Underwriting
Insurer weights potential health risk in its pool of people compare to potential loss of providing coverage
- allowed to ask pre-existing health questions (decide to accept, deny & cost)
Risk
Likelihood that an insured event will occur, requiring the payment of a claim (from insurer)
"possibility of a loss"
Peril: Cause of a loss
ex: fire
Hazard: condition that increases the odds of a loss
ex: fireplace or fire pit
"Due to chance"
potential of accidental loss, the loss must be the result of an unintended action & must be unexpected time & impact
Insurers only pay out these claims
Definiteness and Measurability
show definite proof of loss: bills, if cost can't be calculated or identified it's not insurable.
Statistically Predictable
like a game. How often a loss occurs & severity.
more frequent & higher severity have higher premiums
Not catastrophic "cat"
Not insurable.(exclusion)
Pure risk -
involves situations where the only outcome is loss, where there is no opportunity for gain.
Speculative risk -
happens when there is an uncertain potential for gains or losses. (hard to anticipate "exacts")
Risk Treatment
an action taken to manage risk (identify, assess, treat risk)
5 types of risk treatment:
- Avoidance: This is a choice to not take on the risk
- Reduction: Someone could mitigate certain actions, to reduce the risk
- Transfer: Someone could transfer the risk to another party
- Acceptance: Also known as risk retention, is the choice to face the risk
- Sharing: This is distributing the risk to multiple parties
Underwriting - policy renewal
- underwriting only done once.
Contract provisions & state Insurance laws prohibit raise in premiums once policy is in force.
Domestic Violence Victim
Can't deny coverage to person, refuse to renew their coverage, cancel coverage or charge them a different amount than others in their group for same coverage.