower the chance of paying a large obligation resulting from an insurance claim.
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