Chapter 3 Flashcards
Corporate Strategy
Often very broad and high level
i.e grow customer base, increase cross selling
Underwriting Strategy
- premium targets;
- claims and expense ratios;
- expected investment returns.
Physical hazard
Those physical aspects of a risk that directly impact on its insurability or the terms, conditions and exceptions at which insurance may be accepted.
Physical Hazard
MD - Construction, location to fire services/water/quake zones
BI - Back up sites, alternative suppliers
Liabs - Health & safety, nature of activities
Motor - Ages & condition of vehicle, driver training, compliance of driving hours restrictions, number of vehicles in the fleet.
Personal Accident - Age & health of person, activities, places visited
Moral Hazard
Conduct & attitude of the insured i.e carelessness
- Pre inception
- Post Inception
- Post-loss
Pre inception moral hazard
Not giving full information in proposal form
Poor risk management i.e maintenance, H&S, training etc
Post Inception moral hazard
Attitude to surveyor recommendations for risk improvement
Delays in payment of premium
Delays in producing declarations for premium adjustments
Post loss moral hazard
- delays in notification of the loss with full details of the circumstances;
- lack of readiness to help insurers determine the value of the loss;
- exaggerating the value of the loss; and/or
- failure to provide accurate records to facilitate speedy loss settlement
Four key sections of a wordings
Conditions Clause
Operative Clause
Schedule
Exemptions or exclusions clause
Operative Clause
Type of event insured against
Exemptions or exclusions clause
General Exclusions - whole policy
Specific Exclusions - certain parts of policy
These are determined by - reinsurance protection available, cost of giving cover
Conditions Clause
Express the policy holders rights and obligations
Schedule
The schedule describes the precise subject matter of the insurance
Warranties
Are suspensive covers. i.e once remedied cover is back in force
Franchise
Time Franchises (Prvention of access 12 hours) Once claim threshold is met entire amount of loss is paid
Classification
Personal - car, house, PA, Pet
Motor - Commercial vehicle, motor fleet, motor trade
Property - MD, BI, Theft, Money
Within each class covers and perils are classified separately Fire, lightening, explosion etc
ABI Codings
Common coding’s simplify exchange of information for reinsurance and co-insurance
Not compulsory
Standard Industrial Classification (SIC)
Governmental classifications (European and US versions)
Motor classifications
Type of vehicle
Use of vehicle
Age of driver
Categorisation
Categorise risks into comparable groups for ease of analysis and rating. The aim is to group together risks with similar features and characteristics, which will have a similar degree of hazard and claim profiles. Two examples of this are private car rating groups and theft rating areas.
Categorisation for car rating groups
Band together models of cars with similar characteristics e.g:
- damage and parts costs;
- repair times;
- new car values;
- body shells;
- performance; and
- car security.
Categorisation for theft rating areas
Allocate post codes to different rating areas based on claims, crime stats etc
Regular reviews should take place to ensure accuracy
Risk Improvement Criteria
