FIN 342 Lecture 8: FIN 342- Insurance Operations
Document Summary
Ratemaking: determining premium rates based on actuarial forecasts for risk classes. Underwriting: selection, risk classification, and pricing of applicants for insurance. Claim settlement/adjusting: loss verification and payment of claims. Reinsurance: transfer risk to other insurers. Several types, but mist are advance premium mutual in which the company cannot assess owners beyond the premium charged to them. Long-term game insurers, like life insurance, more beneficial to be mutual: don"t have to rely on ups and downs of stock market. Don"t have as much oversight from shareholders". Lloyd"s associations: syndicates of high net worth members who join together to pool risks. Famous for insuring odd risks; specialize in catastrophe, professional liability, reinsurance. Operate as a non-admitted insurer in most states: can only sell if there are no admitted insurers who can take the risk. Agency building system: general agent, either as independent contractor or employee, hires and trains new agents in an established territory in return for financial assistance from insurer.
