CAIB 2 Ch 2 - Sept 2024.pptx

CAIB 2: Chapter 2 Underwriting Commercial Property Insurance CAIB  CAIB 2 Section 1 The Role of the Broker in the Underwriting Process Introduction to the Underwr...

CAIB 2: Chapter 2 Underwriting Commercial Property Insurance CAIB  CAIB 2 Section 1 The Role of the Broker in the Underwriting Process Introduction to the Underwriting Process Role of Brokers as Importanc Brokers Expectatio First Line e of and ns and Underwrite Broker's Underwrite Challenges rs Judgment rs CAIB Understanding Submissions Definition of a Submission Application Components of a Verbal Information Submission Written Information (e.g., Loss History, Financial Statements) CAIB The Broker's Role in the Underwriting Process Monitoring and Reporting Suggestions for Product Key Duties of Brokers: Changes in Risk Changes Completion of Survey Search for Interested Insurer(s) Discuss Quotes and Select Insurer Request Binding Coverage Review Policy and Deliver to Client CAIB Completion of Survey Importance of Conducting a Survey Advantages: Identifying Loss Exposures Determining Needed Coverages Developing Underwriting Information CAIB Searching for Interested Insurer(s) Shopping the Risk Market the Risk to Multiple Insurers CAIB Meeting with Prospect 1 2 3 and Summarizing Quotes Discussing Advantages Persuading the Prospect Selecting and Disadvantage s Insurer CAIB Requesting Binding Coverage Binding Coverage Process Inspections by Insurer Requirements for Basic Information CAIB Reviewing the Policy and Delivering to Client Thorough Review of Policy Meeting with Client Discussing Coverage, Limitations, and Exclusions CAIB Building Construction Considerations Importance of Building Construction in Underwriting Five Classes of Building Construction: 1.Fire Resistive 2.Non-combustible 3.Heavy Timber 4.Ordinary 5.Frame CAIB Miscellaneous Building Information Age of Building Upgrading Information: Wiring, Heating, Over-current Protection, Roof, Plumbing. (W-H-O-R-P) Building Area CAIB Common Hazards in Buildings Key Factors: Heating Occupancy Protection Electrical Services Detachment H-O-P-E-D CAIB Special Hazards High-Risk Impact on Activities: Underwriting: Welding Additional Deep Frying Questionnaires Woodworking Potential Rate Increases CAIB Broker's Statement and Supplementary Information Importance of Supplementary Information Types of Supplementary Information: Physical Condition and Maintenance Business History and Financial Stability Loss History and Corrective Actions CAIB  The insurance contract: Insurer and Insured Understandin g the Broker as an intermediary Broker's Role in Insurance Applications Good faith requirement CAIB  AGENCY BROKER’S The Agency AGREEMENT OVERVIEW OBLIGATIONS UNDER THE AGENCY Agreement AGREEMENT and Broker Responsibiliti es IMPORTANCE OF TRANSPARENCY WITH THE INSURER CAIB  CAIB 2 Section 2 The Role of the Underwriter in the Underwriting Process Introduction to Underwriting Overview of Importance in Historical underwriting insurance background CAIB Types of Underwriting Departments SMALL LARGE NATIONAL COMMERCIAL COMMERCIAL ACCOUNTS ACCOUNTS ACCOUNTS CAIB Risk Selection Overview Definition and purpose Avoiding adverse selection Evaluating risk conditions CAIB Risk Classification Purpose of Impact on Examples of classification premium risk classes pricing CAIB  Factors affecting rates Soft market vs. hard Rating and market Rate-Making Rate adjustments CAIB Policyholders' Service Services provided Handling policy changes Specialized service departments CAIB Evaluation of Hazards Definition and importance Types of hazards Physical vs. moral vs. morale hazards CAIB Physical Hazards Building construction Occupancy Housekeeping External exposures Geography Protection CAIB Moral Hazards Definition and examples Financial condition Associates Moral character CAIB Morale Definition and examples Indifference to loss Hazards Poor management CAIB  Developing Additional Underwriting Information External sources Broker insights Government Financial rating Consumer of information records services investigation reports CAIB Introduction to Internal Sources Internal sources of information Importance in underwriting Overview of data types CAIB Loss Experience Data Definition and role Regional and national data Impact on risk assessment CAIB Inspection Reports Purpose and content Physical characteristics Applicant cooperation CAIB  Role and responsibilities Verification of Field information Representati ves On-site inspections CAIB Claims Information Accessing previous claims Reviewing claims history Impact on underwriting decision CAIB Production Records Impact of Definition and Accommodati supporting importance on business business CAIB Underwriting Guides and Manuals Purpose and use Contents of guides Consistency in risk selection CAIB Other Underwriters Sharing of information Insights on brokers Impact on underwriting decisions CAIB Making an Underwriting Decision Decision options Underwriters generally have four choices: 1.Accept the submission as presented. 2.Reject the risk. 3.Accept the risk with a rate increase. 4.Accept the risk with the same rate but increase the deductible. Factors influencing decisions Examples of extreme scenarios CAIB Challenges in Underwriting Incomplete information External factors Adjusting for unknown risks CAIB