# Rating and Underwriting Glossary

> 27 terms from the Insurance book's Rating and Underwriting part, each defined in a line and linked to the chapter that explains it.

- **Adverse action (insurance):** under the FCRA, a denial or cancellation of, an increase in any charge for, or an unfavorable change in insurance in connection with underwriting; an initial rate can be one ([Consumer Reports & Third-Party Data](https://www.syntaqx.com/books/insurance/consumer-reports-and-third-party-data#the-fcra-for-insurers)).
- **Base rate:** the price per coverage and territory of the reference risk, before relativities ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#what-a-rate-manual-contains)).
- **C.L.U.E.:** LexisNexis's contributory auto and property claims history exchange, a consumer report ([Consumer Reports & Third-Party Data](https://www.syntaqx.com/books/insurance/consumer-reports-and-third-party-data#loss-history-exchanges)).
- **Credit-based insurance score:** a score built from credit report data to predict insurance losses rather than repayment, banned or restricted in some states and lines ([What You May Rate On](https://www.syntaqx.com/books/insurance/rating-factors-and-limits#credit-based-insurance-scores)).
- **Deductible factor:** the relativity applied to a base rate for a chosen deductible ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#what-a-rate-manual-contains)).
- **Extraordinary life circumstances:** events (catastrophe, serious illness, death in the family, divorce, identity theft, job loss, deployment) for which the NCOIL credit model requires reasonable exceptions to credit-based rating ([Consumer Reports & Third-Party Data](https://www.syntaqx.com/books/insurance/consumer-reports-and-third-party-data#disputes-re-rating-and-exceptions)).
- **Increased limits factor:** the relativity applied to a base rate for limits above the base limit ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#the-rating-algorithm-and-its-order)).
- **Inspection report (underwriting):** a property inspection used to accept or cancel a risk within the state's underwriting period ([Underwriting Rules, Referrals & Models](https://www.syntaqx.com/books/insurance/underwriting#inspections-and-underwriting-periods)).
- **Loss cost multiplier (LCM):** the factor an insurer files to turn an advisory organization's loss costs into its rates, built from its expense and profit provisions and, where allowed, its own loss experience ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#loss-costs-and-loss-cost-multipliers)).
- **Loss cost (prospective loss cost):** an advisory organization's filed expected loss and LAE per exposure unit, without expenses or profit ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#loss-costs-and-loss-cost-multipliers)).
- **Motor vehicle record (MVR):** a state's record of a driver's license status, violations and convictions, released to insurers under the DPPA ([Consumer Reports & Third-Party Data](https://www.syntaqx.com/books/insurance/consumer-reports-and-third-party-data#motor-vehicle-records)).
- **Neutral score rate:** the rate an applicant would have received without the credit score, the baseline for adverse action after Safeco v. Burr ([Consumer Reports & Third-Party Data](https://www.syntaqx.com/books/insurance/consumer-reports-and-third-party-data#adverse-action-after-safeco-v-burr)).
- **Pay-per-mile:** auto insurance priced as a base premium plus a filed rate per measured mile ([Telematics & Usage-Based Insurance](https://www.syntaqx.com/books/insurance/telematics#pay-per-mile)).
- **Permissible loss ratio:** 100% minus the expense and profit provisions, whose reciprocal is the expense multiplier ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#loss-costs-and-loss-cost-multipliers)).
- **Prefill:** populating a quote or application with drivers, vehicles or property attributes from a data vendor ([Consumer Reports & Third-Party Data](https://www.syntaqx.com/books/insurance/consumer-reports-and-third-party-data#prefill-and-property-data)).
- **Price optimization:** varying rates on factors other than risk of loss, such as willingness to pay, barred by bulletin in thirteen jurisdictions ([What You May Rate On](https://www.syntaqx.com/books/insurance/rating-factors-and-limits#price-optimization)).
- **Rating algorithm:** the filed order of lookups, multiplications, additions, minimums and rounding that turns rate tables into a premium ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#the-rating-algorithm-and-its-order)).
- **Rating worksheet:** every input, table version, factor and intermediate result of a rating, stored with the quote or transaction ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#how-to-build-it)).
- **Referral:** an underwriting issue that blocks a quote, bind or issue until someone with enough authority approves it ([Underwriting Rules, Referrals & Models](https://www.syntaqx.com/books/insurance/underwriting#authority-and-referrals)).
- **Relativity:** a multiplicative rating factor for a characteristic that differs from the reference risk ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#what-a-rate-manual-contains)).
- **Safe Driver Insurance Plan (SDIP):** North Carolina's driving record surcharge plan, assigning points to convictions and at-fault accidents with a percentage rate increase per point level ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#driving-record-surcharges)).
- **Telematics:** measuring driving behavior or mileage from a phone, plug-in device or connected car for rating ([Telematics & Usage-Based Insurance](https://www.syntaqx.com/books/insurance/telematics#from-sensor-to-rating-factor)).
- **Territory:** a geographic rating cell to which a garaging or property location is assigned by the filed rule ([How a Rate Is Built](https://www.syntaqx.com/books/insurance/how-a-rate-is-built#territories)).
- **Underwriting guidelines:** an insurer's written rules for which risks it accepts and on what terms, filed with the regulator in some states ([Underwriting Rules, Referrals & Models](https://www.syntaqx.com/books/insurance/underwriting#eligibility-and-underwriting-guidelines)).
- **Underwriting period:** the first days of a policy (often 60) in which state law lets an insurer cancel more freely, for instance after an inspection ([Underwriting Rules, Referrals & Models](https://www.syntaqx.com/books/insurance/underwriting#inspections-and-underwriting-periods)).
- **Unfair discrimination:** rating or underwriting distinctions not justified by expected loss or barred by law; with excessive and inadequate, one of the three rate standards ([What You May Rate On](https://www.syntaqx.com/books/insurance/rating-factors-and-limits#unfair-discrimination-testing)).
- **Usage-based insurance (UBI):** auto insurance priced in part on measured driving or mileage ([Telematics & Usage-Based Insurance](https://www.syntaqx.com/books/insurance/telematics#how-the-platforms-do-it)).

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