RMI Industry Review

property exposure

chance of your stuff getting damages

liability exposure

risk of being legally responsible for injuries or damages to someone else

risk manager (insured)

the buy

agent or broker (intemediary)

facilitates the purchase of insurance, advises insured, negotiates with insurer

underwriter (insurer/carrier)

the insurance company, provides insurance coverage

risk control techniques

• loss prevention/reduction

• duplication

• separation

• diversification

• avoidance

risk financing techniques

• retention

• transfer

• insurance

risk management process

1. identify

2. measure & analyze

3. select the appropriate technique

4. implement & monitor

agents

someone who legally represents the principal (insurance company) and has the auhtority to act on the principal’s behalf

independent agent

usually represents several unrelated insurers, the agent may find coverage that is better suited for the client since it is not limited to one carrier

exclusive/captive agent

represents only one insurer or group of insurers under common ownership

brokers

someone who legally represents the insured

admitted carrier

being approved by the state to carry out insurance in that region/area, rates are capped by the state

underwriting

process of selecting, classifying, and pricing applicants for insurance

combines ratio

(Losses + Expenses)/Premium

gross premium

gross rate x exposure units

adverse selection

the tendency of a person with a higher risk to seek insurance at standard rates, which results in higher than expected loss levels for the company

asymmetric information

when one party has information that is relevant to a transaction that the other party does not have, often causes adverse selection