Exam 5 Reserving: Description of coverage and importance of reserving

Question 1

What does an insurer sell?

Answer 1

Promise

Question 2

In what three ways should we look at the importance of accurately estimating unpaid claims?

Answer 2

1. Internal management
2. Investors
3. Regulators

Question 3

Internal Management: inaccurate estimate of unpaid claims

Answer 3

1. Inappropriate pricing decision

2. Poor underwriting, strategic and financial decisions, e.g.

Question 4

Examples of how inaccurate estimate of unpaid claims might affect decisions

Answer 4

financial state -> wrong decision to exit market, decision of reinsurance, capital management (i.e. capital allocation

Question 5

Investors: inaccurate estimate of unpaid claims

Answer 5

misstated balance sheets and income statements for the insurer

Question 6

Regulators: inaccurate estimate of unpaid claims

Answer 6

supervisory role

Question 7

accident benefits

Answer 7

Canadian no-fault automobile coverage that provides numerous benefits following a covered accident

Question 8

automobile property damage

Answer 8

subcoverage of automobile liability insurance and provides protection to the insured against a claim or suit for damage to the property of a third-party

Question 9

Collision

Answer 9

subcoverage of automobile physical damage coverage providing protection against claims resulting from any damages to the insured’s vehicle caused by collision

Question 10

coverage

Answer 10

lines of business

Question 11

commercial automobile liability

Answer 11

Arise from business used of owned, hired, or borrowed automobiles

Question 12

Crime insurance

Answer 12

Protect from loss of money, securities or inventory resulting from crime

Question 13

Direct compensation

Answer 13

Canadian automobile coverage, to the extent that the driver of another vehicle was at fault for the accident

Question 14

General liability

Answer 14

e.g. premises liability, operations liability, products liability, completed operations liability, and professional liablity

Question 15

Medical malpractice

Answer 15

aka. medical professional liability insurance. includes hospital professional and physician/surgeon professional liability insurance

Question 16

Personal automobile insurance

Answer 16

aka. private passenger automobile insurance. includes first-party and third-party coverages

Question 17

primary insurance

Answer 17

first layer of insurance coverage

Question 18

private passenger automobile liability

Answer 18

third-party liability protection to the insured against a claim or suit for bodiliy injury or property damage arising from private passenger automobile

Question 19

private passenger automobile physical damage

Answer 19

a pesonal lines coverage providing protection against damage to or theft of a covered private passenger automobile

Question 20

property insruance

Answer 20

protection against most risks to property

Question 21

umbrella and excess insurance

Answer 21

liability types of coverage available protecting against claims above and beyond the amounts covered by primary insurance policies or not covered by the primary policies

Question 22

U.S workers compensation

Answer 22

provides coverage for the benefits the insured (i.e. the employer) becomes legally responsible for due to workplace injury, illness and/or disease