Chapter 8: General insurance products Flashcards
List the key features of General Insurance contracts
- They are short term
- There can be multiple claims
- Claim amounts are generally unknown and can be very volatile
- There can be delays in reporting and settling claims
List the 4 generic groups of General Insurance contracts
- Liability
- Property
- Financial loss
- Fixed benefit
List the products covered under liability insurance
- Employers’ liability
- Product liability
- Public liability
- Motor third party
- Professional indemnity
List the products covered under Property Damage Insurance
- Land vehicles
- Marine
- Aircraft
- Residential buildings
- Commercial buildings
- Moveable contents
List the products covered under Financial Loss Insurance
- Pecuniary loss
- Fidelity guarantee
- Business interruption
- Cyber security
List the products under Fixed Benefit Insurance
- Personal accident
- Health
- Unemployment
What is the General Insurance split?
- Personal lines - contracts sold to individuals, such as residential buildings and contents.
- Commercial lines - contracts sold to businesses, such as commerical property, employers’ liability and business interruption insurance
What is the difference between short- and long-tailed business?
Short-tailed means that claims are generally reported quickly and settled quickly by the insurer, and
Long-tailed means that there is a sizeable proportion of total claim payments that take a long time to be reported and/or a long time for the insurer to settle.
Define a rating factor
A rating factor is a factor used to determine the premium rate for a policy, which is measurable in an objective way and relates to the likelihood and/or severity of the risk.
It must, therefore, be a risk factor itself or a proxy for a risk factor or risk factors
How are profits determined for General Insurance contracts?
Premiums net of reinsurance premiums paid
* + Investment income and gains
* - Claims incurred net of reinsurance recoveries
* - Expenses and commission
* - Tax
* = Profit
List the different types of reserves / provisions for general insurance contracts
- An outstanding reported claims reserve
- An incurred but not yet reported (IBNR) reserve
- An unexpired risk reserve
- A catastrophe reserve
- A claims handling expense reserve.
List the key risks under General Insurance contracts
- claim frequency, amount, volatility and delays
- accumulations of risk and catastrophes
- investmetn risks
- expenses being higher than expected
- poor persistency
- new business volumes too high and hence new business strain, or too low and not enough business over which to spread the overheads.
- credit risk
- operational risks
Suggest some risk manamager tools used by General Insurers
- Reinsurance
- Underwriting
- Diversification across classes of business or geographically
- Monitoring the experience
What is the principle of indemnity?
The principle of indemnity is to restor the insured to the same financial position after a loss as before the loss.
Typically, the intention of benefits in short-term insurance is to indemnify the insured, i.e. compensate the insured for the financial loss as a result of the insured event.
What is a peril?
A peril is a type of event that may cause losses, whether man-made or due to natural disasters.
What is liability insurance?
Liability insurance provides indemnity where the insured, owing to some form of negligence, is legally liable to pay compensation to a third party.
Any legal expenses relating to such liability are usually also covered.
An illegal act of negligence will often invalidate the cover.
Outline the 7 features of liability insurance
- Provides indemnity where the insured, due to some form of negligence, is legally liable to pay compensation to some third party.
- The legal fees associated with the claim are usually also covered
- Illegal acts of negligence will invalidate the claim and no payment will be made by the insurer
- There may be an upper limit and/or excess amount applied to the claim
- On the occurrence of a claim the cover may be cancelled, or a reinstatement premium or higher premium might be required for the cover to continue
- The claims are usually medium to long tailed and are likely to be real in nature
- International or nation laws apply, depending on the type of cover.
List the perils covered by employers’ liability
- Accidents caused by negligent actions by the employer
- Exposure to harmful substances
- Exposure to harmful working conditions
List the perils covered by motor third party liability
Compensation payable to third parties for death, personal injury or damage to their property.
List the perils covered by public liability insurance
Legal liability for the death of, or bodily injury to, a third party or for damage to property belonging to a third party, other than those liabilities covered by other liability insurance.
List the perils covered by professional indemnity insurance
Legal liability resulting from negligence in the provision of a service.
The perils also depend on the profession of the insured.
List the perils covered by product liability insurance
Legal liability for the death of, or bodily injury to, a third party or for damage to property belonging to a third party.
List the perils covered by buildings insurance
Fire is the principal peril insured against, but policies can cover many other perils, such as:
* explosion
* lightning
* theft
* storm
* flood
List the perils covered by moveable property insurance
Theft is the major peril.
The policy will define precisely what moveable property is covered by the insurance.
List the perils covered by motor property insurance
- Accidental or malicious damage to the insured vehicle
- Fire
- Theft of the vehicle
List the perils covered by marine hull cover
- perils of the seas
- fire
- explosion
- jettison
- piracy
List the perils covered by pecuniary loss insurance
- Bad debts
- Failure of third party
List the perils covered by fidelity guarantee insurance
Financial losses caused by dishonest actions by its employees.
List the perils covered by business interruption cover
Losses made as a result of not being able to conduct business for varoius reasons specified in the policy, for exmaple, fire at the insured’s property or a neighbouring property.
List the perils covered by cyber insurance
Cyber risks, which include:
* hacking
* phishing
* worm attacks
* viruses
Covers pecuniary, fidelity guarantee and business interruption cover losses for a business.
List the perils covered by personal accident insurance
Insured party suffers the loss of one or more limbs or other specified injury.
List the perils covered by health insurance
The need for treatment in a hospital
List the perils covered by unemployment insurance
The event of the policyholder being made redundant.
