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FIN 331 > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

How did employees recover their losses/damages prior to workers comp

A

By suing their employer

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2
Q

How are workers comp rates determined

A

By the industry and specific job classification within that industry

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3
Q

Does every state have its own variations of workers comp laws

A

Yes

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4
Q

How much of lost wages are covered under workers comp

A

2/3. The other 1/3 is taxes

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5
Q

What drives the cost of workers comp

A

Fraud

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6
Q

o Part A of workers comp

A

 Economic damages (medical+lost wages)
• 100% unlimited damages
• Majority of the cost of workers comp comes from medical

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7
Q

o Part B of workers comp

A

 The lawsuits that ensue

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8
Q

How can workers comp be combatted

A

By self-insuring

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9
Q

Benefits of self insuring

A

 Good if you don’t have many claims because it would incentivize you to have a safe work environment

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10
Q

Drawbacks of self insuring

A

 Bad if you’re self-insured because the company pays each claim as it occurs so you have to pay them as they occur so you cannot build up a fund to cover this

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11
Q

o If you are self-insured and your claims rise rapidly, what happens

A

You will have to pay more

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12
Q

What are the most common risk techniques in home and auto insurance

A

Risk transfer and acceptance

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13
Q

Personal vs. business auto policy

A

 A personal auto policy covers a personal vehicle. If it is used for business, a commercial policy is required

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14
Q

Personal vs. business homeowners policy

A

 A personal homeowners policy covers a personal residence. If it is used as a rental, a commercial policy is required

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15
Q

o 20/50/10

A

 20 is per person (PL)
 50 is per incident (total) (PL)
 10 is for property damage (PD)

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16
Q

o What determines how much you pay in auto insurance

A

 Age
 Miles driven
 Type of vehicle
 Which state you are in

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17
Q

Which state has the highest auto insurance rates

A

Michigan

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18
Q

Types of auto insurance

A

 PL/PD – 54%
 Collision – 42%
 Comprehensive – 17%

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19
Q

How many states have some form of no-fault insurance

A

12

20
Q

Who establishes workers comp in each state

A

The states themselves set the wage benefit levels

21
Q

Methods of workers comp funding

A

State funds - 20 states have their own plans that compete with private insurers

Federal Employees - The federal govt covers its own workers

22
Q

Injured employee benefits

A

Death benefits ($2,000 funeral benefit and weekly income benefit paid to the deceased’s dependents)

Medical benefits (unlimited medical benefits)

Vocational rehab benefits (Training for new employment for those with work related injuries)

23
Q

How many people die in auto accidents each year

A

Roughly 40,000

24
Q

PAP coverages

A

Liability

Medical payments

Uninsured and under-insured motorist protection

Damage to your auto

Duties after an accident or loss

General provisions

25
Q

Duties after an accident

A

Call the police then get the info from the other driver (name, address, phone number name of insurance company, address of agent, policy number, and driver’s license number), then notify your insurance company, then get further instructions from your agent

26
Q

States with the highest rates of auto insurance

A

DC, Louisiana, New Jersey, Florida, and New York

27
Q

States with the lowest rates of auto insurance

A

The Dakotas and Iowa

28
Q

What makes up the auto insurance premium

A

Cost of claims, expenses of running the insurance company, profits/reserves, investment income, and the combined ratio

29
Q

The combined ratio

A

CR = ((claims + loading) / earned premiums)

CR = 100% = no underwriting profits

CR < 100% = expenses are less than premium reserves

CR > 100% = expenses exceed premiums

30
Q

Auto insurance premiums are rising rapidly because

A

The PL/PD expenditures were very large

31
Q

How are losses being controlled in auto

A

By making the roads and vehicles safer

32
Q

No-fault laws were started when

A

In the 1970’s

33
Q

Retrospective rating

A

A rating plan that adjusts the premium, subject to a certain minimum and maximum, to reflect the current loss experience of the insured. Retrospective rating combines actual losses with graded expenses to produce a premium that more accurately reflects the current experience of the insured.

34
Q

HO - 2

A

The broad form covers damage to dwellings, other structures, and personal property caused by named perils

35
Q

HO - 3

A

The special form is open perils covering for almost any type of physical damage to dwellings. However, it doesn’t provide open peril coverage to personal property (only named perils)

36
Q

HO - 5

A

The comprehensive form which is similar to HO - 3, but provides open perils coverage on personal property and costs about 15% more than HO-3

37
Q

HO - 8

A

Modified coverage form which is designed for older homes where replacement value exceeds the fair market value

38
Q

HO - 4

A

The tenant form. For those who rent apartments, rooms, and houses

39
Q

HO - 6

A

The unit owner’s form is designed to cover the special needs of condo and co op owners

40
Q

States with the highest rates of uninsured drivers

A

Oklahoma: 25.9% uninsured
Florida: 23.8%
Mississippi: 22.9%

41
Q

States with the lowest rates of uninsured drivers

A

Maine 4.5%
New York 6.1
Massachusetts 6.2

42
Q

what percentage of auto insurance claims are fraudulent

A

10-15%

43
Q

Loading expense

A

Expense loading is the amount included in the premium charged by an insurance company to cover its administrative and maintenance costs.

44
Q

Independent agent

A

Not tied to one insurance company, but instead represents several

45
Q

Captive agent

A

An agent who works for AAA or State Farm. Only sell policies for their company

FIN 331 (4 decks)

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