LOMA 290 cheat sheet

Insurance Company Operations

• Core operating functions: product development, underwriting, ratemaking, marketing and distribution, policy issue and administration, claims, reinsurance, investments, and actuarial/regulatory compliance.

• Underwriting is risk selection and classification: the underwriter decides whether to accept, reject, or modify a risk and at what rate class, using information from the application, inspections, medical records, and third-party data.

• Field underwriting is performed by the agent/producer, who gathers information, reports observations, and forwards the application; the home office underwriter holds final acceptance authority.

• Ratemaking (actuarial) sets the price; underwriting selects and classifies the individual risk. Pricing must be adequate, not excessive, and not unfairly discriminatory.

• Claims handling steps: claim reporting and verification, coverage investigation, loss evaluation and reserving, negotiation/settlement or denial, and payment with subrogation pursuit where applicable.

• Reinsurance transfers part of the risk from the ceding insurer to the reinsurer: treaty reinsurance covers a class of business automatically; facultative reinsurance is negotiated per risk.

• Proportional reinsurance (quota share, surplus share) shares premiums and losses by agreed percentages or retention limits; nonproportional (excess of loss, stop loss) responds only above a retention.

• Insurers earn from underwriting results and investment income; cash-flow underwriting uses investment return to offset a combined ratio above 100.

• Regulatory compliance spans licensing, solvency monitoring (risk-based capital, reserves), market-conduct exams, rate/form filing, and consumer complaint handling.