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CII: IF3 Insurance Underwriting process > Commercial insurance products cover > Flashcards

Commercial insurance products cover Flashcards

1
Q

What are the three main types of commercial insurance?

A
  1. Property
  2. Pecuniary
  3. Liability
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2
Q

Name the 5 different types of property insurance cover that can be purchased.

A
  • Fire and special perils
  • All risks
  • Theft
  • Glass
  • Money
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3
Q

Name the 2 different types of pecuniary insurance cover that can be purchased.

A
  • Business interruption

- Legal expenses

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4
Q

Name the 4 different types of liability insurance cover that can be purchased.

A
  • Employers’
  • Public
  • Products
  • Professional indemnity
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5
Q

What three parts does the standard fire insurance policy (ABI recommended wording) consist of?

A
  1. Fire
  2. Lightning
  3. Explosion

The policy can be extended to cover damage to property caused be a wide variety of ‘special perils’.

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6
Q

What 6 special perils can be added to a standard fire policy?

A
  • Explosion
  • Aircraft
  • Riot and civil commotion
  • Malicious damage/vandalism
  • Earthquake
  • Subterranean fire
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7
Q

Name another 7 special perils which can be added to a standard fire policy.

A
  • Spontaneous fermentation or heating
  • Storm and flood
  • Escape and water
  • Impact (including vehicles)
  • Sprinkler leakage
  • Subsidence, heave and landslip
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8
Q

What are the 4 different types of standard fire policy exclusion?

A
  1. Absolute exclusions:

war, pollution, contamination, consequential loss, etc.

  1. Gradually operating exclusions:
    e. g. corrosion/rust, wind/rain damage to property in the open.
  2. Aspects of cover which can be written into the policy:

money, glass, subsidence, etc.

  1. Property or risks more appropriate to another class of business:

motor vehicles,
aircraft etc.

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9
Q

What is the main difference between cover provided under a commercial theft policy and the cover provided under the theft section of a household policy?

A

Forcible and violent entry or exit is required (as defined in the Theft Act 1968).

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10
Q

What common automatic extensions are covered under a theft policy?

A
  • Breakage of glass and other damage (caused by thieves if building is not insured).
  • Replacement of locks, if keys are lost/misplaced
  • Theft or damage while contents are temporarily away from the premises.
  • Index-linking.
  • Extended or full theft (forcible and violent entry not included).
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11
Q

What common exclusions are made under a theft policy?

A
  • Collusion
  • Fire and explosion
  • Cash, bank notes, etc.
  • Livestock
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12
Q

What is EML?

A

EML = Estimated Maximum Loss.

The amount which is considered by the insurer to be an accurate reflection of the worst financial affect that the maximum forseeable loss would have.

(e.g. a thief would be selective).

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13
Q

What is a theft cover rating factor?

A

100% loss is not expected.

Therefore, underwriters apply different levels of rating for the types of goods at risk as some are more attractive than others.

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14
Q

What does glass insurance cover?

A

Destruction or damage to all fixed glass including:

  • Windows
  • Doors,
  • Fanlights
  • Showcases
  • Mirrored glass
  • Glazed partitions
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15
Q

What extensions can be included under a glass insurance policy?

A

Damage to storefront contents because of:

  • Broken glazing and damage to washbasins and sanitary fittings in haidressing salons.
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16
Q

What is non-negotiable money?

A

Money which is difficult to convert in to a cash value (e.g. crossed cheques).

Limits of £250,000 or even £500,000 are not uncommon.

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17
Q

What is negotiable money?

A

Items which are readily convertible to their cash value (e.g bank or currency notes).

For cover purpses, negotiable items have limits.

18
Q

What limits will specified in a policy schedule for negotiable money items?

A
  • money in safe: £1,000 to £100,000 plus.
  • in the insured’s premises out of working hours: up to, say, £250 or £500 limit.
  • at the private residence of a director or employee: nominal limit - up to £250 or £500.
  • Any other money limit (when premises is open for business): limits range from £2,000 to whatever is required.
19
Q

What is an escort warranty?

A

An accompaniment condition stipulating how many people should accompany different size transits.

(typically, one person for every £2,500 or £3,000 in transit).

20
Q

What does a money insurance policy cover?

A

Risks of loss or damage to or destruction of money on all risks basis.

Includes damage to safes or strong rooms caused by theft or attempted theft.

Can be extended to include personal accident/assault and credit cards (which aren’t covered by the standard policy).

21
Q

What do ‘pecuniary insurances’ cover?

A

Financial losses when running a business.

22
Q

What is insured under a business interruption (BI) policy?

A

Loss of profit following material damage.

It covers loss of earnings and additional expenses incurred while a business is unable to operate at full capacity due to a fire, or other insured incident.

23
Q

When is business interruption (BI) cover required?

A
  • When earnings may reduce or cease (e.g. during rebuilding).
  • When some overheads will still need to be paid (e.g. staff salaries).
  • When some costs may temporarily increase (e.g. renting alternative premises to keep the business going).
24
Q

What is the ‘material damage proviso’ contained in a business interruption (BI) policy?

A

The requirement that property insurance is in force to cover the material damage claim, before the BI policy comes into operation.

This is necessary to avoid the possibility that the interruption period is extended because there is no insurance place to pay for repairs/rebuilding or replacement of stock/equipment.

25
Q

What are the 3 main business interruption (BI) policies?

A
  1. Fire and special perils
  2. Engineering
  3. All risks
26
Q

What is the sum insured under a business interruption (BI) policy based on?

A

Gross profit.

It can also be based on ‘increased cost of working basis’. This suitable for small businesses that have no reliance on their business premises.

27
Q

What do legal expenses insurance cover?

A

Firms’ costs if they need to take legal action, or have an action taken against them.

They can also contribute to the cost of the insured’s and their employees’ time spent in court.

28
Q

What does a standard legal expenses insurance cover?

A
  • Employment disputes
  • Criminal prosecution defence cover
  • Property disputes cover
  • Motor cover
  • Patents, registered designs, copyright and trademarks cover
  • Taxation proceedings.
29
Q

Define negligence.

A

Doing something which the reasonable or prudent person would not od, or omitting to do something which a reasonable person guided by those considerations which ordinarily regulate the conduct of human affairs, would do.

30
Q

What is employers’ liability insurance?

A

Cover against liability for injury or disease suffered by their employees, arising out of their employment.

31
Q

What does the Employers’ Liability (Compulsory Insurance) Act 1969 stipulate?

A
  • That every employer must have employers’ liability insurance
  • A certificate of insurance must be displayed at each place of work to show that it is in force. (Can be held in an electronic format).
  • The Employers’ Liability Compulsory Insurance Regulations 1998 require that the cover is provided for a minimum of £5 million.
32
Q

What common extensions can be made to an employers’ liability insurance?

A
  • Criminal defence costs and expenses
  • Additional persons insured
  • Compensation for court attendance
  • Unsatisfied court judgements
33
Q

What is Public Liability (PL) insurance?

A

Insurance which covers all legal liability that is not excluded (i.e. it is an ‘open’ cover).

34
Q

What does Public Liability (PL) insurance cover?

A

The insured is indemnified for liability to third parties for damages for:

illness, injury, death and loss of or damage to their property…

…in connection with the busines insured under the policy and occurring during the period of insurance.

35
Q

What are the key features of Public Liability (PL) insurance?

A
  • Cover
  • Accident (unexpected events)
  • Injury to persons (physical/medial impairment
  • Loss or damage to property
  • Consequential loss
  • Limit of liability (£2 million normally)
36
Q

What 5 exclusions apply to Public Liability (PL) insurance?

A
  • Injury to employees
  • Property belonging or in the custody or control of the insured
  • Products liability
  • Contractual liability
  • Cost of rectifying defective work
37
Q

Name 5 more exclusions which apply to Public Liability (PL) insurance.

A
  • Professional negligence
  • Deliberate acts
  • Motor vehicles, vessels and craft
  • Passenger lifts, elevators and boilers
  • War risks and radioactive contamination
38
Q

Name 3 examples of product liability situations.

A
  1. Injury caused by faulty wiring on an electric kettle.
  2. Damage to a house caused by a leak from a faulty radiator.
  3. Food poisoning caused by incorrectly processed tinned food.
39
Q

What does a products liability insurance policy cover?

A

Legal liability for accidental bodily injury or damage to material property which arises out of goods or products manufactured, constructed, altered repaired, serviced, treated, sold, supplied, or distributed by the insured.

Policies are issued on an OCCURRENCE basis.

40
Q

What exclusions apply to products liability policies?

A
  • Contractual liability
  • Damage to the actual good(s) supplied
  • Faulty design or formula
41
Q

What is pollution liability cover restricted to?

A

Liability arising from pollution or contamination caused by…

…a sudden, identifiable, unintended and unexpected incident that takes place in entirety at a specific moment in time and place during any period of insurance.

The policy indemnity limit is in the aggregate any one period of insurance.

42
Q

What does a standard professional indemnity (PI) insurance cover?

A

Liability of the insured for damages and claimant’s costs and expenses as a result of…

…breach of their professional duty or negligent acts, errors or omissions in their professional capacity.

The policy will also cover the insured’s approved defence costs.

Policies are issued on an CLAIMS MADE basis.

CII: IF3 Insurance Underwriting process (11 decks)

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