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
Expectations of investment return, mortality experience, and expenses used in projecting future cash values for life insurance and annuities. These projections cannot be part of the actual ...
Exchange of a new policy for one already in force. ...
Transfer of high severity risks through the insurance contract to protect against catastrophic occurrences. While insurance is generally not the most cost-effective means of recovery of ...
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Means of providing insurance protection for the property of a business that is not at a fixed location. ...
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Ratio of authorized control level risk-based capital of an insurance company to its total adjusted capital. This statistic determines regulatory action taken by the state's insurance ...
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