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