Chapter 2 Flashcards
Fire Resistive
Building which has met minimum standards in terms of hours it will withstand a specific, carefully controlled test fire
Non-combustible
All structural members including floors, roofs and their supports are constructed of steel, iron, concrete or other non-combustible materials. Exterior also requested to be of non-combustible construction. Falls just short of classifying as fire resistive.
Common Hazards
Conditions common to all buildings which influence their potential for a loss
Detachment
Refers to the proximity of the building insured or containing the property insured to other commercially rated buildings
Adverse Selection
Occurs when the applicant for insurance are largely those most likely to suffer a loss
Risk Classification
Refers to the grouping or classifying of risks according to established criterial which, in large part, is based on their probability for loss as a class.
Soft Market
Characterized by intense competition between insurers. As a result, rates tend to be low.
Hard Market
Low profit margins force out some of the competition, insurers have a more disciplined underwriting approach, little or no rate discounts
Hazard
A condition that may cause a peril to occur
Physical Hazard
A condition relating to the use of tangible property which could cause a peril to occur.
Moral Hazard
Subjective characteristics of the applicant that could cause a peril to occur.
Morale Hazard
Deals with the attitude of the client
Accommodation business
Business which is marginal or substandard but which the insurer agrees to accept as a favour or accommodation to the broker.
Supporting business
The existence of other insurance policies the applicant has with the same insurer.
What is included in a submission
Application
Additional verbal information
Additional written information, including: previous policy premium, loss history and details of losses, financial statements, photographs
Purpose of survey
Assists in identification of loss exposures
Helps to determine the coverages needed
Develops other underwriting information needed by the Insurer
3 advantages to using a property checklist with clients
Alerts broker to possible loss exposures
Ensures that needed coverages are not forgotten or ignored
Helps to reduce the potential for an e&o claim
What are the 5 classes of building construction
Fire Resistive
Non-combustive
Heavy Timber
Ordinary
Frame
Which type of building construction is likely to produce the highest insurance rate
Frame
Which type of building construction is likely to produce the lowest insurance rate
Fire resistive
Approximately how old does a building have to be for the insurer to request additional information about recent renovations or upgrades
25 years or older
Identify five kinds of upgrades to the building likely to be of most interest to insurers
Roof
Wiring
Over-current protection (circuit breakers/fuses)
Plumbing
Heating
Identify five hazards common to the majority of commercial risks
Heating
Electrical Services
Detachment
Protection
Occupancy
Why is the distance or detachment from other commercial risks an important rating consideration for insurers?
The distance to neighboring buildings, their height, construction, and occupancy is info which is routinely requested by Insurers. When a neighboring business represents a potential for loss which could spread to the Insured’s property, the Insurer will usually increase the rate or premium charged.
Identify two kinds of protection which insurers consider when establishing the rate or premium charged
Private protection (ex. fire extinguishers, intrusion detection equipment)
Public Protection (Availability of fire fighting services)
Occupancies that fall into the category of special hazards
Churches
Garage
Bakeries/Hotel Restaurants
Butcher Shops/Locker Plants
Risk classification
Grouping or classifying of risks according to established criteria which, in large part, is based on their probability for loss as a class
Identify two factors which can cause premiums charged by Insurers to change
Rising claims cost due to inflation
Changes in interest rates paid on investments
Social inflation where society did not consider certain losses in the past important but are now treated as significant
(Why do premiums change)
Three external sources of UW info
The Broker
Government Records
Financial Rating Services
Consumer Investigation Reports
Three internal sources of UW info
Loss Experience Data
Inspection Reports
Field Representatives
Claims Information
Production Records
Underwriting Guides and Manuals
Other Underwriters
Four activities common to all underwriters
Risk Selection
Risk Classification
Rating and Rate-Making
Policyholders’ Service
Individual risk underwriting
Considers individual submissions on their own mertis, regardless of the class they belong to.
3 conditions indicating presence of moral hazard
Financial Condition
Associates
Moral Character
Six considerations of physical hazards
Type of Building Construction
Occupancy
Housekeeping
External Exposures
Geography
Protection
Parameters that UW use to make a decision on a risk
To accept the submission on the basis presented
To reject the risk
To accept the risk with an increase in the rate
To accept the risk, maintain the rate, and increase the deductible
