1. RI 2. commission 3. profits 4. investment management 5. contingencies

7. General Insurance Products Flashcards by Harry Moss

Define indemnity

To reimburse losses

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What types of insurance does GI involve?

All non-Life

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Can you have multiple claims under a single GI contract?

Yes

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What is the general terms for a GI contract?

1 year

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What’s the difference between personal lines and commercial lines GI?

Personal lines contracts are sold to individuals
Commercials lines contracts are sold to businesses

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What does it mean for a GI claim type to be long-tailed?

Takes a long time to be reported/settled

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Give 5 causes of reporting delays

Initial admin
waiting for claimant condition to stabilise
establishing liability
establishing claim size
court disputes

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What is underwriting?

The process of understanding how risky a potential policyholder is

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What does underwriting enable?

Deciding an appropriate premium for a given level of cover

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What factors are used in the underwriting process to determine appropriate premium?

Rating factors

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How does underwriting differ between personal and commercial lines?

Personal lines are usually via form whereas commercial lines are much more detailed

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What’s the formula for GI profit?

Premium net of RI +
Investment return -
Claims Incurred net of RI -
Expenses -
Tax

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What’s the formula for risk premium?

Expected claims freq *
Expected cost per claim

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What are the 3 steps in setting GI premium?

Calculate expected risk premium for a base case
Use generalised linear modelling to fit a curve
Add costs

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Name 5 GI expenses

RI
commission
profits
investment management
contingencies

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What is provisioning?

Setting money aside to pay future liabilities

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Name the 5 things GI provisioning must include (CCOIU)

CHE
Catastrophe reserve
Outstanding reported claims
IBNR
Unexpired risk reserve for claims yet to happen under future cover

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What is new business strain?

Worsening of financial position from writing new business which have higher costs associated

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What are the 5 main risks to the provider under a GI contract?

High frequency of long-tailed claims
Heterogeneity of written risk
Catastrophe exposure
Data availability
Volume of contracts

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What is the main consideration of a GI investment strategy?

Matching assets with liabilities

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What makes GI contracts difficult to match liabilities?

Most claims will be settled near the time of a claim so there will be inflation in claims incurred

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What kind of assets do GI firms generally hold? (4 points)

liquid assets like cash
fixed interest bonds to meet fixed liabilities
short-medium assets to match liability terms
assets in domestic currency

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What 2 constraints are there on GI investment strategy?

Need to be tax efficient
Regulation

How does investment strategy hedge inflation risk?

Using real assets

Name 7 KPIs which need monitoring (PRINCEL)

- Profitability - RI performance - Investment returns - NB vs renewals - Claims - Expenses - Lapses

Give 4 reasons for monitoring experience (PPCRI)

- Premium rating assumptions - Capital requirements - RI assessment - Profitability assessment

Name the 4 types of GI products

- Liability - Property Damage - Financial Loss - Fixed benefit

What is the aim of the GI benefit of non-fixed-benefit contracts?

To indemnify claimants

What does liability insurance indemnify against?

Indemnity where the insured is legally liable to compensate a 3rd party

What can void liability insurance?

Illegal negligence

Name 3 ways the indemnity of liability insurance may be restricted (i.e. the insurer won't pay the full sum of liability)

- maximum sum per claim - aggregate maximum sum per contract - an excess where the first part of a claim is not paid

What is a reinstatement clause?

A clause detailing how long after a claim that the cover can resume

What are the 2 options when a reinstatement clause is triggered?

- additional premium to resume cover - cancellation of policy

What does employer liability insurance indemnify against?

Indemnifies against liability to compensate employer for claims due to negligence

What kinds of perils does insurer liability insurance cover?

Exposure to harmful substances or working conditions

What does 3rd party motor insurance indemnify against?

Indemnifies motor vehicle owners against compensation payable in the event of BI, death or damage

What does public liability indemnify against?

Death or injury to a 3rd party in the event other than those covered by other liability insurance

What does product liability insurance indemnify against?

Indemnifies against BI or death to a 3rd party or damage to property from a product fault

What does property damage indemnify against?

Indemnity against 'loss of' or 'damage to' material property

What does it mean that contents cover is written on a new-for-old basis?

That new goods are provided to replace lost/damaged ones

What 5 perils does residential & commercial property damage insurance indemnify against? (LETSF)

- Lightning - Explosion - Theft - Storm - Flood

What does movable property damage insurance indemnify against?

Damage to property which is strictly defined in the insurance contract (e.g. builder tools)

What is the major peril of moveable property insurance?

Theft

What perils does marine/aviation property cover indemnify against? (PPEFJ)

- Perils of the sea - Piracy - Explosion - Fire - Jettison

What does pecuniary loss insurance indemnify against?

Protects against bad debt or other 3rd party failure

Define bad debt

Loans or outstanding balances owed that are no longer deemed recoverable and must be written off

Does pecuniary loss insurance cover mortgage indemnity?

Yes

What does mortgage indemnity cover protect against?

Default risk and risk of property sale not covering mortgage & interest costs for the lender

What does fidelity guarantee insurance indemnify against?

Protects against financial loss from dishonest employee actions such as fraud including the cost of establishing the size of loss

What does consequential loss insurance indemnify against?

Loss resulting from a business not being able to conduct business

What does cyber insurance indemnify against?

Pecuniary loss, fidelity guarantee & consequential loss relating to a cyber attack relating to: - data theft - extortion - fraudulent transactions

What is the main concern with cyber insurance with the pace of advancements?

Pace of tech advancements makes cyber attacks more prevalent

Give 2 examples of fixed benefit GI products

Health insurance Unemployment insurance

What does health insurance indemnify against?

Provides money for medical treatment

Health insurance is an umbrella term covering which 4 areas? (CILP)

- Critical illness - Income protection - Long-term care - Private medical care

What generally is unemployment insurance duration?

no more than 1 year