Financial Analysis, Underwriting and Claims Handling
This domain links numbers to decisions: reading insurer results, selecting and rating risks, and handling claims to a defensible conclusion.
Financial analysis
Earned premium differs from written premium. Key ratios: loss ratio (incurred losses including IBNR over earned premium), expense ratio, combined ratio (above 100% means an underwriting loss covered by investment income), retention, liquidity and premium-to-surplus leverage. Admitted assets exclude items the IC will not count, such as unsecured reinsurance recoverables.
Underwriting
Selection and classification, rating factors, moral hazard signals, and using terms instead of price - deductibles, exclusions, warranties, limits - plus authority levels and referral where treaty capacity is exceeded.
Claims
Notify, issue a reservation-of-rights letter, investigate, appoint a licensed adjuster, obtain proof of loss, decide coverage, then settle or give a reasoned denial. Preserve subrogation, watch for fraud indicators, and meet turnaround commitments.
Worked example
Earned premium P100M, incurred losses P60M, underwriting expenses P35M. Loss ratio 60%, expense ratio 35%, combined ratio 95% - a 5% underwriting margin before investment income. If expenses were P45M the combined ratio would be 105%, an underwriting loss that investment income must absorb. This is why two insurers with identical loss ratios can report very different results.
Traps
- Mixing written and earned premium in a ratio.
- Omitting IBNR from incurred losses.
- Denying a claim without a reservation-of-rights letter.
- Settling before subrogation rights against the third party are secured.