RMI-4292 Chapter 4: Property Ch4 Textbook
11 Feb 2019
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If an insurer"s underwriting practices generate policy premiums that exceed losses and expenses, the policyholders" surplus will increase, thereby increasing capacity: enforcing underwriting guidelines. Constraints in establishing underwriting policy: financial capacity, refers to the relationship between premiums written and the size of the policyholders" surplus, which is an insurer"s net worth. Insurers want to maximize return on equity: regulation. Insurers must be licensed to write insurance in each state in which they write insurance: rates, rules, and forms must be filed with state regulators, some states specifically require underwriting guidelines to be filed. Implementing underwriting policy: purposes of underwriting guidelines. Steps in the underwriting process underwriting guidelines: evaluate the submission, develop underwriting alternatives, accepting a submission as is, rejecting the submission, or making a counter offer, select an underwriting alternative, determine an appropriate premium. Implement the underwriting decision: monitor underwriting decision.
