> Do insurance policies get packaged and sold as financial products, or are they re-insured on the backend but continue to be held by the originator?
I've never seen this happen. Smaller carriers carry re-insurance since most smaller carriers are limited geographically and it's entirely possible a big-enough event would cause an issue where they couldn't pay out to cover all claims. State-based carriers (smaller farm mutuals, for instance) could be VERY susceptible to this.
In Texas after Hurricane Ike this caused a slew of changes to our underwriting guidelines along along the coast with rate changes and where we focused on recruiting agents and policies. (e.g. recruiting further north and west).
> Related, at what point of policy origination/reinsurance are standards audited and applied? where does that get noticed/rejected?
A lot of policies are bound for 30 days initially and then can be cancelled if the underwriting guidelines fail for the policy. Some companies may not even bind coverage until after underwriting is completed. As an agent if you sell a policy that isn't priced correctly, MOST of the time it gets caught by underwriting. They have ranges of limits that you can go between. For instance, normally contents coverage on a house can be some percentage of the insurance home value (let's say 40% to 120%). Let's say your house is insured for $250k... but you bought a $120k brand piano. Normal contents coverage might be 80% = $200k for your clothes, computers, electronics, kitchen stuff, etc, etc. That piano would require you to either 1) exceed 120% (which would require EXPLICIT underwriting approval) or you'd have to get a rider/endorsement for a special item. (which would likely also require more underwriting approval.)
I've never seen this happen. Smaller carriers carry re-insurance since most smaller carriers are limited geographically and it's entirely possible a big-enough event would cause an issue where they couldn't pay out to cover all claims. State-based carriers (smaller farm mutuals, for instance) could be VERY susceptible to this.
In Texas after Hurricane Ike this caused a slew of changes to our underwriting guidelines along along the coast with rate changes and where we focused on recruiting agents and policies. (e.g. recruiting further north and west).
> Related, at what point of policy origination/reinsurance are standards audited and applied? where does that get noticed/rejected?
A lot of policies are bound for 30 days initially and then can be cancelled if the underwriting guidelines fail for the policy. Some companies may not even bind coverage until after underwriting is completed. As an agent if you sell a policy that isn't priced correctly, MOST of the time it gets caught by underwriting. They have ranges of limits that you can go between. For instance, normally contents coverage on a house can be some percentage of the insurance home value (let's say 40% to 120%). Let's say your house is insured for $250k... but you bought a $120k brand piano. Normal contents coverage might be 80% = $200k for your clothes, computers, electronics, kitchen stuff, etc, etc. That piano would require you to either 1) exceed 120% (which would require EXPLICIT underwriting approval) or you'd have to get a rider/endorsement for a special item. (which would likely also require more underwriting approval.)