Discussion 1. Describe how underwriting function can cooperate with marketing an
ID: 2658665 • Letter: D
Question
Discussion 1. Describe how underwriting function can cooperate with marketing and sales, producers, claims in achieving insurers’ goals. 2. Describe how underwriters could react to underwriting cycles. Discussion 1. Describe how underwriting function can cooperate with marketing and sales, producers, claims in achieving insurers’ goals. 2. Describe how underwriters could react to underwriting cycles. Discussion 1. Describe how underwriting function can cooperate with marketing and sales, producers, claims in achieving insurers’ goals. 2. Describe how underwriters could react to underwriting cycles.Explanation / Answer
ANSWER 1
Underwriting is a critically important function and is performed each time an insurance
application is taken. Its purpose is to determine if applications represent risks acceptable to the
insurer to determine whether or not the insurer will issue a policy to an applicant.
Many types of insurance are written on a group basis, and health insurance is often written in
this manner. Group insurance is handled somewhat differently than individual policies for
underwriting purposes. Generally in life and health insurance group programs, a rate is
established that applies to the entire group to be insured. This rate is established by analyzing
the characteristics of the group as a whole, as well as individuals within the group. This rate is
generally reviewed and revised on an annual basis.
Under some types of group underwriting, individual rates are assigned to individuals within the
group, but a discounted rate is applied because the individual is part of the group, so the
insurer’s marketing costs are reduced on a per coverage basis.
Underwriting involves examining application forms, supporting documents such as appraisals or
bills that verify the value of property, or medical reports that verify the health condition of an
individual, looking at insurance maps that provide information relevant to the statistical
possibility of certain types of loss, reviewing statistical data applicable to the risk to be insured,
reviewing company records regarding the application and evaluating site inspection reports.
Upon a thorough examination of all the data, underwriters then assign rates to the application,
or decline to issue a policy if it does not meet underwriting standards. During the entire
process, the underwriting department frequently communicates with agents, inspectors,
adjusters and other field personnel.
ANSWER 2
The underwriting cycle is the tendency of property and casualty insurance premiums, profits, and availability of coverage to rise and fall with some regularity over time. ... Stricter standards and higher premium rates lead to an increase in profits and accumulation of capital.
There are at least two popular descriptions of the underwriting cycle: one focuses on underwriting profitability, the other on
underwriting terms and conditions. They reflect the perspectives of the two major market participants. Insurers feel the pain
when underwriting losses surge; policyholders grimace when insurers raise premium rates and tighten underwriting
standards. The former occurs following the onset of the “soft” part of the market cycle, the latter when the market “hardens.”