CPCU 520 Study guides, Class notes & Summaries

Claims has two primary goals Complying with the contractual promise Supporting the insurer's financial goals 3 primary internal department users of claims information Marketing - claims satisfaction Underwriting - loss lessons learned Actuarial - loss reported and IBNR External interfaces with the Claims department Public - public image is largely determined by the claims department behavior Lawyers - hiring a lawyer does not necessarily mean a higher or faster settlement, since legal...

Strategic management process The process an organization uses to formulate and implement its business strategies Mission statement A broad expression of an entity's goals Three steps of a strategic management process Strategy formulation Strategy implementation Strategy evaluation SWOT analysis A method of evaluating the internal and external environments by assessing an organization's internal strengths and weaknesses and its external opportunities and threats Strategy formulati...

Goals of risk control activities Earn a profit Meet customer needs Comply with legal requirements Fulfill duty to society Primary goal of risk control evaluate loss exposures to assist with underwriting decisions and to help the insured prevent losses or reduce their effect Risk control activities help insurers reach profit goals by (6 items) Improve underwriting decisions Improve premium volume - turn marginal accounts into acceptable Encourage insured to improve risk control Reduce...

Proprietary insurer Insurer formed for the purpose of earning a profit for its owners Mutual Insurer An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them Reciprocal insurance exchange (interinsurance exchange) Insurer owned by its policyholders, formed as an unincorporated association for the purpose of providing insurance coverage to its members (called subscribers) and managed by an attorney-in-fact. Members agree to mut...

Policyholders' surplus Under statutory accounting principles an insurer's total admitted assets minus its total liabilities Capacity The amount of business an insurer is able to write, usually based on a comparison of the insurer's written premium to its policyholders' surplus Underwriting authority The scope of decisions that an underwriter can make without receiving approval from someone at a higher level Line underwriter Underwriting who is primarily responsible for implmeneting ...

Reinsurance The transfer of insurance risk from one insurer to another through a contractual agreement under which one insurer (the reinsurer) agrees, in return for a reinsurance premium to indemnify another insurer (the primary insurer) for some or all of the financial consequences of certain loss exposures covered by the primary's insurance policies. Primary insurer In reinsurance, the insurer that transfers or cedes all or part of the insurance risk it has assumed to another insurer in a ...

Sherman Anti Trust Act prohibits collusion to gain a monopoly. prevents insurers from banning together to control insurance rates Paul vs. Virginia legal decision that determined insurance was not interstate commerce and became the legal precedent for the exemption of insurance from federal regulation. Result of destructive competition Certain types of insurance become unavailable All states attempt to ensure that continuous auto insurance coverage is available to consumers by: Restrict...

Business Intelligence The skills, technologies, applications, and practices used to improve decision-making insights and reinforce information integrity Retention The percentage of policies in force that are renewed at the policy anniversary Internet of things A network of objects that transmit data to computers Underwriting The process of selecting insureds, pricing coverage, determining insurance policy terms and conditions and then monitoring the underwriting decisions made. Predi...

One of the functions of reinsurance is to increase large-line capacity. Which one of the following best describes this function from the perspective of a primary insurer? Select one: A. To withdraw from a market segment in a geographic area B. To assume a loss exposure with potential financial consequences that are higher than its financial condition would otherwise permit C. To limit liability for a single loss that occurs over more than one policy period D. To reduce the financial conse...

What is the primary goal of the claims function complying with the contractual promise to pay losses that are covered by the policy and supporting the insurer's financial goals What is the difference between a 1st party claim and a 3rd party claim? 1st party claims are made by the insured directly against the insurer. 3rd party claims are made indirectly by someone against the insured to whom the insured might be liable Describe how claims managers can help maintain an insurer's underwri...