OC UW M4 Product Rating and Pricing LG
Sections:
How to Use This Guide
Icons
How You Will Learn
Overview of the Module
Introduction
Concept of Risk
Probability Basics
Principles of Rate Making
Components of a Premium Rate
Rating Methods
Short-term Insurance Underwriting
Various Types of Insurance (e.g. Fire, Theft, Business Interruption)
Life Insurance Rating
Coverage Types (e.g. Term Assurance, Whole Life)
Medical Schemes Underwriting and Rating
Research Methodology
Principles, Theories, and Data Collection
Glossary of Terms
Bibliography
Page 3: Further Module Breakdown
Sections outline the details of each type of underwriting, rating principles, and risk management concepts in insurance, focusing on the importance of understanding both short-term and long-term obligations in insurance policies.
Page 4: How to Use This Guide
Purpose: Resource for training and post-training reference.
Structure: Readings, activities, and application aids.
Encouragement of Participation: Take notes and share insights.
Icons & Their Meanings:
Assessment Outcomes, Group Assignment, Individual Activity, etc.
Page 5: Learning Methodology
Learning methods include facilitator presentations, readings, and group discussions.
Focus on risk acceptance by the insurer and the underwriter's role in the insurance process.
Page 6: Learning Unit 1 - Rating Factors
Learning Outcomes:
Identify relevant rating factors and underwriting criteria.
Calculate and explain risk ratings and their relationship to profitability.
Page 7: Introduction
Concept of Risk:
Risk: Potential variation in outcomes; can be positive or negative.
Types of Losses: Theft, physical damage, fire, deterioration, etc.
Risk in Life Insurance: Involves human behaviors and potential financial loss.
Probability Basics:
Definition & Calculation of Probability: Used in determining risks within insurance policies.
Page 8: Understanding Losses
Direct vs. Consequential Losses:
Direct Loss: Immediate impact (e.g. vehicle damage in an accident).
Consequential Loss: Secondary loss as a result of a primary loss (e.g. loss of income due to vehicle damage).
Page 9: Events in Probability
Mutual Exclusivity:
Definition: Outcomes that cannot occur simultaneously.
Calculating Probabilities:
Example: Assessing potential losses based on historical data and probabilities.
Page 10: Independent and Dependent Events
Definitions:
Independent Events: Occurrences do not impact each other.
Dependent Events: One occurrence influences another (e.g. fire spreading to adjacent buildings).
Page 11: Probability Calculations for Events
Methodology for determining the probability of events and their impact on risk assessment.
Page 12: Risk Assessment using Probability
Methods for analyzing risks based on varying probabilities of events occurring.
Page 13: Understanding Distribution and Risk Measures
Types of Data:
Discrete vs. Continuous Data
Types of Probability Distributions:
Bernoulli, Uniform, Binomial, Normal, Poisson, Exponential.
Page 14: Importance of Pooling Risk
Concept of Risk Pooling:
Essential for insurance to mitigate individual risk.
Page 15: Ratemaking Principles
Importance:
Ratemaking is crucial for insurance profitability, involving sophisticated calculations to determine appropriate premiums.
Page 16: Benefits of Underwriting
Insured vs. Insurer:
Continuous underwriting processes that improve lifestyle for insured while reducing risk for insurers; effective rating can lead to profitability.
Page 17: Principles of Rate Making
Rating manuals: essential for determining premiums and classification of risks.
Page 18: Rating Methods Overview
Types:
Judgement/Individual Rating
Class/Manual Rating
Experience Rating
Page 19: Examples of Judgement Rating
Reliance on underwriter's judgment based on risk factors.
Page 20: Class/Manual Rating Methods
Definition and Example:
Rating based on grouped risks (e.g. geographic or risk-related clusters).
Page 21: Understanding Pure Premium Method
Calculation Example for loss adjustment expenses and earning premiums.
Page 22: Components of a Premium Rate
Breakdown:
Pure premium + loading for different expenses.
Page 23: Rating Methods and Their Applications
Constructs:
Merit rating variations and their relevance.
Page 24: Introduction to Life Insurance Ratings
Key Concepts:
Considerations when rating life insurance risks based on clear guidelines and risk assessments.
Page 25 and onwards: Exploring Insurance Product-Specific Ratings
Short term insurance: Fire, Theft, Business Interruption, etc.
Life Insurance: Term, Whole Life, Endowments, Risk considerations.
Diverse coverage options are detailed alongside underwriting criteria pertaining to each.
Page 31: Learning Unit 2 - Insurance Products and Suppliers
Description:
Compare benefits, exclusions, and coverage provided by various suppliers.
Page 124: Closing Thoughts and Importance of Research in Insurance
Emphasizing the need for ongoing research and data collection for improved underwriting practices and product development.
Page 149: Glossary of Key Terms
A collection of terminologies relevant to insurance underwriting, risk assessment, and policy development.