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CAIB 2 > Lesson 1-2 > Flashcards

Lesson 1-2 Flashcards

1
Q

24 (a) Identify two types of property which are subject to a ‘special basis of settlement’:

A

Tenants Improvements and Records

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2
Q

1 (a) Identify the four categories that buildings may fall into:

A

Residential
Non-mercantile
Mercantile
Manufacturing/industrial

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3
Q

2 (a) Identify the two bases that coverage can be provided on:

A

Scheduled
All Property

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4
Q

Building Defined
Define Fixted Structures

A

Permanent structure on the insured property like erect pole signs yard lights and fencing

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5
Q

Building Define
Define Additions and Extensions

A

A structure in contact or attached to the insured building, and not separate from it
Ex. Enclosed walkway

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6
Q

Building Defined
Define Permanente Fittings and Fixtures

A

Items that are intended to remain part of the insured structure. They must be attached to and form part of the building.
Ex. Light fixtures, burglar and fire alarms

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7
Q

Building Defined
Define Materials, equipment, and supplies

A

Items used for the purpose of maintenance of the premises, normal repairs, alterations, or for building services.
Ex. Lumber, roofing shingles and glass

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8
Q

Building Defined
Define growing plants, trees, shrubs or flowers

A

Must be inside the building for decorative purposes. The insured must be the owner of the building.

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9
Q

6 (a) Identify the three ways in which property may be valued:

A

Actually Cash Value
Replacement Cost
Book Value

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10
Q

Name 5 types of property contained in the definition of building

A
  1. Fixed structures
  2. Additions and extensions
  3. Permanent Fittings and fixtures
  4. Materials, equipment, and supplies
  5. Growing Plants, trees, shrubs, and flowers inside
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11
Q

Building

Identify the three conditions pertaining to the coverage for growing plants, trees, etc.

A

Must be inside
Used as decoration
The insured owns the building

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12
Q

Identify 3 types of property contained in the definition of Stock

A
  1. Advertising Material
  2. Similar Property belonging to others
  3. Merchandise usual to the insureds business
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13
Q

Identify the three conditions that need to be present before ‘similar property belonging to others’ will be insured under the definition of Stock.

A
  1. Property must be similar to that insured on the policy
  2. Must have obligation to keep the property
  3. Must have been legally liable for it
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14
Q

Identify the five methods that may be used to determine Actual Cash Value:

A

Formula/Cost
Market Value
Income
True Value to owner
Broad evidence rule

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15
Q

Determining Insurance Values
Identify the two types of depreciation used in the Formula/Cost Approach

A

Straight Line
Plateau Accelerated

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16
Q

A licensed real estate appraiser will generally be consulted to provide an expert opinion when establishing Market Value/Direct Sales Approach. Identify the three items he or she may consider:

A

Property before the loss
Property after the loss
The land

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17
Q

Determining Insurance Values

When is the Income Approach method most commonly employed

A

Rental properties

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18
Q

Determining Insurance Values

The Broad Evidence ties together the previous four methods when establishing actual cash value, and the courts will take into account many different factors. Identify any three such factors:

A

Use of building
Location
Rental value

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19
Q

Identify 4 instances when Subscription Policies may be used

A
  1. Business is too specialized
  2. Large exposure
  3. Beyond what the insurer is prepared to pay in a single claim
  4. Broker wants to spread good large line of business among markets
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20
Q

What’s the purpose of a Minimum Retained Premium?

A

Costs of underwriting can be recouped

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21
Q

Common Policy Clauses

12 (a) Identify the three amounts to be considered when calculating the amount of payment as outlined in the Indemnity Agreement:

A
  1. Value of the lost or damaged property
  2. Interest of the Insured in the property
  3. Amount of insurance specified on the Declaration Page
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22
Q

Purpose of the deductible

A

Eliminates minor maintenance claims

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23
Q

14(a) Insurers agree to ‘waive’ any co-insurance requirement when a loss meets either of the following conditions:

A

Less than 2%
Less than $5,000

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24
Q

(b) Calculate if the Insurer will ‘waive’ the co-insurance requirement in the following example:

Amount of insurance: $100,000
Loss: $1,000

A

Yes

25
Q

(b) Calculate if the Insurer will ‘waive’ the co-insurance requirement in the following example:

Amount of insurance: $100,000
Loss: $2,500

A

No

26
Q

(b) Calculate if the Insurer will ‘waive’ the co-insurance requirement in the following example:

Amount of insurance: $500,000
Loss: $6,000

A

No

27
Q

14 (c) In order to replace a Co-Insurance Clause with a Stated Amount Co-Insurance Clause, the client must comply with the following:

A
  1. File a statement of values verified with an appraisal
  2. Maintain those values throughout the term
28
Q

Identify the 2 types of exclusions found in property policies

A
  1. Property exclusions
  2. Perils exclusions
29
Q

Identify 6 reasons why exclusions exist:

A
  1. Uninsurable
  2. Potential to be catastrophic
  3. Other specialized forms exist
  4. To exclude losses that are wholly or partial in control of the insured, which can be expected
  5. Uncommon to most insureds, but which increases the potential for loss which deserves an additional premium
  6. Illegal activities
30
Q

Identify 3 ‘permissions’ allowed in a commercial property policy:

A
  1. For other insurance concurrent with this form
  2. Make additions, alterations, or repairs
  3. To do such work and to keep and use such articles, materials, and supplies in such quantities as are usual or necessary to the Insurd’s business
31
Q
  1. b) Identity 2 instances when an Insurer may not deny coverage when there has been a Breach of Conditions:
A
  1. The loss was not cause or contributed by the Breach
  2. Breach of Conditions occurred in a portion of the premises over which the Insured has no control
32
Q

Explain the effect of the Reinstatement clause

A

The Reinstatement Clause provides that insureds shall have as much insurance after a loss, as they did before it

33
Q

Identify 2 parties against whom the Insurer will not exercise Subrogation

A

The Insured and the partner of the Insured

34
Q

Identify 3 types of property protection

A
  1. Sprinkler/Fire extinguishing systems
  2. Fire detection systems
  3. Intrusion detection systems
35
Q

21 (a) identify the class of property to which the Premium Adjustment clause will apply:

A

Stock

36
Q

22 (b) Identify three obligations placed upon Insureds who have installed protection systems:

A
  1. Notify Insurer of interruption, flaw, or defect
  2. System canceled or not renewed
  3. Suspension of policy service
37
Q

Identify under Basis of Valuations how losses will be paid for unsold stock

A

Actual Cash Value or repair or replace whichever costs less

38
Q

Identify under Basis of Valuations how losses will be paid for sold stock

A

Selling price minus discounts

39
Q

Identify the liability of the Insurer when there is loss to books of account kept on a manual system:

A

Insured for blanket values plus cost to copy. No coverage for gathering or assembling info

40
Q

Identify the liability of the Insurer when there is loss to books of account stored electronically:

A

Covered for reproducing media, data storage devices, and program devices FROM duplicates or originals

41
Q

Statutory Conditions Applicable

27 (a) Identify three breaches of good faith that would be considered contrary to Statutory Condition 1:

A
  1. False description of property
  2. Misrepresentation of material fact
  3. Any fraudulent omission of material fact
42
Q

28 (a) Identify five Additional Conditions contained in a number of commercial property forms:

A
  1. Notice to authorities (call policy)
  2. Sue & Labour (protecting from damage or future damage)
  3. No benefit to Bailee (does not remove the bailee’s responsibility)
  4. Pair & Set (only covers the damaged item, not the full set)
  5. Parts (not whole item if just part can be replaced or repaired)
43
Q

Define Material Fact

A

A fact which if the insurer knew about it would cause it to decline the insurance altogether, or charge a higher premium for accepting it.

44
Q

Identify five steps of the broker’s role in the underwriting process

A
  1. Completion of survey
  2. Search for interested Insurer(s)
  3. Meet with prospect, discuss quotes and select Insurer
  4. Request Binding coverage from the selected Insurer
  5. Review policy and deliver to client
45
Q

Role of broker in the underwriting process

Identify 3 things that a survey does:

A

Assists in identification of loss exposures.

Helps to determine the coverages needed.

Develops other underwriting information needed by the Insurer

46
Q

Identify three reasons for a broker to use a Commercial Property Check List:

A
  1. Alerts to possible loss exposure
  2. Needed coverages are not forgotten or ignored
  3. Reduces potential for E&O claim
47
Q

Five classes of Building Construction

A
  1. Fire Resistant
  2. Non-Combustive
  3. Heavy Timber
  4. Ordinary
  5. Fame
48
Q

Identify five areas of information that may be required when a building is over 25 years of age:

A
  1. Roof
  2. Wiring
  3. Over-current protection (circuit breakers/fuses)
  4. Plumbing
  5. Heating
49
Q

Identify five hazards common to all commercial buildings which may influence their potential for loss:

A

(HOPED)
Heating
Occupancy
Protection
Electrical Services
Detachment

50
Q

Identify the 2 types of protection available for insured property

A
  1. Private Protection (ex. Fire & Intrusion detection equipment)
  2. Public Protection (ex. Fire department, nearest fire hydrant, police)
51
Q

Identify 4 activities that are common to all underwriters

A
  1. Risk Selection (adverse selection)
  2. Risk Classification
  3. Rating & Rate-Making
  4. Policyholders Service
52
Q

Define Adverse Selection

A

Adverse selection occurs when the applicants for insurance are largely those most likely to suffer a loss

53
Q

Identify 2 factors which normally affect the premium charged by Insurers

A

Soft Market
Hard Market

54
Q

Identify six types of Physician Hazards

A

(HOT PEG)
Housekeeping
Occupancy
Type of Building Construction
Protection
External Exposures
Geography

55
Q

Identify 3 types of Moral Hazards

A
  1. Financial Condition
  2. Associates
  3. Moral Character
56
Q

Identify 2 types of Morale Hazards

A
  1. Indifference to loss
  2. Poor Management
57
Q

Identify 4 ‘External Sources of Information’ available to an underwriter:

A
  1. The Broker
  2. Government Records
  3. Financial Rating Services
  4. Consumer Investigation Records
58
Q

Identify seven ‘internal sources of information’ available to an underwriter:

A

a) Loss Experience Data
b) Inspection Reports
c) Field Representatives
d) Claims Information
e) Production Records
f) Underwriting Guides and Manuals
g) Other Underwriters

59
Q

Identify the four parameters within which an underwriter makes a decision about a particular risk:

A

a) Accept as presented.

b) Reject the risk.

c) Accept with an increase in rate.

d) Accept with an increase in deductible.

CAIB 2 (3 decks)

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