AIO cheat sheet

Underwriting is the risk-selection process that decides whether to accept a submission, at what terms, and at what price; it sits between marketing/distribution and policy issuance.

The policy lifecycle runs: submission → underwriting → rating/quote → bind → issuance → endorsements → renewal or cancellation; each handoff is a control point for data quality.

Premium is earned pro rata over the policy term; unearned premium reserve at time t = written premium × (remaining days ÷ term days) on a straight-line basis.

Loss ratio = incurred losses ÷ earned premium; expense ratio = underwriting expenses ÷ written premium; combined ratio = loss ratio + expense ratio, with under 100% indicating an underwriting profit.

Claims handling stages: FNOL (first notice of loss) → coverage verification → investigation → reserving → settlement or denial → subrogation and recovery; the claim file must document each step.

Case reserves are set per claim by the adjuster; IBNR (incurred but not reported) reserves are estimated actuarially for losses incurred but not yet reported or recorded.

Reinsurance cedes risk above a retention (per risk or per occurrence) or shares it pro rata; cessions reduce net premium and net loss but add a credit-risk exposure to the reinsurer.

Segregation of duties, audit trails, and documented authority limits (underwriting, claims, and payment approval) are the core internal controls in an insurer's operations.

Risk is uncertainty about outcomes; pure risk offers only loss or no loss (insurable), while speculative risk offers gain or loss (generally not insurable).

Risk-management treatment options: avoidance, reduction/loss prevention, retention (with or without funding), and transfer (insurance or non-insurance contracts).

Insurable risk characteristics: large number of similar exposure units, accidental and definite loss, measurable loss, no catastrophic concentration, and premium that is affordable.

Indemnity principle: insurance restores the insured to pre-loss financial position, subject to the limit; valued policies are the exception where a fixed sum is agreed.

Insurable interest must exist at inception for property/casualty and at the time of loss for life insurance; without it the contract is not enforceable.

Utmost good faith imposes disclosure duties on the applicant (material facts) and fair dealing on the insurer; breach can allow avoidance or rescission.

Subrogation transfers the insured's right to recover from a negligent third party to the insurer after paying the claim, preventing double recovery.

Coinsurance (property) is a contractual penalty mechanism: recovery = (limit ÷ required limit) × loss, capped at the policy limit, when the insured carries less than the required percentage.

Perils cause loss; hazards increase the chance or severity of loss (physical, moral, morale) and are underwritten separately from the peril itself.