Chapter 10 - Underwriting Exposure Measurement Flashcards
What is a hazard?
A condition that makes the occurrence of an accident more likely
What are the two main types of hazard?
Moral Hazard
Physical Hazard
What is a moral hazard?
The likelihood of loss by some deficiency in the character of the insured
What is the concern in regards to liability with a moral hazard?
The danger that the insured may run the business carelessly
What is a physical hazard?
A physical condition associated with property, material, or equipment that increases the chance of loss.
What are the most common examples of physical hazards?
- Construction of the property
- Maintenance
- Downspouts
- Exit doors
- Frontage
- Railway sidetrack
- Floors
- Stairs
- Lighting
- Heating
- Elevators
- Escalators
- Security measures
- Food
- Liquor
- Hazardous items
- Employees
What is a loss exposure?
A hazardous situation or physical circumstance that makes an individual or organization vulnerable to loss, damage or injury and will lead to a financial loss
What is a liability loss exposure?
The possibility of a claim being brought against an insured
What sources of information are available to underwriters?
- Applications for insurance
- Checklists
- Inspections
- Surveys
- Insurance policy reviews
- Procedure and policy reviews
- Compliance reviews
- Contract reviews
- Financial statement analysis
- Claims information
What information is in the application?
- Identity of the applicant to be insured
- Loss and policy history
- Limits and coverage
- Location details
- Gross receipts
- General application information
- Products or completed operations
What is reviewed under “identity of the applicant to be insured”?
- Name
- Postal address
- Contact information
- Web site address
- Policy period required
- Description of business operations
- Role of the applicant
What is reviewed under “loss and policy history”?
- Claims in last 5 years
- Actions that were taken by applicant to avoid future losses
- Details in incidents that may result in a claim
- Details of any insurer cancelling, declining or refusing to renew
- Previous insurer information
What is reviewed under “location details”?
- Is the applicant the owner or a tenant?
- Does the applicant lease out part of the premises?
- Do lease agreements have hold-harmless clauses and indemnity agreements?
- How does the applicant use the premises it occupies?
- What are the adjacent properties?
- Who is responsible for maintenance?
What is reviewed under “gross receipts”?
- Number of employees
- Payroll
What are the two most common organizations that certify safety?
ULC & CSA
What is ULC?
Underwriters Laboratories Canada
An independent standards development organization, testing lab and certification body for products
What is CSA?
Canada Standards Association
Not-for-profit association servicing business, industry, government and consumers in Canada. It helps to develop standards to enhance public safety and health and to promote safety generally
What are the common types of work that underwriters are concerned with contractors performing?
- Asbestos
- Caisson
- Dredging
- Excavating
- Hot tar roofing
What is the concern with asbestos?
Anyone who inhales asbestos fibres is at risk of developing an asbestos related disease
What is the concern with a caisson?
They are watertight structures often used with bridge piers, concrete dams or to repair a ship. They are highly specialized and highly hazardous
What safety precautions must be taken with dredging?
- Proper inspections are made
- Equipment is maintained
- Public notices when dredging poses a threat to navigation of public
- Each operation needs comprehensive safety plan (provisions for communication & emergency response)
What are common losses that can occur from excavations?
- Cave Ins
- Collapse
- People falling into the pit
- Machinery lost when placed too close to the edge
Outside the scope of the job, what else could be evaluated?
- Height and depth of work
- Materials and machinery to be used
- Nature of tools/equipment including; ownership of equipment, appropriateness for work, condition of equipment, hazards with equpment
- Repairs to structurally defective buildings
- Safety and security measures (barricades, warning signs, lighting)
- Safety Regulations
What are some hazards at a car wash?
- Wet, soap and slick floors
- Storage of hazardous chemicals
- Noisy systems
- Machinery and electrical equipment
- Large turnover rate; training program could be problematic
- Convenience store or coffee shop
What must be considered with spills in a car wash?
- What triggers employees to deal with a spill?
- Are caution pylons and signs employed to warn customers of the danger?
What are some examples of equipment at a day spa that could be considered a hazard?
- Massage tables/beds
- Adjustable chairs
- Manicure tables
What equipment do beauticians and cosmetologists use that could cause injury if not maintained?
Scissors, combs, hairbrushes, hair dryers, curling irons, flat irons, makeup brushes, spongers, nail scissors, clippers and filers
What are some hair and skin care products that can cause a concern?
Paraffin, mud, seaweed compounds, aromatherapy oils, lotions and candles
What processes would an underwriter review to ensure product quality is maintained?
- Initiatives in quality assurance protocols
- Documentation of retention procedures
- Product sale documentation (warnings/liability limitations)
- Loss and claims management protocols
- Evidence preservation procedures
What information would an underwriter need from a manufacturer?
- Class and type of goods manufactured
- Characteristics of raw materials used
- Machinery used in productions
- Loading and unloading arrangements
What are some areas that a municipality may have liability?
Sewer back ups, road maintenance, repair and construction, winter maintenance, management of playgrounds, parks, and arenas, police and fire department operations, land use and development, defamation, employment and utility management
What is PIPEDA?
Personal Information Protection and Electronic Documents Act
What type of claims may result from use of a private investigator?
Malicious prosecution, false arrest, false imprisonment, excessive use of force, negligent investigation and invasion of privacy
What would an underwriter want to know of a theatre?
- Crowd control and appropriate emergency exits
- Number of seats for patrons
- Details of passageways and washrooms
What information would an underwriter want for any weed spraying business?
- Identity of persons doing the dangerous work
- Assessment of the competence of persons doing the spraying
- Identity of the person who controls spraying process
- Type of equipment used
- Chemicals used
- Purpose of spraying
- Location to be sprayed
- Precautions taken to avoid overspray
- Verification of prevailing wind directions
- Considering of farming methods in the area
- Condition of trees and plants
What are the pros of a checklist?
- It improves the consistency and completeness of assessing a risk
- It compensates the limitations of memory
- Alerts underwriter to potential exposure
What are the cons of a checklist?
- They can be restrictive and thus are rarely used by themselves
- Can decrease reliability and create unnecessary burdensome process delays
- Can be too narrow of a scope
- Can never include every element that may be of a concern
Who would likely complete an inspection of a property?
A loss control specialist
What does the disclaimer in an inspection explain?
The insurance company will not warrant that the insured party has a safe workplace, they accept no responsibility for the completeness or effectiveness of the inspection.
With a larger property, who else may assist the loss control specialist with the inspection?
Risk manager and underwriter
What is the difference between an inspection and a survey?
Survey is usually a more formal and comprehensive review
What sort of risks are surveys used for?
Commercial
ie. Retail stores, builders and contractors, manufacturers, warehouses, hotels and restaurants, schools and hospitals
Who helps train firefighters?
Office of the Fire Marshall
What is WHMIS?
Workplace Hazardous Materials Information System
Under WHMIS, what are the three ways information for hazardous materials must be provided?
- Labels on the containers of hazardous materials
- Material safety data sheets
- Worker education programs
Why might an underwriter review an existing insurance policy?
To reconfirm a risk that has already been identified
How can a financial statement be used to identify loss exposure?
Balance sheets for assets, income statements to review income
On an application, loss and policy history is usually requested for the last how many years?
Five
