CAIB 2 - Chapter 2 - Flashcards

The process of evaluating and selecting risks for insurance where underwriters use various criteria to decide whether or not to insure a particular risk and at what price.

The application and all supporting documents that outline the risk characteristics to be insured. It provides the underwriter with the information needed to assess the risk and make a decision.

Categorizing risks into groups based on shared characteristics, which influences premium pricing and coverage. Risks with similar characteristics are grouped, allowing insurers to better estimate the likelihood of losses and set appropriate premiums.

The tendency of higher-risk individuals to seek insurance more than lower-risk individuals, which skews the insurance pool towards greater risk.

Factors related to the physical characteristics of a property or location that can increase the likelihood of a loss. These include building construction, occupancy, and external exposures.

Ethical behavior issues related to the risk that someone with insurance might behave less cautiously because they know they are covered. This can increase the likelihood of claims.

The process of determining the type of construction used for a building, which significantly impacts the level of risk. Categorized into classes like Fire Resistive, Non-combustible, etc., it helps underwriters assess the building's resistance to fire and other perils.

Historical claims data used to assess the risk associated with a particular insurance coverage. This data helps insurers determine the frequency and severity of past losses, which informs their pricing and underwriting decisions.

Verification of the physical characteristics of a property conducted to assess its condition and identify potential loss exposures. It requires applicant cooperation and is a crucial step in the underwriting process.

The process of gathering all necessary information about a risk, including coverage details and underwriting information. It helps ensure that the risk is accurately assessed and the appropriate coverage is provided.

The process of obtaining temporary coverage based on initial information received. This allows for a quick response to the applicant's needs, and the final underwriting decision is made after a detailed review.

An insurance market characterized by high premiums and limited availability of coverage due to a combination of factors, including increased losses, market instability, and risk aversion by insurers.

An insurance market characterized by lower premiums and wider availability of coverage. It's a favorable environment for buyers with increased competition among insurers.

The underwriter's decision regarding a submission, which can be to accept, modify, reject, or defer. The decision is based on an in-depth assessment of the risk, taking into account various factors.

The process of determining the appropriate premium for an insurance policy, taking into account the risk profile, coverage needs, and market conditions. Different pricing methods may be used based on risk assessment and market factors.

A set of guidelines and resources underwriters follow for making consistent risk selection and underwriting decisions. They help ensure fairness and transparency in the underwriting process.

Access to historical claims data, which is crucial for underwriters to analyze past losses and adjust premiums accordingly. It helps in measuring risk more accurately and ensures proper pricing for coverage.

Often needed by insurance companies to gain additional coverage that may not be available in the traditional insurance market. They provide specialists in placing difficult-to-insure risks.

Services provided by brokers to assist in ensuring that all potential coverage needs are addressed and to mitigate errors and omissions liability. These services help brokers provide comprehensive and effective placement for their clients' risks.

The characteristics of a building and its surroundings that contribute to the assessment of the risk. This includes factors like the development of the building, its distance to nearby buildings, and the presence of public services like fire stations.

Rating methods used by municipalities or insurance companies to classify risks based on their exposure and experience. This involves analyzing factors like proximity to rivers for flood risk or the frequency of claims in certain areas.

The process of grouping similar risks together based on their likelihood of loss. This allows insurers to calculate accurate premiums for each group.

The use of qualified personnel to conduct physical inspections of properties to assess their condition and identify potential loss exposures. This ensures that the risks are accurately evaluated and proper coverage is provided.

Internal services provided by insurance companies to advise on various aspects of the business, including investment returns, underwriting strategies, and market analysis.

A period of intense competition among insurers, leading to lower premiums and relaxed underwriting standards. This can create a favorable environment for buyers, but also increase the potential for risks for insurers.

A period of stricter underwriting standards and rising premiums, typically occurring after periods of heavy competition or increased losses. Insurers try to reduce their risk exposure during this time.

A condition or characteristic of a property or its surrounding environment that can contribute to the occurrence of a peril, leading to potential losses. This includes physical factors like building construction and external hazards, as well as moral hazards.

Geographical factors that can increase the risk of loss, such as restricted access to the property, which can hinder emergency response or make it difficult to prevent a loss. This can influence the underwriter's decision regarding premium pricing or acceptance of the risk.

Events that have the potential to cause widespread and significant losses, challenging for insurers due to their scale and potential impact. These events require special consideration in risk assessment and may prompt insurers to utilize risk mitigation strategies.

The tendency for people with insurance to engage in riskier behaviors or neglect preventative measures, knowing that they are insured. This can increase claim frequency and severity, presenting a challenge for insurers.