Chapter 3: The Role of Government in the Insurance Industry Flashcards
Define fiduciary
one who handles other people’s money
Define the meaning of “subrogation” and indicate how this right is exercised by the insurer.
Subrogation = Put oneself “into another’s shoes”
This right allows the insurer to place itself “in the insured’s shoes” in respect of their right to recover the amount of the loss from the responsible party
How can a term or condition of the insurance contract be waived by an insurance broker?
only the insurer can change terms and conditions of an insurance contract. Must be written and “signed by a person authorized for that purpose” before it is binding
Your clients received their policy 1 month ago.It has not yet been paid for. Yesterday, they had a fire loss. What affect does the delivery of the policy have on the obligations of the insurer?
it shall be as binding on the insurer as if the premium had been paid
3 coverages required to be provided on all policies of fire insurance
- fire
- lightening
- explosion of natural gas
What is “friendly fire” and provide example
fire that is contained in its proper receptacle. it is where it is supposed to be.
example: steaks burnt while cooking, wood being burned in a fireplace
What is “hostile fire” and provide example
fire which escapes from its receptacle
example: loss to carpeting caused by a spark which escaped from a fireplace
Of the 2 types of fire, which one is insured by a fire policy?
only hostile fire
Fiduciary responsibility of insurers
return unearned premium
premium is fully earned upon policy expiry
Fiduciary responsibility of brokers
return unearned commissions
Policy period
policy starts 12:01AM standard time at the address of the named insured
Removal clause
covers property for up to 7 days if moved to a location not stated on the policy to prevent further loss (necessary removal)
Perils not covered
- application of heat
- lightning damage to electrical devices
- electrical currents
- contamination by radioactive material
- riot, war
3 forms of misrepresentations
- false description of property to the prejudice of the insurer (if the insured incorrectly describes the property making it appear better than it is)
- misrepresentation of a “material fact” (make a true representation)
- fraudulent omission of a “material fact” (applicant deliberately withholds vital information to secure coverage or to get a lower premium)
Material fact is…
something that would change the insurer’s decision if known (ie. decide not to cover or to increase premium)
Statutory Condition: Property of others
no coverage unless you’re named on the policy
Statutory Condition: Change of interest
if insured no longer has insurable interest in the property, coverage is not automatically extended to new owner EXCEPT WHEN: authorized transfer under the Bankruptcy Act, succession, order of law, or death
Statutory Condition: Material Change
insured is not entitled to payment if loss directly results from unreported change
Statutory Condition: Termination
responsibilities of both parties when terminating a policy
When contract is terminated by insurer…
insurer must give written notice by either:
- registered mail: 15 days’ notice starting the day after the notice is received by the post office of the insured
- hand delivered: 5 days notice
When contract is terminated by insured…
insured must give notice to insurer (no advance notice required)
premium refund: on a short-rate basis to recover cost of document processing
short rate basis = pro-rate minus administration fee
Statutory Condition: Requirement After Loss
sets out responsibilities of insured after loss
notice of loss: ASAP in writing
proof of loss: as soon as practicable
statutory declaration: proof of loss signed under oath that all info is correct and loss wasn’t caused intentionally by insured
Statutory Condition: Fraud
void the entire claim if found
Statutory Condition: Who May Give Notice and Proof
aside from the insured
- Notice: by an agent of the insured (agent = anyone authorized)
- Proof of Loss: only by people with insurable interest
Statutory Condition: Salvage
insured must reasonably protect property from further loss
Statutory Condition: Entry, Control, Abandonment
rights after loss
- Entry: can enter immediately after loss to investigate
- Control: insurer cannot take control of the property after loss
- Abandonment: cannot give property to insurer in expectation of a cash payment
Statutory Condition: Appraisal
procedures when claim payment is disputed by insured
Statutory Condition: When Loss is Payable
insurer pays within 60 days of receiving Proof of Loss
Statutory Condition: Replacement
when insurer decides to repair or replace instead of paying cash
- Written Notice to insured: within 30 days after receiving Proof of Loss
- Repair or Replacement: must start within 45 days of Proof of Loss
Statutory Condition: Action
legal action must be taken within 1 year of date of loss (ie. if insurer denies claim)
Statutory Condition: Notice
insured: in writing to the local head office of the insurer
insurer: in writing to the last known address of the insured
Consists of a misstatement and/or fraudulent omission of a a material fact….
Misrepresentation
Deliberate attempt to deceive with a view to securing some profit….
Fraud
Any change which serves to increase the chance of loss arising after the policy is issued…
Material Change
Written notice to the insurer can be delivered at or sent by registered mail to the chief agency or head office of the insurer in the province…
Notice
Not insured unless interest of insured is stated in the contract…
Property of Others
Policy is automatically continued to protect insureds after an authorized assignment under the Bankruptcy Act or insureds who have possession of insured property as a result of a change of title due to succession, operation of law or by death…
Change of Interest
Requires that the insured take all reasonable steps to protect insured property from further damage
Salvage
Requires that the insured take all reasonable steps to protect insured property from further damage…
Salvage
Must be commenced within 1 year after the loss occurs…
Action
Option available to either the insurer or insured when there is a disagreement as to the value of property insured, saved or amount of loss…
Appraisal
Identifies the documents needed when a claim is filed…
Requirements After Loss
Consists of a misstatement and/or fraudulent omission of a material fact…
Misrepresentation
Requires that notice of the insurer’s intentions be provided to the insured within 30 days after receipt of the proof of loss…
Replacement
Requires that the insured be provided with 15 days notice by registered mail or 5 days notice when personally delivered…
Termination
Entitles any party of interest, or agent of insured to file a claim on behalf of the insured…
Who May Give Notice and Proof
