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Property & Casulaty > 3 - P&C Insurance Basics > Flashcards

3 - P&C Insurance Basics Flashcards

1
Q

Underwriting

A

“Classifies” the applicant to match the risk presented with the premium charged by the insurer

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2
Q

Loss ratio

A

The percentage of claims paid in comps is on to the total premiums collected during a period of time.

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3
Q

Judgement rating

A

The underwriter determines the individual rate using their intuition and experience instead of a rating manual.

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4
Q

Manual rating

A

The underwriter refers to rates as published in the insurer’s rating manual (law of large numbers)

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5
Q

Merit rating

A

The underwriter modifies a he manual rate based in past loss experience

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6
Q

Retrospective rating

A

A rating plan, subject to minimum and maximum premiums, where the final premium is not determined until the end of the policy period and is based in prior loss experience

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7
Q

Experience rating

A

Used to calculate premiums on a large group life or health insurance policy. Modifies the manual premium based in the insureds own loss experience

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8
Q

Insurance Services office

A

A rating bureau that develops and Giles rates and policy forms with different states for their members (insurance companies)

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9
Q

What is the difference between a rate and a premium?

A

The rate is the cost per unit.
The premium is the # of units multiplied by the rate.

Ex: if one unit is $100 and if the rate is $0.25 per $100 in f coverage. For a $100,000 policy, it would be $250/year.

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10
Q

Tort lawyers

A

Lawyers who handle negligence lawsuits

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11
Q

Assumption of the risk

A

You agree to take the risk of engaging in certain activities and if you are injured during the course of that activity, you may not sue.

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12
Q

Tort threshold

A

You assumed risk up to a certain level

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13
Q

Statute of limitations

A

Limits the time during which a lawsuit may be filed after the occurrence of claim.

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14
Q

Special damages

A

Consist of medical expenses and lost wages. Exact and verifiable figures.

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15
Q

General damages

A

The insurer is attempting to compensate the injured party for their mental and physical distress

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16
Q

Punitive damages

A

Awarded when injury was caused by gross negligence if the defendant

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17
Q

Absolute or strict liability

A

So dangerous that the liability is absolute or statutory.
Ex: keeping a wild tiger makes you absolutely responsible for injury or damage.

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18
Q

Vicarious liability

A

Some state statutes spell out situations where one party may be responsible for the negligent activities of another party.

Ex: you let your secretary drive her own car for your business, you can be sued if she negligently hurts someone.

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19
Q

Named perils

A

They only cover the causes of loss that are named in the contract

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20
Q

Open peril policy

A

All risk policy
Covers all perils UNLESS excluded

21
Q

Direct loss

A

One that happens suddenly due to a coveted peril

22
Q

Indirect loss

A

A loss that occurs as a consequence of the direct loss

23
Q

Blanket property insurance

A

Provides a single amount of insurance that may apply to different types of property or to different locations

24
Q

Specific property coverage

A

A specific amount of insurance for specific types of property at a specific location

25
Q

ACV
(Def & equation)

A

Find the replacement cost and subtract any depreciation.

RC - D = ACV

26
Q

Declarations

A

1st page
Named insured. Location of the property. Premium & effective date.

27
Q

Definitions

A

Who is covered as an insured:
HO: people in the home
PAP: a covered auto

28
Q

Insuring agreement:clause

A

Coverage is provided, perils to be covered and insurers promise to pay coveted claims

29
Q

Additional/supplementary coverage

A

Debris removal, coverage for trees, shrubs and plants and fire department service charges.

30
Q

Conditions

A

Apply to insured and insurer. Notice of claim and proof of loss. Protect from further damage

31
Q

Exclusions

A

Provisions in the policy taking coverage away for certain claims. (Flood)

32
Q

Endorsements

A

Added to the policy to make it better/more coverage

33
Q

Named insured

A

The person listed on the declarations page, including their spouse, if they live together.

34
Q

First Named Insured

A

The person named 1st on the declarations page of a commercial policy, if there are more than one named on the policy. Only person that has to be notified for a cancellation notice.

35
Q

Additional/Other Insureds

A

Any additional insured is another party listed in your policy
(Ex/ contractor puts you additional on their liability policy while working on YOUR home)

36
Q

Policy Period & Policy Territory

A

On declarations to let you know when coverage ends and begins and let’s you know what locations are covered

37
Q

Cancellation

A

Can be requested by the insured or the insurer. The policy is being canceled at some point other than the normal date, mid-term

38
Q

Non-Renewal

A

Insurer gives the client advanced notice (by law) that their policy will not be continued beyond the normal date. No refund is required.

39
Q

Deductibles

A

Selected by the client at policy inception, the higher the deductible chosen, the lower the premiums will be.

40
Q

Other insurance clause/ pro rata liability clause

A

Designed to reinforce the principle of indemnity by keeping clients from collecting more than they lost

41
Q

Limits of liability

A

The most the insurer will pay for a single occurrence. On the declarations page.

42
Q

Aggregate limit

A

Total limit

43
Q

Restoration of limits

A

Coverage is restored with a new aggregate limit on the anniversary date

44
Q

Split limit definition: 15/30/10

A

15 is the amount the insurer will pay to any one person
30 is for BI, no matter how many people are injured
10 is for PD

*MOST to be paid for one claim is 40k + defense

45
Q

Coinsurance

A

Are contained in many property insurance policies to assure that the insurance risk is commensurate to the amount of premium charged

46
Q

Insuring agreement

A

Contains their promise to pay coveted claims as per the terms of the policy

47
Q

Liberalization clause

A

The insurer can change the terms of the contract at any point one as long as the insured benefits and no additional premium is charged

48
Q

Subrogation clause

A

The insurer may required and assignment of all rights of recovery against any negligent 3rd party

Property & Casulaty (7 decks)

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