Policy Transactions
Let’s turn our attention to the first row of the matrix by focusing on the transactions for creating and altering a policy. Assume the policy represents a set of coverages sold to the policyholder. Coverages can be considered the insurance company’s products. Homeowner coverages include fire, flood, theft, and personal liability; automobile coverages include comprehensive, collision damage, uninsured motorist, and personal liability. In a property and casualty insurance company, coverages apply to a specific covered item, such as a particular house or car. Both the coverage and covered item are carefully identified in the policy. A particular covered item usually has several coverages listed in the policy.
Agents sell policies to policyholders. Before the policy can be created, a pricing actuary determines the premium rate that will be charged given the specific coverages, covered items, and qualifications of the policyholder. An underwriter, who takes...