Exam 3 Flashcards
How did employees recover their losses/damages prior to workers comp
By suing their employer
How are workers comp rates determined
By the industry and specific job classification within that industry
Does every state have its own variations of workers comp laws
Yes
How much of lost wages are covered under workers comp
2/3. The other 1/3 is taxes
What drives the cost of workers comp
Fraud
o Part A of workers comp
Economic damages (medical+lost wages)
• 100% unlimited damages
• Majority of the cost of workers comp comes from medical
o Part B of workers comp
The lawsuits that ensue
How can workers comp be combatted
By self-insuring
Benefits of self insuring
Good if you don’t have many claims because it would incentivize you to have a safe work environment
Drawbacks of self insuring
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
o If you are self-insured and your claims rise rapidly, what happens
You will have to pay more
What are the most common risk techniques in home and auto insurance
Risk transfer and acceptance
Personal vs. business auto policy
A personal auto policy covers a personal vehicle. If it is used for business, a commercial policy is required
Personal vs. business homeowners policy
A personal homeowners policy covers a personal residence. If it is used as a rental, a commercial policy is required
o 20/50/10
20 is per person (PL)
50 is per incident (total) (PL)
10 is for property damage (PD)
o What determines how much you pay in auto insurance
Age
Miles driven
Type of vehicle
Which state you are in
Which state has the highest auto insurance rates
Michigan
Types of auto insurance
PL/PD – 54%
Collision – 42%
Comprehensive – 17%
How many states have some form of no-fault insurance
12
Who establishes workers comp in each state
The states themselves set the wage benefit levels
Methods of workers comp funding
State funds - 20 states have their own plans that compete with private insurers
Federal Employees - The federal govt covers its own workers
Injured employee benefits
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)
How many people die in auto accidents each year
Roughly 40,000
PAP coverages
Liability
Medical payments
Uninsured and under-insured motorist protection
Damage to your auto
Duties after an accident or loss
General provisions
Duties after an accident
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
States with the highest rates of auto insurance
DC, Louisiana, New Jersey, Florida, and New York
States with the lowest rates of auto insurance
The Dakotas and Iowa
What makes up the auto insurance premium
Cost of claims, expenses of running the insurance company, profits/reserves, investment income, and the combined ratio
The combined ratio
CR = ((claims + loading) / earned premiums)
CR = 100% = no underwriting profits
CR < 100% = expenses are less than premium reserves
CR > 100% = expenses exceed premiums
Auto insurance premiums are rising rapidly because
The PL/PD expenditures were very large
How are losses being controlled in auto
By making the roads and vehicles safer
No-fault laws were started when
In the 1970’s
Retrospective rating
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.
HO - 2
The broad form covers damage to dwellings, other structures, and personal property caused by named perils
HO - 3
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)
HO - 5
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
HO - 8
Modified coverage form which is designed for older homes where replacement value exceeds the fair market value
HO - 4
The tenant form. For those who rent apartments, rooms, and houses
HO - 6
The unit owner’s form is designed to cover the special needs of condo and co op owners
States with the highest rates of uninsured drivers
Oklahoma: 25.9% uninsured
Florida: 23.8%
Mississippi: 22.9%
States with the lowest rates of uninsured drivers
Maine 4.5%
New York 6.1
Massachusetts 6.2
what percentage of auto insurance claims are fraudulent
10-15%
Loading expense
Expense loading is the amount included in the premium charged by an insurance company to cover its administrative and maintenance costs.
Independent agent
Not tied to one insurance company, but instead represents several
Captive agent
An agent who works for AAA or State Farm. Only sell policies for their company
