Ch 8 General Insurance Flashcards
What are perils
This is a risky event such as fire and floods that cause loss to happen
What is a hazard
Conditions that make perils worse or cause perils
Who needs general insurance
Individuals and companies
What are the four main types of general insurance products
Property damage insurance
Financial loss
Fixed benefits
Liability insurance
Explain property damage insurance
When individuals are at risk of property damage, loss or stolen property. They get it insured in order to indemnify the policyholder against loss
What is financial loss
Cover against things that cause financial loss
What is pecuniary loss
When a company suffer due to a debtor not paying what is owed
What is fidelity guarantee
When money is stolen or embezzled by employees
What is business interruption
Company suffers losses due to a result of having to suspend work
What are fixed benefits
Sum assured for an event that occurs if an agreed event occurs such as body parts
What is liability insurance
Provided to indemnity where the insured is legally liable to pay compensation to a third party
What are the types of liability insurance
Employers liability
Motor third party liability
Public liability
Product liability
Professional indemnity
Explain employers liability
Protects employer from employees demanding compensation for work accidents
Explain motor party liability
Protects vehicle owners from damage caused by them to other drivers, pedestrians, property
Explain public liability
Protects companies from paying compensation to members of the public as a result of something that is seen as company’s fault
Explain product liability
Protects companies from damage their products may have caused to the public
Explain professional indemnity
Protects professionals such as actuaries, doctors , lawyers from claims against them as a result of advice or services rendered
Explain policies as combinations of cover
When events lead to several different types of claims. So police’s can be sold as a package to meet all the needs of the policyholder
How to access general insurance products
Brokers - give you an idea of multiple products
Contact directly
Aggregator websites - obtain several quotes on the website
What are the characteristics of general insurance policies
Premiums are payable either as a single premium in advance or a regular premiums
Short term policy
Any amount of claims
Claim frequency and amount are uncertain
What is long tail in GI
When there are policies that take a long time for the claim to be reported
What are risk factors
Characteristics of the policyholder that precisely define how much risk he or she is exposed to
What are rating factors
Approximation of risk factors
Which are easily measurable
Roughly proportional to risk
Difficult to misrepresent
What is the measure of exposure
Value component of the policy and a way to standardise the premiums
What needs to be determined when pricing a policy
What is insured
What are the perils
Probability and present value
Measure of exposure
Risk factors
Rating factors
Adjustment to the probability of the event we make for each rating factor
What are some features of general insurance policies that affect claims
Excess
No claims bonus
Explain excess
Where the policyholder pays an agreed amount and the insurer covers the rest of the claim.
Advantages of excess
Policyholder pay lower premiums
Insurers process less claims
Explain no claims bonus
Policyholders get paid a bonus if there are no claims during a period of
Advantages of no claims
Policyholders don’t claim on small losses which reduces number of claims for insurers
What are IBNR claim reserve
Claims which insurer expects already happened but not reported
What are outstanding reported claims reserve
Claims which insurer knows about but has not paid
What is the catastrophe reserve
A reserve to assist insurer in case a catastrophic event occurred
Why is general insurance possible
Despite being dynamic risks , insurers take advantage of short term policies to be able to review and change policy prices year after year
