p&c basics

What is the role of an arbitrator in an insurance dispute?

An arbitrator is responsible for resolving a claim settlement dispute between an insured and insurer.

What does the term credibility refer to in actuarial science?

Credibility describes the degree of accuracy in forecasting future events based on statistical reporting of past events.

What is earned premium?

Earned premium is the portion of premium paid in advance that now belongs to the insurer for providing coverage for a specified period of time.

How are exposure units used in insurance?

Exposure units are used as a measure of the rating units or the premium base of a risk.

Define the term homogeneity in the context of insurance.

Homogeneity refers to the degree to which items are similar.

What is the inception date of an insurance policy?

The inception date is the date at which the insurance policy goes into effect.

What does it mean when a policy is void?

A void policy is one that is cancelled or declared invalid.

What is the role of the ISO (Insurance Services Office)?

ISO reviews policy forms for compliance with minimum standards and makes recommendations as part of its regulatory authority.

What is the purpose of the American Association of Insurance Services (AAIS)?

AAIS develops standardized policy forms and rating information used by personal commercial and inland marine insurers.

What do independent rating services assess about an insurance company?

They assess the financial strength of an insurance company based on prior claims experience, investment earnings, levels of reserves, and management.

What is the function of the California Workers' Comp Inspection Rating Bureau (WCIRB)?

WCIRB provides statistics and rating information regarding workers compensation and collects and tabulates information to develop pure premium rates.

What does property insurance cover?

Property insurance covers losses to belongings, possessions, or assets in which the insured has a financial interest.

What is the difference between an accident and an occurrence in insurance?

An accident is a sudden and unexpected event, while an occurrence includes losses caused by continuous or repeated exposure to conditions.

What is the definition of loss in an insurance context?

Loss is the reduction, decrease, or disappearance of value of the person or property insured in a policy.

What are direct and indirect property losses?

Direct losses are damages covered by property insurance, while indirect losses are related to the direct loss and may require additional coverage.

What is the difference between named peril and open peril coverage?

Named peril coverage lists specific covered perils, while open peril coverage insures against all perils except those specifically excluded.

What is the expense ratio in insurance?

The expense ratio measures how much of the company’s funds are used for administrative and operational expenses.

Define cancellation in insurance terms.

Cancellation is the act of revoking or terminating an insurance policy.

What is the definition of short rate cancellation?

Short rate cancellation imposes a penalty on the refund of unearned premium if the insured cancels the policy prior to the renewal date.

What is the formula for calculating premium?

Premium is calculated as the rate multiplied by the number of units.

What are the two types of rates used in insurance?

The two types of rates are class rating and individual rating.

What is merit rating?

Merit rating is based on factors indicating the probability that loss will occur rather than on actual loss records.

Define the term subrogation in insurance.

Subrogation is the insurer’s legal right to seek damages from third parties after reimbursing the insured for a loss.

What is meant by loss reserve in insurance?

A loss reserve is an estimate of what will ultimately be paid out on a claim to the insured by the insurer.

What is the requirement for insurable interest in insurance?

Insurable interest must exist when the insurance takes effect and when the loss occurs, but need not exist in between.