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
Same as term Fixed Dollar Annuity: annuity that guarantees that a specific sum of money will be paid in the future, usually as monthly income, to an annuitant. For example, a $1000-a-month ...
Statutory accounting principles (SAP), as listed in the insurance company's annual financial statements filed with the insurance commissioner of each state in which it is licensed. Income ...
Coverage for the expenses incurred by a business resulting from the recall of products, whether defective or not. ...
Measurement of the response of the cash flow of an insurance company to various interest rate scenarios; for example, how rising interest rates will affect the number of life insurance ...
Trust to which a donor transfers assets and that distributes income to finance a predetermined situation. After the trust expires, any remaining assets are donated to the qualified charity ...
Same as term: generally accepted accounting principles (GAAP): ...
Home office underwriter who evaluates risk based on probability, statistics, and medical knowledge. ...
State law that limits the admitted value of an insurance company's EDP equipment to 3% of the company's ADJUSTED SURPLUS. ...
Provision applied as a rider attached to an ordinary life insurance policy for the purpose of meeting estate planning requirements. When the insured dies, the beneficiary is entitled to ...
Have a question or comment?
We're here to help.