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admitted companies. Admitted insurance companies can insure any
insurable risk. Other insurance companies may be licensed to
write only on a surplus lines basis; i.e., they are allowed to
underwrite only risks that admitted companies in the State do not
or will not cover. Admitted insurance companies are required to
file annual reports on a calendar year basis with the appropriate
State insurance department in a form specified by the National
Association of Insurance Commissioners (NAIC).
A line of business refers to a group of insurance policies
involving similar risks. Some lines of business, such as
workers' compensation, can be written only by admitted carriers.
Marketing is the process of selling policies to insureds.
Underwriting is the selection and pricing of risks to be insured.
The pricing portion of the underwriting function is the process
of setting premiums in amounts that are expected to be sufficient
to cover insured losses and the expenses of adjusting claims, and
the costs of operating the company and any planned underwriting
profit. State regulatory agencies limit the premiums that may be
written by insurance companies to amounts that are prudent in
light of the companies' capitalization. Premiums are usually set
by trained underwriters or actuaries, who may be employees or
outside consultants. For certain lines of insurance, such as
workers' compensation, rates are set by law on the basis of
statistical information compiled by rating bureaus, with only
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Last modified: May 25, 2011