Danika's Cards Flashcards
What does comprehensive insurance cover?
Covers loss or damage caused by things other than collision, much broader than specified perils but has overlapping coverages.
OSFI
-Office of the Superintendent of Financial Institutions
-Federal Government
To be federally licensed, must meet strict financial standards set by OSFI, OSFI monitors insurers financial solvency
Superintendent of Insurance
Provincial Government
- Supervises terms and conditions of insurance contracts
- Licenses insurers
- Monitors financial stability of provincially licensed insurers (Financial solvency)
PACICC
Property & Casualty Insurance Compensation Corporation (1992)
If participating insurance company goes insolvent, corporation pays out losses.
Max $250,000/claim
Refund up to 70% of unearned premiums, Max $700/policy.
What 6 things must appear on every insurance policy? (Insurance Act)
- Parties to the contract
- Policy Period
- Loss payable or payee, if any
- Type and amount of coverage
- Rate and premium charged
- Subject matter of insurance
What 2 things does the Subject matter of insurance need to include?
- Item insured
2. Location of insured item
Subrogation
The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.
Effect of delivery of policy
If insurance policy is delivered but not yet paid, coverage is still applied.
Perils under fire peril include:
- Fire
- Lightening
- Explosion of natural gas, coal, or manufactured gas
4 Standard exclusions of fire peril
- Application of heat
- Lightening damage to electrical devices or appliances
- Electrical currents (surge)
- Contamination by radioactive material
Statutory Conditions
- Outline the duties and responsibilities of all parties to the contract.
- Are legislated in provincial insurance acts
- Are required in every fire, auto, and accident & sickness insurance contract
Statutory Condition 1: Misrepresentation
- False description of the property to the prejudice of the insurer.
- Misrepresentation of a material fact
- Fraudulent omission of a material fact
Statutory Condition 2: Property of others
-Insurer does not have to pay out for loss/damage to property of others
Statutory Condition 3: Change of interest
Include exceptions
-Normally only parties to the contract are entitled to benefit from it
Unless:
-Authorized assignment under bankruptcy act
-Change of title by succession
-Change of title by death
Statutory Condition 4: Material Change
- Any change within the control and knowledge of the insured which arises after the policy is issued, and serves to increase the chance of loss.
- To qualify, change must be SUBSTANTIAL and CONTINUING
Statutory Condition 5: Termination
By insurer: Pro Rata
5 days notice in person, or 15 days registered mail day after it arrives at post office
By insured: Short Rate
Any time on request, subject to cancellation fee.
Statutory Condition 6: Requirements after loss
Insured must:
- Give notice to insurer
- Proof of loss whenever practiceable
- Give inventory of undamaged property
- Give receipts/invoices
Statutory Condition 7: Fraud
When insurer is able to prove fraud, it is entitled to deny the entire claim, not just the fraudulent part
Statutory Condition 8: Who may give notice and proof
If insured is unable to give notice (for good reason), an agent of the insured may do so for them.
Ex, if in extended hospital stay, spouse may make claim for them.
Statutory Condition 9: Salvage
Insured must take all reasonable steps to prevent/reduce loss/damage, including property removal if required.
Statutory Condition 10: Entry, Control, Abandonment
- Insurer is granted immediate access to property after loss
- Insured cannot abandon property and risk more damage
Statutory Condition 11: Appraisal
If insurer/insured cannot determine the value of property, either party can request an appraisal.
Statutory Condition 12: When loss is payable
Within 60 days after proof of loss
Statutory Condition 13: Replacement
- Insurer can repair/replace/rebuild any loss
- If they choose to repair, must notify insured of intentions within 30 days of proof of loss
- Must begin action 45 days after proof of loss
Statutory Condition 14: Action
If you want to seek action against insurer, must be within one year of claim
Statutory Condition 15: Notice
Any written notice to insurer must be sent to chief agency or head office.
Who is responsible for the administration of the provincial Insurance Act?
- Superintendent of Insurance
- Superintendent of Financial Institutions (BC only)
Who establishes the code of conduct/ethics for brokers?
Provincial insurance councils
-Typically set a higher standard for brokers than the insurance act does.
Licensing standards (5 points)
- Qualifications for licensing
- Class of license
- License Jurisdiction
- License term
- Basis for termination of license
What is an Agent/Broker
-Serves as intermediary between client and insurer.
-They are not a party to the contract
Agent= Represents insurers interests
Broker= Represents client’s interests
What is a broker’s primary duty to clients?
Ensure that they receive the right insurance advise and coverages.
What is a broker’s primary duty to insurers?
- Will tell the truth about risks submitted
- Will not withhold or conceal important information.
E&O Claim
Errors & Omissions Claim
- When a client suffers financial loss due to broker’s mistake, E&O claim filed against brokerage.
- Most common claim is inadequate coverage
Underwriter
- An insurer employee who evaluates applicants for insurance, selects those that are acceptable to the insurer, prices coverage, and determines policy terms and conditions.
- Primary role is to select risks most likely to be profitable for the insurer.
- Does not require a license
- Underwriter/broker relation very important
Where do underwriter’s obtain the information required to assess risk? (4)
- The application
- The broker
- Loss experience data
- Inspection reports
Physical Hazard
a physical condition that increases the chance of loss Example: -Type of building construction -Occupancy -Housekeeping
Moral Hazard
Subjective characteristics of the applicant that could cause a peril to occur. Examples: -Financial conditions -Moral character -Indifference to loss
Underwriter’s possible decisions for assessing risks
- Reject the risk
- Accept the risk unconditionally
- Accept risk w/ increased rate
- Accept risk w/ increased deductible
- Accept risk subject to conditions
Underwriter’s policyholders services
- Makes any changes to policy
- Prep of cancellation notice (If required)
- Prep of renewal certificate
Benefits of having a good broker/underwriter relationship
- Underwriter’s more co-operative w/ brokers they know and trust
- Underwriters can speed up process and help brokers with deadlines
- Underwriters have high degree of knowledge to share w/ broker.
Types of Homeowner insurance
- Tenant’s
- Homeowner’s
- Mobile home
- Condo unit owner
- Secondary/seasonal dwelling
IBC
Insurance Bureau of Canada
Homeowners forms used by insurers automatically include what 4 kinds of personal property coverage?
- Dwelling building
- Detached private structures
- Personal Property
- Additional Living Expenses
Additional commercial property insurance policies are required to insure this business property:
- Building
- Stock
- Equipment
Direct damage
Object is directly damaged by an insured peril.
Ex. Fire burnt down wall
This is covered by property insurance
Indirect damage
Arise as a consequence of direct losses
Not covered by property insurance
Ex. Loss of rental income when apartment building burns down
Deductible
a specified amount of money that the insured must pay before an insurance company will pay a claim
Pair and Set Clause
A clause found in various Property insurance contracts that states that when part of a set is damaged or destroyed, the insured is not entitled to reimbursement for the entire set. Loss will be deducted from total value.
ex. One earring
Parts Clause
When loss to one part of property which consists of several parts, the settlement pays for the value of lost part and the installation cost.
ex. Corner of carpet
How do you find ACV?
Actual Cash Value:
ACV= Replacement cost-Depreciation
What factors influence depreciation?
- Condition of object
- Obsolescence
- Resale value
- Normal life expectancy
Replacement Cost Basis
Replacing loss with another one instead of paying out.
Can also repair if replacement is not possible
Valued Policies
Irreplaceable objects.
Usually requires an appraiser to determine value of loss.
ex. Antiques
Standard Mortgage Clause
Protects interest of mortgagee (bank) for loan.
States that:
-Guarantee of payment when insure breaches any policy
-Insurer cannot change policy to prejudice mortgagee without notice/consent
Mortgagee
Anyone with insurable interest in the property insured.
Uninsured or unidentified motorist coverage (Hit and run)
- Included in autoplan basic for $200,000 coverage
- If uninsured, no deductible
- If unidentified, $750 deductible
For an own-damage claim, insured must submit proof of loss within _______ days.
90
ICBC
April 19, 1973
Insurance Corporation Act passed
Established the Insurance Corporation of British Columbia (ICBC) as a crown corporation.
Underinsured Motorist Coverage (UMP)
- Included in autoplan basic for min $1 million coverage.
- Compensates crash victim when the at-fault driver doesn’t have enough TPL coverage.
Third Part Liability
-Included in autoplan basic $200,000 coverage (private vehicle)
$1 million (Commercial vehicles)
$2 million (Dangerous goods)
-Means that ICBC covers up to $200,000 when a policyholder causes damages.
What are the 5 functions of insurance?
- Spread of risk
- Basis of the credit system
- Eliminates worry and encourages entrepreneurship
- Loss reduction and loss prevention
- Source of employment and investment capital
3 Types of P&C insurance
- Property
- Liability
- Automobile
What is “General Insurance”?
Property & Casual (P&C)
Auto, liability, property
Spread of Risk
- Main function of insurance
- Mechanism in which the losses of the few are shared among the many.
Direct writing System
Insurer —> Customer
- Sell only their own products
- Remuneration = salary/commission
- Insurer owns all of their business and performs all admin.
ex. belairdirect
Independent Brokerage System
-Covers >80% of all P&C Insurance
-Represent several insurance companies
-Brokerage owns the business and provided client services
-Paid commission
Insurers –> Broker –> Customer
Stock Companies
- A type of insurance company that is owned by shareholders.
- Type of profit insurer
- Profit driven
- Money is provided by public sale of stock or private funds.
Mutual Companies
- Insurance organizations that have no capital stock, but are owned by the policyholders.
- Type of private insurer
- Profit not primary incentive
- Goal is to provide shareholders w/ cheapest insurance possible.
Which provinces have compulsory auto insurance?
BC, SK, MB, QB
2 main methods of insurance distribution
- Direct writing system
2. Independent Brokerage System
Risk
The “chance of financial loss” to which the object of insurance may be exposed.
Peril
cause of loss
3 categories of risk people face
- Personal risk
- Property Risk
- Liability Risk
What are the 4 ways to deal with risk?
- Avoidance
- Controlling
- Retention
- Transfer of risk
What are the 2 types of risk
- Speculative Risk (Not insurable)
2. Pure Risk (Insurable)
Lloyd’s of London
not an insurer, but a society of members who underwrite insurance in syndicates
Definition of indemnity
Offering an EQUAL amount of loss, no more and no less.
What are the 2 distinct types of insurers?
- Private (Stock/Mutual)
2. Government
Syndicates
A formation of people/underwriters that subscribe to a slip as a group.
5 elements of a contract
- Agreement
- Consideration
- Legality of object
- Legal capacity of the parties to contract
- Genuine Intention
T/F
You must own a vehicle to purchase auto insurance
False
Base Rate
Standard rate charged for autoplan basic, before optional coverages, surcharges/discounts
No-Fault System
System of auto insurance where victim of accident has no right to sue for damages, all parties of the incident are covered by the insurance company.
Tort-Based System
- System of auto insurance where victim of car accident can sue for damages
- Must prove the other party is at fault
3 Essential elements to insurance contracts
- Insurable interest
- Utmost good faith
- Indemnity
Floaters
Added to a contract to cover property with a high degree of mobility
Ex. Boat, ring
Endorsements and Riders
Acknowledges a change in the terms of a contract.
Binder
A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued.
Who does not have the legal capacity to contract?
- Minors
- Mental incompetents
- Under influence of alcohol/drugs
- Trade name
Statute Law
A law or act passed by government
Tort
A wrongful act which has negligently caused damage or injury to another. This wrongful act may be an intentional act, a negligent act, or a failure to act.
Tort Law
Law that deals with harm to a person or a person’s property.
Contract Law
A legally enforceable agreement between 2+ parties. It is a private agreement and the terms express intentions of those parties.
Priority of Claims rule
90/10 rule
-When claims for both injury and property damage equal or exceed TPL coverage, 90% goes towards injury, and 10% towards property damage.
Autoplan basic covers you where in the world?
Canada and USA, including vessels travelling between the 2.
Negligence
The omission to do something which a reasonable person would do, or doing something which a reasonable and prudent person would not do.
What are the 4 liability coverages on Section II of the IBC Homeowners forms?
E: Personal legal liability
F: Voluntary medical payments
G: Voluntary payment for damage to property
H: Voluntary compensation for residence employees
Are liability coverages subject to a deductible?
no
What premises are insured without being described on the Coverage Summary page? (Liability Policies)
- Temporary residence that you do not own and do not stay at for more than 90 consecutive days
- If purchase new home that is going to be principal residence, it is automatically insured from the day they take possession but coverage is for a limited time only.
- Individual or family cemetery plots or burial vaults
- Vacant land (not farm land)
- Land where you are building 1-3 family residence to be occupied by you.
