Manifold Advisory

Underwriting means and includes: evaluation of insurability/helps in taking decision of acceptance or rejection of risk/it ensures the profitability of the company/deciding price, terms and conditions.

Purpose or object includes: determine the risk, classify the risk, do the pricing, decide terms/conditions and do everything on sound principles.

Underwriting helps companies to remain competitive, to remain solvent, helps insured to know the coverage etc, it helps agents and brokers to understand the needs of customers, it helps society as it recommends various safety measures and overall helps country for its economic development. Underwriting means selection, classification of rates, applying terms and conditions, retention if possible or otherwise go for reinsurance.

Types: fire, Marine, Misc, life and health, group, liability. WU- treatment means preferred, standard, non standard or decline risk.

rate making procedure: visualization of potential risk, identify loss exposure, forecast liability and severity of loss, underwriting decisions, decision on rates t & c , decision for retention or reinsurance, drafting policy.

Limits of acceptance, acceptance subject to controlling office approval, acceptance of extra hazardous risk, acceptance subject to underwriting safeguards. new business procedures (no previous experience) , underwriting of renewals.

factors considered for risk identification process: risk profile, risk structure and relationship, operational aspects, organizational charts and flow chart, event analysis ad Hazop study (hazard and operability). Financial statement analysis, contingency plans for dealing events, users internal and external to be interviewed.

perils of fire, lightning, explosion/implosion aircraft, riot strike & MD, STFI, Impact, Subsidence, Bursting, Leakage, missile operation, bush fire,

scrutiny of proposal:insureds details, risk details, type of cover, business details, physical properties, previous insurance, basis of indemnification.

objects of rating: stability, responsiveness, contingencies, incentives to insured.

types of rating: generic and individual.

business objectives of rate making: simplicity, stability and solvency, responsiveness and business growth, encourage for loss control measures.

basic approach to rate making: Pure premium method, loss ratio method. Pure premium is based upon exposure, does not require existing rates, gives indicating rates, whereas loss ratio method based on premium, requires existing rates, givens indicated loss ratio.

loss development method: triangle horizontal bar for development(claims development over a period of time) , right side triangel (positive sloped diagonal line represents the evaluation data) and vertical line downward on left side represents change in exposure level.

this method is used for projecting unpaid and unreported losses to their ultimate settlement values.

risk elements in the rate making: parameter risk and process risk, if parameters selected are wrong then rates may be short, Process means risk associated with the projection of future contingencies which are inherently variable.

individual rate system: prospective (use of past loss experience) and retrospective system where current or actual experience is taken into account.

types of rating-individual or merit and genric (class rating) Individual- schedule (loading discounts for good or bad features) , experience rating loading and discounts on five year base , exposure rating.

experience rating is again based on retrospective and prospective rating methods.

rate making process refers to the process of determining the rate that can be charged to an insurance company for providing insurance cover to policy holders.

liability * TP motor insurance three to 10 year experience is taken into account. on the other hand property insurance the settlement period is just 12 months.

File and Use guidelines/Use and file guidelines. class rated products follow internal guidelines or packaged or customized products

individual rating means schedule, experience or exposure rating method.