Section

Page

Section 1: Exposures, Premium, Losses, and Claims

6

Section 2: Loss Reserves and Loss Adjustment Expenses

8

Section 3: Underwriting Expenses, Insurance Company Profit, and the Fundamental Insurance Equation

10

Section 4: Ratemaking Principles, Frequency, Severity, and Pure Premium

12

Section 5: Average Premium, Loss Ratio, Loss Adjustment Expense Ratio, Underwriting Expense Ratio, and Operating Expense Ratio

15

Section 6: Combined Ratio, Retention Ratio, and Close Ratio

18

Section 7: Rules, Rates, and Rating Algorithms in Insurance Rating Manuals

21

Section 8: Underwriting Guidelines and Rating Manuals in Insurance

23

Section 9: Practice Problems and Solutions Pertaining to a Fictional Rating Manual for Homeowners' Insurance

26

Section 10: Practice Problems and Solutions Pertaining to a Fictional Rating Manual for Medical Malpractice Insurance

32

Section 11: Practice Problems and Solutions Pertaining to a Fictional Rating Manual for Workers' Compensation Insurance

39

Section 12: Moral Hazard Versus Morale Hazard in Insurance

44

Section 13: Ratemaking Data Types, Policy Databases, and Claims Databases

47

Section 14: Aggregation of Insurance Data

52

Section 15: Insurance Data Aggregation Methods and External Insurance Data

55

Section 16: Practice Questions and Solutions on the Use of Competitor Rate Filings and Third-Party Data by Insurance Companies and Criteria for Exposure Bases

59

Section 17: Exposure Bases, Methods of Aggregating Exposures, and In-Force Exposures

62

Section 18: Risk, Loss Exposures, and Hazards in Insurance

65

Section 19: Competition in Property and Casualty Insurance Markets

71

Section 20: Basic Supply and Demand and Some Factors Affecting Insurance Supply

76

Section 21: Considerations Regarding Insurance Markets and Pooling of Risk

79

Section 22: Functions and Properties of Risk Pooling and Insurance

84

Section 23: Characteristics of Ideally Insurable Loss Exposures

87

Section 24: Net Income Loss Exposures and Personal Loss Exposures

92

Section 25: Basic Legal Concepts Relevant to Insurance

95

Section 26: Intentional Torts, Strict Liability, and Remedies for Torts

99

Section 27: Distinguishing Characteristics of Insurance Policies

103

Section 28: Exchange of Unequal Amounts, Conditionality, and Restrictions on Transfer in Insurance

108

Section 29: Common Insurance Policy Provisions

111

Section 30: Aggregation of Written, Earned, and In-Force Exposures for Insurance Policies of Unequal Terms and the "15th of the Month" Rule

115

Section 31: Adjustments to Historical Premium and Written Premium Aggregation for Calendar Years and Policy Years

119

Section 32: Aggregation of Earned Premium and In-Force Premium by Calendar Year and Policy Year

123

Section 33: Adjusting Historical Premium to Current Rate Levels: The Extension of Exposures Method and an Introduction to the Parallelogram Method

127

Section 34: Application of the Parallelogram Method for Adjusting Historical Premium to Current Rate Levels

130

Section 35: Policy-Year Calculations Using the Parallelogram Method

134

Section 36: Calculations Using the Parallelogram Method when Some Rate Changes Are Applied to Already Written Insurance Policies

137

Section 37: Premium Trends, Exposure Trends, One-Step Trending, and Two-Step Trending

143

Section 38: Analyzing Loss Data by Calendar Year, Accident Year, and Policy Year

147

Section 39: Catastrophe and Excess Losses

154

Section 40: Changes in Insurer Losses Due to Reinsurance and Changes in Coverage or Benefit Levels

157

Section 41: Calculations Pertaining to Workers' Compensation Insurance Benefit Levels

160

Section 42: Analysis of Insurance Losses Using the Parallelogram Method and Age-to-Age Development Factors

164

Section 43: Loss Development, Age-to-Ultimate Development Factors, and Calculations of Loss Trends

168

Section 44: Calculations of Loss Trends in Insurance – Part 2

173

Section 45: Trends Pertaining to Total Limits Losses, Basic Limits Losses, and Excess Losses

175

Section 46: Comparisons of Various Types of Loss Trends in Insurance and Simple Methods of Estimating Unallocated Loss Adjustment Expenses

179

Section 47: Risk Management Steps, the Law of Large Numbers, Types of Insurers, and Insurance Functions

182

Section 48: Independent Agents and Brokers in Insurance

187

Section 49: Exclusive Agents, Direct Writers, Excess and Surplus Lines Brokers, Agency Premium Billing, and General Functions of Insurance Producers

191

Section 50: General Underwriting Purposes, Functions, and Information in Insurance

196

Section 51: General Insurance Underwriting Considerations and Procedures

202

Section 52: General Underwriting Purposes, Functions, and Information in Insurance – Part II

206

Section 53: Construction and Occupancy Considerations Pertaining to Fire Risk

210

Section 54: Occupancy Hazards, Fire Protection Classes, Fire Prevention, and Fire Detection

214

Section 55: Fire Sprinkler Systems and External Fire Loss Exposures

218

Section 56: Coinsurance Requirements for Property Insurance and the Fire, Lightning, Explosion, and Windstorm Causes of Loss

221

Section 57: Losses Due to Hail, Vandalism, Earthquakes, Water, and Other Perils

225

Section 58: Concepts Pertaining to Legal Liability and Commercial Liability Insurance

230

Section 59: Personal and Advertising Injury Loss Exposures, Premises Medical Payments Loss Exposures, Hold-Harmless Agreements, and Products Liability Loss Exposures

234

Section 60: Completed Operations Loss Exposures, Professional Liability Insurance, Personal Liability Insurance, and Laws Pertaining to Automobile Insurance

238

Section 61: Personal Automobile and Commercial Automobile Loss Exposures

242

Section 62: Underwriting Considerations Pertaining to Workers' Compensation Insurance

246

Section 63: Basics of Insurance Claims and Property Claim Adjusting

250

Section 64: Indirect Losses to Property, Verification of Property Losses, Intentional Property Losses, Replacement Cost, and Actual Cash Value

254

Section 65: Replacement Cost, Actual Cash Value, Depreciation, Agreed Amounts, Stated Amounts, and Policyholder Duties in the Event of Insured Losses

258

Section 66: Waiver, Estoppel, Reservations of Rights, Salvage, and Subrogation in Insurance Claims

261

Section 67: Basics of Liability Claim Adjusting

265

Section 68: Coverage, Investigation, and Defenses for Liability Insurance Claims

269

Section 69: Damages and Settlements in Liability Insurance Claims

273

Section 70: Negotiations, Settlements, and Litigation for Liability Insurance Claims

278

Section 71: Stages of a Lawsuit, Legal Expense Controls, and Alternative Dispute Resolution

283

Section 72: Treatment of Expenses in Ratemaking and the All Variable Expense Method

287

Section 73: The Premium-Based Projection Method and the Exposure-Based Projection Method for Expenses in Insurance Ratemaking

291

Section 74: Trending of Fixed Expenses, Reinsurance Costs, and Treatment of Profit in Insurance Ratemaking

296

Section 75: The Pure Premium Method and the Loss Ratio Method in Insurance Ratemaking

299

Section 76: Criteria for Selecting Underwriting and Rating Variables in Insurance

303

Section 77: The Pure Premium Approach for Determining Relativities Pertaining to Specific Insurance Rating Variables

308

Section 78: The Loss Ratio Approach for Determining Relativities Pertaining to Specific Insurance Rating Variables

312

Section 79: The Adjusted Pure Premium Approach for Determining Relativities Pertaining to Specific Insurance Rating Variables

316

Section 80: The Minimum Bias Procedure for Two Rating Variables and Two Categories Per Variable

320

Section 81: Multivariate Classification Ratemaking Methods and Basic Principles of Generalized Linear Models

326

Section 82: Basics of GLM Diagnostics, Validation, and Factor Analysis

330

Section 83: The Role of Data Mining Techniques and External Data in Enhancing Generalized Linear Models in Insurance

333

Section 84: Attributes of Territorial Ratemaking in Insurance

336

Section 85: Increased Limits Ratemaking for Single Limits with Uncensored Losses

340

Section 86: Increased Limits Ratemaking for Single Limits with Censored Losses

344

Section 87: Calculations of Increased Limit Factors Using Continuous Loss Distributions and Basic Calculations of Deductible Relativities and Loss Elimination Ratios

349

Section 88: Calculation of Loss Elimination Ratios Using Observed Data

352

Section 89: Calculations of Loss Elimination Ratios Using Continuous Loss Distributions and Considerations Pertaining to Expenses in Workers' Compensation Ratemaking

355

Section 90: Calculations Pertaining to Coinsurance Requirements and Penalties in Property Insurance

358

Section 91: Rate Calculations for Property Insurance and Considerations Pertaining to Insurance to Value

361

Section 92: Basics of Classical Credibility, Bühlmann Credibility, and Bayesian Analysis of Credibility

365

Section 93: Methods for Determining Complements of Credibility

369

Section 94: Methods for Finding Complements of Credibility: Harwayne's Method and the Use of Competitors' Rates

373

Section 95: Using Trended Present Rates in Finding the Complement of Credibility, Statistical Methods in Multivariate Classification Analysis, and the Challenges of Excess Insurance Ratemaking

378

Section 96: Finding Complements of Credibility in Excess Insurance Ratemaking Using Increased Limit Factors, Lower Limits Analysis, and Limits Analysis

381

Section 97: The Method of Fitted Curves for Finding the Complement of Credibility in Excess Insurance Ratemaking and Cost-Benefit Analyses for Changes in Insurance Rating Structures

387

Section 98: Formulas for Competitive Comparisons and Measurements of Performance for Insurers

392

Section 99: Elements of a Personal Automobile Insurance Policy – Part 1

397

Section 100: Elements of a Personal Automobile Insurance Policy – Part 2

401

Section 101: Elements of a Personal Automobile Insurance Policy – Part 3

404

Section 102: Elements of a Personal Automobile Insurance Policy – Part 4

408

Section 103: Elements of a Personal Automobile Insurance Policy – Part 5

412

Section 104: Elements of a Personal Automobile Insurance Policy – Part 6

416

Section 105: Elements of Typical Homeowners' Insurance Policies – Part 1

420

Section 106: Elements of Typical Homeowners' Insurance Policies – Part 2

424

Section 107: Elements of Typical Homeowners' Insurance Policies – Part 3

428

Section 108: Elements of Typical Homeowners' Insurance Policies – Part 4

432

Section 109: Elements of Typical Homeowners' Insurance Policies – Part 5

436

Section 110: Elements of Typical Homeowners' Insurance Policies – Part 6

440

Section 111: Elements of Typical Homeowners' Insurance Policies – Part 7

444

Section 112: Insurance Non-Pricing Changes and Rating Changes Aimed at Achieving Rate Adequacy

448

Section 113: The Approximated Average Rate Differential Method of Establishing Base Rates for Insurance Rating Plans

451

Section 114: The Approximated Change in Rate Differential Method of Establishing Base Rates for Insurance Rating Plans

454

Section 115: Considerations Pertaining to Insurance Rate Dislocations, Rate Transitions, and New Rating Selections

460

Section 116: A Fictional Commercial Insurance Experience Rating Plan

464

Section 117: A Fictional Workers' Compensation Insurance Experience Rating Plan

467

Section 118: A Fictional Commercial Insurance Composite Rating Plan

470

Section 119: A Fictional Commercial Insurance Large Deductible Plan

473

Section 120: A Fictional Workers' Compensation Insurance Retrospective Rating Plan

476

Section 121: Occurrence-Based versus Claims-Made Insurance Policies

479

Section 122: Common Types of Commercial Insurance

484

Section 123: Common Elements and Additional Common Types of Commercial Insurance Policies

488

Section 124: Aspects of Typical Commercial Property Insurance Coverage Forms and Causes of Loss Forms

492

Section 125: Covered Perils and Exclusions Under Typical Commercial Property Insurance Causes of Loss Forms

495

Section 126: Elements of the "Special" Commercial Property Insurance Causes of Loss Form and Commercial General Liability Insurance

499

Section 127: Coverages and Exclusions of a Typical Commercial General Liability Insurance Policy

504

Section 128: Insureds and Limits of Commercial General Liability Insurance Policies

510

Section 129: Conditions of a Typical Commercial General Liability Insurance Policy

513

Section 130: Elements of Typical Claims-Made Commercial General Liability Insurance Policies, Certificates of Insurance, and Other Liability Coverage Forms

517

Section 131: Elements of Workers' Compensation Insurance

520

Section 132: Elements of Workers' Compensation Insurance – Part 2

524

Section 133: Elements of Employers' Liability Insurance

527

Section 134: Special Elements of Some Workers' Compensation Insurance Programs and Basics of Excess and Umbrella Liability Insurance

531

Section 135: Elements of Umbrella Liability Insurance

534

Section 136: Elements of Professional Liability Insurance and Management Liability Insurance

538

Section 137: Elements of Directors' and Officers' Liability Insurance, Employment Practices Liability Insurance, Employee Benefits Liability Insurance, and Fiduciary Liability Insurance

541

About Mr. Stolyarov

546