Hamilton & Ferguson 6 & 9 Flashcards
Briefly describe the FAIR plan:
Property owner unable to get coverage through voluntary market applies to FAIR plan via an authorized agent or broker
Describe how the FAIR plan operates:
-FAIR plan may operate as a policy issuing syndicate
-For a percentage of premium, servicing carries u/w, service, and settle claims
-Either the staff of the FAIR plan, or a contracted insurer
would handle the above
-In almost all plans, insurers share risk in proportion to
market share
What types of property are considered to be
uninsurable under FAIR:
-Vacant or open to trespass
-In poor physical condition or has unrepaired fire damage
-Subject to poor housekeeping (including overcrowding,
storage of trash, flammable materials)
-In violation of law or public policy
-Not built in accordance with building and safety codes
List some Perils covered under FAIR:
-Fire, lightning, windstorm or hail, explosion, riot, aircraft,
vehicles, smoke, and vandalism or malicious mischief
-Some states include crime, sprinkler leakage, and earthquake
What types of properties are covered by Beach and
Windstorm Plans:
Properties along Atlantic and Gulf Coasts vulnerable to
windstorm loss
Describe the Operation of Beach and Windstorm Plans:
- LA and MS use single servicing carrier for u/w, services, and claims
- Other states, the plan issues and services policies
- In all plans, property insurers share in plan losses according to premium volume
What types of properties are eligible for Beach and
Windstorm Plans:
- Plans offer coverage only in designated coastal areas
- Each plan requires buildings that are constructed or rebuilt after certain date to conform to applicable building code
What types of properties are not eligible for Beach and
Windstorm Plans:
-In poor physical condition or with unrepaired previous
damage
-Subject to poor housekeeping
-In violation of law or public policy
3 exceptions to the rule that Cancellation of for Beach
and Windstorm Plans are subject to 30-day statutory
notice:
- Nonpayment of premium
- Material misrepresentation
- Evidence of arson at direction of or by the owner/occupant
List 4 types of residual auto plans:
- assigned risk plans
- reinsurance facilities
- JUAs
- Maryland Automobile fund
Describe how the Assigned Risk Plans work:
-When rejected in voluntary market, driver applies for
coverage through plan
-Plan assigns application to insurer
-Insurer obligated to accept specified percentage based on market share
-Insurer handles policy as if written voluntarily (Receives
premium, services, pays losses; retains profit/ loss; Voluntary insureds required to subsidize assigned risk drivers)
-Rates in a state are usually uniform
3 Objectives of Reinsurance Facility:
- Achieve more equitable pricing
- Improve service
- Avoid stigma associated with being in assigned risk plan
Explain how the Reinsurance Facility plan works:
-Premiums and losses are ceded to facility
-Producer accepts application for auto insurance and submits to insurer
-Insurer can choose to Handle submission as voluntary
business OR Cede premium to facility and just service the policy
-When claim occurs, servicing insurer handles and pays claim (Insurer is reimbursed by facility)
-Operating losses and expenses of the facility are shared by all insurers based on a formula
-Insured cannot readily detect whether he is in the shared market
-Rates are not uniform
Explain how the JUA works:
-Limited number of servicing insurers are designated to
handle all residual auto insurance business
-Servicing carriers get fee for handling policies
-Applicants found unacceptable to voluntary insurer are
forwarded to JUA servicing carrier
-Servicing insurer issues policy, collects premium, provides service, pays claims
-Results of business in pool shared by all insurers based on voluntary market share
List some properties of rates in the JUA:
- Based on experience of the pool
- Uniform for all servicing insurers
- Like auto insurance plans, higher than voluntary market
