LOMA 290 flashcards
LOMA 290 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Underwriting
- The process of evaluating, selecting, and classifying risks to decide whether to accept an application and at what rate class, based on information in the application and supporting sources.
- Field underwriting
- Risk screening performed by the producer or agent, who collects application information, records observations about the applicant, and submits the case to the home office underwriter for final decision.
- Adverse selection
- The tendency of higher-than-average risks to seek or retain insurance more than lower risks, which can worsen the insurer's loss experience unless underwriting and pricing controls are applied.
- Ratemaking
- The actuarial process of determining premium levels for classes of insureds so that premiums are adequate, not excessive, and not unfairly discriminatory, while covering expected losses and expenses.
- Rate
- The price per unit of coverage charged to a given class of insureds; multiplying the rate by the number of exposure units produces the premium for an individual policy.
- Loss ratio
- Incurred losses divided by earned premium, expressed as a percentage; it measures the share of premium consumed by claims and is a core indicator of underwriting performance.
- Expense ratio
- Underwriting expenses divided by written premium, expressed as a percentage; it shows how much premium is used for operating costs such as commissions, salaries, and administration.
- Combined ratio
- The sum of the loss ratio and the expense ratio; a result below 100 indicates an underwriting profit, while a result above 100 indicates an underwriting loss.
- Claims settlement
- The process of verifying coverage, investigating the loss, estimating damages, reserving funds, and paying, negotiating, or denying the claim according to policy terms and applicable law.
- Claim reserve
- An amount set aside for a reported but unpaid claim, reflecting the insurer's estimate of the ultimate cost including defense and adjustment expenses.
- Subrogation
- The insurer's right, after paying a covered loss, to pursue recovery from the party legally responsible for the loss, standing in the insured's legal position.
- Reinsurance
- An arrangement in which an insurer (the ceding company) transfers part of its risk and premium to another insurer (the reinsurer) in exchange for a share of losses.
- Treaty reinsurance
- A standing agreement under which the reinsurer automatically accepts all risks within a defined class that meet the treaty's terms, without case-by-case negotiation.
- Facultative reinsurance
- Reinsurance negotiated separately for an individual risk; the ceding insurer and the reinsurer each may accept or decline the specific risk offered.
- Quota share reinsurance
- A proportional treaty in which the ceding insurer and reinsurer share every covered loss and premium in a fixed percentage, such as 70 percent retained and 30 percent ceded.
- Surplus share reinsurance
- A proportional treaty in which the ceding insurer retains a stated amount per risk and cedes the excess portion up to a limit, with premium shared in the same proportion.
- Excess of loss reinsurance
- A nonproportional arrangement in which the reinsurer pays losses above a stated retention, up to a limit, for each risk or each loss occurrence.
- Retention
- The amount of risk or loss an insurer keeps for its own account before reinsurance responds; it defines the point at which ceded coverage begins.
- Ceding commission
- An allowance paid by the reinsurer to the ceding insurer to cover acquisition and administrative expenses on ceded business, often a percentage of ceded premium.
- Policy issue and administration
- The operational function that converts an approved application into an issued policy and maintains records, billing, endorsements, renewals, and correspondence throughout the policy term.
- Product development
- The function that designs new or revised coverage, sets policy provisions and pricing targets, tests market demand, and obtains required regulatory approval before launch.
- Distribution system
- The channel through which insurance is sold, such as career agents, independent brokers, direct response, banks, or digital platforms, each with different cost and control profiles.
- Separate account
- An insurer account holding assets that support variable products, where investment risk is borne by the contract owner rather than the insurer's general account.
- General account
- The insurer's main asset pool backing fixed obligations such as traditional life reserves and annuities, where the insurer bears the investment risk.
- Risk-based capital
- A regulatory solvency measure that compares an insurer's actual capital to the minimum required for its risk profile, including asset, underwriting, and business risks.
- Market conduct examination
- A regulatory review of an insurer's sales, advertising, underwriting, and claims practices to assess compliance with consumer protection laws and fair treatment standards.
- Actuarial reserve
- A liability recorded for future policy obligations, calculated from assumptions about mortality, morbidity, interest, expenses, and lapse to ensure funds exist for promised benefits.
- Premium audit
- A review, common in commercial lines, that verifies exposure units such as payroll or sales reported by the insured so that the final premium reflects actual exposure.
- Underwriting authority
- The defined limits within which an underwriter or producer may accept risks, bind coverage, or approve rate modifications, granted by the insurer's management.
- Cash-flow underwriting
- A pricing approach in which an insurer accepts a combined ratio above 100 because investment income on premiums is expected to offset the underwriting loss.
- Unearned premium reserve
- A liability representing the portion of written premium that applies to the unexpired part of the policy term and has not yet been earned by the insurer.
- Loss adjustment expense
- Costs incurred in investigating, defending, and settling claims, such as adjuster fees and legal defense, which are tracked separately from paid losses.