Chapter 8: General Insurance products Flashcards
Key features of a general insurance products
What products are they similar to ?
- Short term
- Can be multiple claims
- Claim amounts generally unkown and volatile
- there can be delays in reporting and setting claims
Healthcare products
Short-tailed businesses
Claims generally reported quickly and settled quickly by the insurer
Long-tailed businesses
There is a sizeable proportion of total claim payment that take a long time to be reported and/or a long time for the insurer to settle
Rating factor
- Used to determine the premium rate for a policy
- Measureable in an objective way
- Relates to the likelihood and/or severity of the risk
- Should be a risk factor (hard to calculate) or a proxy for a risk factor
Profits in General insurance
+Premiums net of reinsurance premiums paid
+Investment income and gains
+Claims incurred net of reinsurance recoveries
-Expenses and comissions
-Tax
Note that there is no seperate line for reinsurance
Similar to life insurance
Calculating risk premium
Expected frequency x expected cost per claim
Also known as the theoretical cost
Difference between risk premium and office/gross premium
Office premium allows for expenses, commision, contigencies, reinsurance and profits
Types of provisions in general insurance
- IBNR reserve
- Claims handling expense reserve
- Outstanding reported claims
- Unexpired risk reserve
- Catastrophe reserve
Key risks under general insurance
- Claim frequency, amount, volatiliy and delays
- Accumulations of risks and catastrphes
- Investment risks
- Expenses being higher than expected
- Poor persistency
- New business volume being to high and hence new business strain
- Too low new business volumes and not enough business to spread overheads
- Credit risks
- Operational risks
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Liability insurance
Provides indemnity where the insured, owing to some negligence, is legallu liable to pay compensation to a third party
Types of liability insurance
- Employer’s liability
- Third party motor liability
- Public liability
- Product liability
- Professional liability
Explain the following types of liability insurance
* Employer’s liability
* Third party motor liability
* Public liability
* Product liability
* Professional liability
- Employer liability - Perils include accidenets in the workplace due to the negligence of the employer or employee
- Motor third party liability - Indemnifies the insured against compensation payable for death, personal injury, or property damage of a third party
- Public liability - demnifies the insured against compensation payable for death, personal injury, or property damage of a third party
- Product liability - demnifies the insured against compensation payable for death, personal injury, or property damage of a third party which results from a product fault
- Professional indemnity - The insured is indemnified against legal liability resulting from negligence in the provision of a service
Property damage insurance
Indemnify the insured against damage or loss of their own property
Main types of property under property damage insurance
- Residential builings
- Commercial buildings
- Moveable property
- Land vehicles
- Marine craft
- Aircraft
Financial loss insurance
Indemnify the insured against a peril covered by the policy
