L
Leala
Member
In the solution for this description, it says it's where premiums are lower than they really should be, because the amount of risk wasnt really known fully when contract was written.
When I looked at the description of the underwriting cycle, I presumed a soft market was where premiums are intentially decreased since it's part of the underwriting cycle where competition is high? So in this case, the insurance company would know their premiums were too low for the risk they have taken on.
However, if I am incorrect on my thinking in the above paragraph (para.2), is the link between the above paragraph, and the correct interpretation in the April solution (para.1), that it is actually the fact they think they can afford these lower premiums (which they are lowering due to the competition) but only realise just how profitable they are when claim notifications happen.
Again, just need confirmation on whether/why my 2nd paragraph is incorrect above.
Thanks
When I looked at the description of the underwriting cycle, I presumed a soft market was where premiums are intentially decreased since it's part of the underwriting cycle where competition is high? So in this case, the insurance company would know their premiums were too low for the risk they have taken on.
However, if I am incorrect on my thinking in the above paragraph (para.2), is the link between the above paragraph, and the correct interpretation in the April solution (para.1), that it is actually the fact they think they can afford these lower premiums (which they are lowering due to the competition) but only realise just how profitable they are when claim notifications happen.
Again, just need confirmation on whether/why my 2nd paragraph is incorrect above.
Thanks