Risk Selection
Methods by which a home office underwriter chooses applicants that an insurer will accept. The underwriter's job is to spread the costs equitably among members of the group to be insured. Therefore, the underwriter must determine which are normal risks, or standard risks, to be charged the standard rate; which are substandard risks, to be charged a higher rate; and which are preferred risks, to receive a discount. This process is made more difficult by SELF-SELECTION and ADVERSE SELECTION. The underwriter must screen applicants who are looking for insurance, specifically because they have a greater-than-normal chance of loss, and set the correct PREMIUM rate for them.
Popular Insurance Terms
Return of a pro rata portion of an agent's commission for a policy that is canceled prior to its expiration date. A commission is paid to an agent in the expectation that the premium will ...
Approach in loss prevention placing emphasis on physical features of the workplace as a potential cause of injuries. For example, if a product is inherently dangerous in design or during ...
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Stipulation that every participant in health care has the right according to law to purchase health insurance from a private insurance entity. The participant's purchase is voluntary and ...
Life insurance rate determined by the valuation of company policy reserves. State regulators set strict standards for policy reserves to make certain that life insurers will have enough ...
Form that provides coverage for a business whose inventory has fluctuating values during the year. The amount of insurance coverage is adjusted monthly, quarterly, or annually to reflect ...
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