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Insurance & Social Security > 08. General Insurance > Flashcards

08. General Insurance Flashcards

1
Q
  1. What are the laws that govern general insurance purchased by consumers?
A
  • The Insurance Contracts Act 1984
  • The Corporations Act
  • The Trade Practices Act 1974
  • Financial Services Reform Act 2001
  • The Common Law
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2
Q
  1. The other guidance for general insurers are the code of practice. What type of insurance is not covered by the code?
A
  • Workers compensation
  • Marine insurance
  • Medical indemnity insurance
  • Compulsory third party insurance including where there is linked driver protection cover
  • Reinsurance
  • Life and health insurance products by life insurers or registered health insurers
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3
Q
  1. What are the objectives of the code of practice?
A

a) Promote better, informed relations between insurers and their customers
b) to improve consumer confidence in the general insurance industry
c) to provide better mechanisms for the resolution of complaints and disputes between insurers and their customers; and
d) to commit insurers and the professionals they rely upon to higher standards of cust service

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4
Q
  1. What is the role of FOS in the code of practice?
A

To monitor compliance with the Code.

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5
Q
  1. What are the different types of variables applicable to home and contents insurance?
A
  • What is covered? building, contents and/or valuables
  • The basis for cover
  • the basis of payment of claims
  • Whether averaging applies
  • Whose property is covered
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6
Q
  1. What are the two main methods of determining the basis for cover?
A
  • Defined events (named peril policy)

* Accidental damage

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7
Q
  1. What is the difference between a defined events policy and an accidental damage policy for home and contents?
A

Defined events will only pay out where a defined event occurs, where as accidental damage will pay for all accidents as long as the policy does not exclude them. It is also generally more expensive.

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8
Q
  1. What are ‘all risk policies’?
A

A type of insurance policy for valuables that insure the valuable wherever it is in Australia. They are also expensive.

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9
Q
  1. What are the extra covers which are often included in home insurance?
A
  • Domestic worker’s compensation
  • Fusion of electric motors
  • Cover for items temporarily removed from the home
  • Loss of rent
  • Replacement of locks
  • Credit card liabilities
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10
Q
  1. The basis of payment for a home and contents policy sets the upper limits over all and for particular items. There are three main types of basis for payment?
A

1) Replacement and reinstatement policies - new for old and is generally limited to particular items
2) Indemnity policies pay an amount based on today’s prices and then reduced for depreciation
3) Market value policies - Generally pay the market value of the house and land, less the market value of the land.

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11
Q
  1. How do insurers protect themselves against under insurance in the house and contents market?
A

They use co-insurance clauses which will average out the loss in the case of a claim. Ie (Sum insured divided by 80% of the full value) x amount of loss

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12
Q
  1. Why should individuals reassess the amount of cover on renewal?
A

Because may objects are decreasing in value due to depreciation and it may no longer be worth insuring them. Also new items may have been purchased.

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13
Q
  1. In dealing with contents most policies limit cover to items owned by who?
A
  • The insured
  • any member of the insured’s family residing at the property and
  • anyone else named in the policy.
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14
Q
  1. What does an individual seeking home and contents insurance not have to disclose?
A
  • matters which diminish the risk
  • matters that are common knowledge
  • Matters which the insurer knows or in the ordinary course of its business should know
  • Matters where compliance with the duty of disclosure has been waived by the insurer
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15
Q
  1. There are many underwriting factors considered for house and contents insurance and many are included on the application, what do they include (12)?
A
  • Insured’s personal details
  • address (location) of property
  • Value of property
  • Special items of significant value
  • Use of home (holiday, permanent)
  • Roof construction (storm damage)
  • Number of occupants
  • Use of property to run a business
  • Security measures fitted to property
  • Consumer’s insurance history
  • Past burglaries
  • Any hazardous goods stored.
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16
Q
  1. Do individuals have an ongoing disclosure obligation with regard to home and contents insurance?
A

Yes, the insured must notify the insurer of any change that alters the facts or circumstances applicable at the start of insurance, and any building alterations and additions.

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17
Q
  1. From the insurer’s viewpoint, what are the three main basic objectives in settling claims?
A
  • Verification of a covered loss
  • Fair and prompt payment of claims - including internal complaints distribution
  • Personal assistance to the insured
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18
Q
  1. What are some of the unfair claim practices that are prohibited by the Insurance Contracts Act of Australia?
A
  • Refusing to pay claims without conducting a reasonable investigation based on all information
  • Not attempting in good faith to effect prompt, fair and equitable settlements of claims in which liability is clear
  • Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering less than what is due.
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19
Q
  1. What is the difference between a claim assessor and adjustor? and what role do they play?
A

There is no difference, they examine a claim in detail, but do have separate professional associations. They interview the claimant, witnesses and other. They will use other information as well such as police reports and forensics.

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20
Q
  1. What is proximate cause?
A

The proximate cause is the ‘real cause’, ‘effective cause’ and ‘efficient cause’.

21
Q
  1. What will occur if there are two proximate causes and will the benefit be payable?
A

If two causes have been equally efficient or effective, then both are accepted as proximate causes. If one is covered and the other is not, then the claim is payable. If one is covered and the other is specifically excluded, the claim fails.

22
Q
  1. What is accidental damage defined as?
A

An unlooked for mishap which is not expected or designed, and it can include damage from an intentional act which has an unintentional and unexpected outcome.

23
Q
  1. How do insurers limit the broad nature of an ‘accidental damage’ policy?
A
  • By a number of specific exclusions
  • Some policies require an accidental event rather than just an accidental result
  • The cause of the damage must be known
24
Q
  1. What are the steps in the settlement of a claim?
A
  • Notice of loss must be given
  • The claim is investigated
  • A proof of loss may be required
  • A decision is made concerning payment
25
Q
  1. In regards to a claim, what does the Code of Practice require insurance companies to do?
A
  • Make the claims process clear and accessible with plain language forms
  • Provide help to claimants upon request
  • Give prompt responses, and
  • Provide reasons if a claim is denied.
26
Q
  1. When must a loss be notified to the insurer and what is contained?
A

Homeowners must provide immediate notice, medical expense policy is generally 30 days and a car policy requires as soon as reasonably possible. The notice must include details of how, when and where the accident or loss happened and any witnesses or injured persons.

27
Q
  1. What type of losses must also be reported to the police?
A
  • theft, fire, malicious damage, or other criminal actions.
28
Q
  1. How can proof of loss be proven to an insurer?
A
  • receipts
  • Bank or credit card statements
  • Cheque stubs
  • Guarantees or warranties
  • Boxes in which the items were bought
  • Photos or videos in which they appear
  • Statutory declarations from other people
  • Statutory declarations from the claimant.
29
Q
  1. The investigator or adjustor will investigate the claim. What are the most important questions that they need to ask?
A
  • did the loss occur while the policy was in force
  • does the policy cover the peril that caused loss
  • does the policy cover the property destroyed / damaged
  • is the claimant entitled to recover
  • did the loss occur at an insured location
  • is the type of loss covered
  • is the claim fraudulent
30
Q
  1. What are the decisions concerning a payment that the adjustor can make?
A
  1. The insurer admits fully liability
  2. The claim is denied
  3. The claim is reduced
31
Q
  1. What are the three main forms of motor vehicle insurance available?
A
  • Compulsory third party
  • Comprehensive cover
  • Third party fire and theft
32
Q
  1. What is compulsory third party motor vehicle cover?
A

This covers your liability to bodily injury caused to third parties arising from the use of a motor vehicle. It is compulsory.

33
Q
  1. What is comprehensive motor vehicle insurance cover?
A

To covers the insured for loss or damage to his or her car, whether the car has been involved in an accident. It also covers damage to other people’s property caused by the insured’s car.

34
Q
  1. What is third party fire and theft motor vehicle cover?
A

It covers damage caused by the insured’s car o other people’s property, but doesn’t cover cost of repairs to the insured’s car. It also extends limited coverage to loss of or damage to the insured’s car caused by fire or theft.

35
Q
  1. What are the two types of compulsory third party policies and how do they differ?
A
  • Fault system - fault must be proved before the payment to the injured party can occur
  • No fault system - all can claim compensation for their road accident injuries.
36
Q
  1. What are the additional benefit options available on optional motor vehicle insurance?
A
  • Third party extended cover - covers the value of insured’s car up to a limited amount where fault is caused by someone else.
  • Uninsured motorist extension
  • Free-hire car
  • Towing cost
  • Medical costs
  • Death benefits
  • Rating 1 protection
37
Q
  1. What is meant by rating 1 protection?
A

Drivers who are those regarded as the best risk due to a good driving record and they consequently pay the lowest insurance premiums.

38
Q
  1. What are the basis of payment options for a motor vehicle policy?
A
  • Market value

* Agreed value

39
Q
  1. Why should insureds carefully consider the terms of an agreed value policy?
A

Some policies allow the insurer to reduce the agreed amount where the car suffers from rust, damage, or has significant deterioration of body paint or mechanical items

40
Q
  1. What is the disadvantage of a market value motor policy?
A

Disagreements and disputes about the market value of the car at time of claim.

41
Q
  1. When may a car be completely replaced with a new car under a motor policy and does this depend on which basis of payment is selected?
A

Where a car is destroyed within one year of it first being registered. It is applicable to both market and agreed value policies.

42
Q
  1. What are the main underwriting factors to be considered in a motor vehicle policy?
A
  • Use of the car
  • Area of garaging
  • Type of car
  • Modification to the car
  • Alarms
  • Distance the car has travelled over the past 12 months
  • The insured’s personal details and those of a regular driver
43
Q
  1. What are the personal details that an insurance underwriter want to know about the insured for a motor vehicle policy?
A
  • ownership of car
  • age
  • sex
  • driving history
44
Q
  1. What is usually included in the policy?
A
  • A standard form printed booklet covering what is covered, what is excluded and a subrogation clause.
  • A typed addition or schedule which sets out the details for the individual insured
45
Q
  1. What are the common exclusions for a motor insurance policy?
A
  • Mechanical, structural or electrical failures
  • Loss of use (stolen or damaged)
  • Depreciation, wear and tear, rust
  • Tyres
  • Unauthorised modifications to the car
  • Unroadworthy cars
  • Driving under the influence of alcohol or drugs
  • Unlicensed driving
  • Unauthorised drivers
  • Wilful damage
  • Undisclosed use of the car
  • Racing
46
Q
  1. What is an excess and what are the two basic types?
A

It is an amount of money an insured is normally liable to pay when making a claim on the insurance policy, which limits the insurer’s liability and removes smaller claims. There is a basic excess and an age excess

47
Q
  1. What is the difference between a basic and age motor vehicle insurance policy excess?
A

A basic excess is the initial amount payable and may be flexible depending on the level of premiums paid. An age excess is generally a standard amount payable if the driver is under a certain age (and may include sex of the person as well)

48
Q
  1. What are the ongoing disclosure requirements for a motor vehicle policy?
A
  • The address where the car is normally kept
  • The use of the car
  • A change in or addition to the person who drives the car
  • Details of any driving offences
  • Any modifications made to the car
49
Q
  1. What should an insured consider before making a claim?
A

Whether it is in their best interest to actually make a claim, ie where they are at fault or where the damage is less than the excess / effect on ongoing premiums

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