Chapter 2 -- The Insurance Industry Tools A B Stock Company Company owned by shareholders Domestic insurer Company licensedto do business in your state Alien insurer Company licensed in another country Mutual Company Company owned by its policyholders Foreign insurer Company licensed in another state Underwriting The selection, classification, and acceptance or rejection of a proposed insured. Underwriter Person who actually selects the applicants, prices coverage and determines policy terms. loss ratio Determined by dividing total losses by total premiums received. expense ratio Determined by dividing an insurer's total operating expenses by total premiums. rate The amount of dollars and cents charged for a particular amount of insurance. premium Total cost for the amount of insurance coverage purchased. Reinsurance Provides insurance potection to an insurance company should a loss occur. (Insurance company's insurer). McCarran-Ferguson Act Law that recognized that state regulation of insurance was in the public's best interest. insurer Any person or company engaged as the principal party in the business of entering into insurance contracts. broker Person who represents the insured rather than the insurance company.