Introduction to Property Insurance Flashcards
what does it mean to “bind” an insurer on a risk
the broker has committed the insurer to a contract of insurance
binders may be ____ or ____
oral or written
why are binders important
avoids a potential for disagreement as to coverage and amounts insured in the event a loss occurs before a policy has been issued
what is a binder/cover note?
a piece of paper setting out basic details of risk, along with coverages and limits requested
what informs brokers of the limits they have the authority to bind a company to?
the Agency Agreement
what happens if a broker exceeds their binding limits and a loss occurs
might be dealing with an E&O claim
what do endorsements do?
endorsements AMEND the contract
what are endorsements?
legal forms that amend the policy wording
what is a rider?
a type of endorsement that adds additional coverage to an existing contract
what is a floater?
a type of endorsement that provides coverage for property that moves from place to place (floats) and is transient in nature
what does PACICC stand for?
Property and Casualty Insurance Compensation Corp
what does PACICC do
it is insurance in case the insurER is bankrupt/insolvent and the insured has a claim
what are PACICC’s claims limits?
up to 500k per policy, policy deductibles are applied to the total amount of the insured loss
PACICC will also refund what percentage of unearned(unexpire) portion of your premium calculated from the date of the wind-up order
70%
what is the definition of fiduciary
one who holds property or money in trust for another.
insurers and brokers are……
fiduciaries
define ‘right of subrogation’
this is a legal right provided to insurers, who having indemnified an insured, are now entitled to the same rights of recovery as the insured had to recover the amount of a loss from the responsible party.
The INSURER has the “right” to collect money paid from the at fault party
what does subrogation mean
to put oneself in anothers’ shoes
a policy insuring loss by FIRE must provide what 3 coverages?
1) fire
a) friendly fire: one that is contained in its proper receptacle and is where it should be (NOT COVERED)
b) hostile fire: a fire which escapes from its receptacle (COVERED)
2) lightning
3) explosion of natural, coal, or manufactured gas
Insurers are NOT required to provide coverage for losses cause directly by these 4 legislated exclusions:
1) direct application of heat
2) lightning damage to electrical devices or appliances
3) “other’ types of electrical currents
4) contamination by radioactive material
give an example of a ‘direct application of heat’ exclusion:
Brian is ironing his shirt, fire breaks out and burns house. only the actual shirt to which heat was directly applied via iron would not be covered
give further clarification to what is meant by the contamination by radioactive material exclusion:
when any perils insured under a policy cause radioactive materials to escape, resulting damage is not insured.
Fire damage resulting from what following deliberate acts are uninsurable?
-war
-rebellion
-revolution
-invasion
-civil war
-hostilities
-act of foreign enemy and military power
-arson (must be proven)
why is fire damage resulting from specific deliberate acts uninsurable?
because would bankrupt insurers and are to be borne by society as a whole
who are statutory conditions imposed by
provincial legislation
can insurers make changes to statutory conditions?
NO, prohibited
why are statutory conditions important?
they clearly outline the rights and responsibilities of all parties to the contract and ensure all are treated fairly
what policies do statutory conditions apply to
auto, property, accident and sickness policies
every policy that insures the peril of fire contains what??
statutory conditions
the Insurance Act requires that all rules governing the rights and responsibilities of all parties to a contract of _________insurance be a part of _____ _____
FIRE, every contract
Brokers legally represent and owe their primary duty of interest to the
client
agents legally represent and owe their primary duty of interest to the
insurer
brokers are employed by
owner of independent brokerage
agents are employed
directly by insurance company
brokers can sell….
a variety of products offered by many insurance companies
agents can sell…
products offered by ONE insurance company only
brokers and agents owe what type of duty to the insureds they represent
fiduciary
what is a physical hazard
hazards you can see and touch , may enhance or deter the possibility of a loss
examples of physical hazards?
occupants, building construction, housekeeping
what is a hazard?
the condition of a property that could cause a claim
what is a peril
the cause of loss
what are moral hazards
subjective characteristics of the applicant which may or may not be observable
examples of moral hazards
financial condition of business, moral character
what is estoppel?
a legal doctrine which precludes the person from denying the truth of a statement they previously made that would cause one to draw certain logical conclusions.
in other words, a ‘bar of expectation’ whereby someone’s actions lead another to believe something. that becomes their reality and what the insured would then believe in a reasonable assessment
give an example of estoppel
ex: auto policy violation
driver intoxicated. adjuster leads insured to believe company is going to provide all coverages. by adjusters actions alone, the company would be estopped from denying this claim
what is a hard market
a hard market occurs when insurance companies have experienced poor underwriting results. when insurance companies are not realizing an underwriting profit, rates need to be adjusted to improve the financial performance.
what is significant of a hard market
rates increase and coverage becomes more restrictive
in a hard market, what becomes more difficult?
for agents and brokers to obtain favorable and competitive terms for their clients
what is a soft market
when the underwriting results are positive, companies are competitive and making money. more companies are willing to write that class of business, and naturally the rates (premiums) reduce
what is the process of reporting clams
claims are technically reported to the broker, and the broker then reports it to the insurance company. from there either an insurance company adjuster or an independent adjuster will be assigned by an insurer to settle a claim.
who are underwriters
employees of insurance companies
what do underwriters do?
assist in rate-making and helping place business through the insurer, not required to be licensed
