Lesson 1-2 Flashcards
24 (a) Identify two types of property which are subject to a ‘special basis of settlement’:
Tenants Improvements and Records
1 (a) Identify the four categories that buildings may fall into:
Residential
Non-mercantile
Mercantile
Manufacturing/industrial
2 (a) Identify the two bases that coverage can be provided on:
Scheduled
All Property
Building Defined
Define Fixted Structures
Permanent structure on the insured property like erect pole signs yard lights and fencing
Building Define
Define Additions and Extensions
A structure in contact or attached to the insured building, and not separate from it
Ex. Enclosed walkway
Building Defined
Define Permanente Fittings and Fixtures
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
Building Defined
Define Materials, equipment, and supplies
Items used for the purpose of maintenance of the premises, normal repairs, alterations, or for building services.
Ex. Lumber, roofing shingles and glass
Building Defined
Define growing plants, trees, shrubs or flowers
Must be inside the building for decorative purposes. The insured must be the owner of the building.
6 (a) Identify the three ways in which property may be valued:
Actually Cash Value
Replacement Cost
Book Value
Name 5 types of property contained in the definition of building
- Fixed structures
- Additions and extensions
- Permanent Fittings and fixtures
- Materials, equipment, and supplies
- Growing Plants, trees, shrubs, and flowers inside
Building
Identify the three conditions pertaining to the coverage for growing plants, trees, etc.
Must be inside
Used as decoration
The insured owns the building
Identify 3 types of property contained in the definition of Stock
- Advertising Material
- Similar Property belonging to others
- Merchandise usual to the insureds business
Identify the three conditions that need to be present before ‘similar property belonging to others’ will be insured under the definition of Stock.
- Property must be similar to that insured on the policy
- Must have obligation to keep the property
- Must have been legally liable for it
Identify the five methods that may be used to determine Actual Cash Value:
Formula/Cost
Market Value
Income
True Value to owner
Broad evidence rule
Determining Insurance Values
Identify the two types of depreciation used in the Formula/Cost Approach
Straight Line
Plateau Accelerated
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:
Property before the loss
Property after the loss
The land
Determining Insurance Values
When is the Income Approach method most commonly employed
Rental properties
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:
Use of building
Location
Rental value
Identify 4 instances when Subscription Policies may be used
- Business is too specialized
- Large exposure
- Beyond what the insurer is prepared to pay in a single claim
- Broker wants to spread good large line of business among markets
What’s the purpose of a Minimum Retained Premium?
Costs of underwriting can be recouped
Common Policy Clauses
12 (a) Identify the three amounts to be considered when calculating the amount of payment as outlined in the Indemnity Agreement:
- Value of the lost or damaged property
- Interest of the Insured in the property
- Amount of insurance specified on the Declaration Page
Purpose of the deductible
Eliminates minor maintenance claims
14(a) Insurers agree to ‘waive’ any co-insurance requirement when a loss meets either of the following conditions:
Less than 2%
Less than $5,000
(b) Calculate if the Insurer will ‘waive’ the co-insurance requirement in the following example:
Amount of insurance: $100,000
Loss: $1,000
Yes
(b) Calculate if the Insurer will ‘waive’ the co-insurance requirement in the following example:
Amount of insurance: $100,000
Loss: $2,500
No
(b) Calculate if the Insurer will ‘waive’ the co-insurance requirement in the following example:
Amount of insurance: $500,000
Loss: $6,000
No
14 (c) In order to replace a Co-Insurance Clause with a Stated Amount Co-Insurance Clause, the client must comply with the following:
- File a statement of values verified with an appraisal
- Maintain those values throughout the term
Identify the 2 types of exclusions found in property policies
- Property exclusions
- Perils exclusions
Identify 6 reasons why exclusions exist:
- Uninsurable
- Potential to be catastrophic
- Other specialized forms exist
- To exclude losses that are wholly or partial in control of the insured, which can be expected
- Uncommon to most insureds, but which increases the potential for loss which deserves an additional premium
- Illegal activities
Identify 3 ‘permissions’ allowed in a commercial property policy:
- For other insurance concurrent with this form
- Make additions, alterations, or repairs
- 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
- b) Identity 2 instances when an Insurer may not deny coverage when there has been a Breach of Conditions:
- The loss was not cause or contributed by the Breach
- Breach of Conditions occurred in a portion of the premises over which the Insured has no control
Explain the effect of the Reinstatement clause
The Reinstatement Clause provides that insureds shall have as much insurance after a loss, as they did before it
Identify 2 parties against whom the Insurer will not exercise Subrogation
The Insured and the partner of the Insured
Identify 3 types of property protection
- Sprinkler/Fire extinguishing systems
- Fire detection systems
- Intrusion detection systems
21 (a) identify the class of property to which the Premium Adjustment clause will apply:
Stock
22 (b) Identify three obligations placed upon Insureds who have installed protection systems:
- Notify Insurer of interruption, flaw, or defect
- System canceled or not renewed
- Suspension of policy service
Identify under Basis of Valuations how losses will be paid for unsold stock
Actual Cash Value or repair or replace whichever costs less
Identify under Basis of Valuations how losses will be paid for sold stock
Selling price minus discounts
Identify the liability of the Insurer when there is loss to books of account kept on a manual system:
Insured for blanket values plus cost to copy. No coverage for gathering or assembling info
Identify the liability of the Insurer when there is loss to books of account stored electronically:
Covered for reproducing media, data storage devices, and program devices FROM duplicates or originals
Statutory Conditions Applicable
27 (a) Identify three breaches of good faith that would be considered contrary to Statutory Condition 1:
- False description of property
- Misrepresentation of material fact
- Any fraudulent omission of material fact
28 (a) Identify five Additional Conditions contained in a number of commercial property forms:
- Notice to authorities (call policy)
- Sue & Labour (protecting from damage or future damage)
- No benefit to Bailee (does not remove the bailee’s responsibility)
- Pair & Set (only covers the damaged item, not the full set)
- Parts (not whole item if just part can be replaced or repaired)
Define Material Fact
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.
Identify five steps of the broker’s role in the underwriting process
- Completion of survey
- Search for interested Insurer(s)
- Meet with prospect, discuss quotes and select Insurer
- Request Binding coverage from the selected Insurer
- Review policy and deliver to client
Role of broker in the underwriting process
Identify 3 things that a survey does:
Assists in identification of loss exposures.
Helps to determine the coverages needed.
Develops other underwriting information needed by the Insurer
Identify three reasons for a broker to use a Commercial Property Check List:
- Alerts to possible loss exposure
- Needed coverages are not forgotten or ignored
- Reduces potential for E&O claim
Five classes of Building Construction
- Fire Resistant
- Non-Combustive
- Heavy Timber
- Ordinary
- Fame
Identify five areas of information that may be required when a building is over 25 years of age:
- Roof
- Wiring
- Over-current protection (circuit breakers/fuses)
- Plumbing
- Heating
Identify five hazards common to all commercial buildings which may influence their potential for loss:
(HOPED)
Heating
Occupancy
Protection
Electrical Services
Detachment
Identify the 2 types of protection available for insured property
- Private Protection (ex. Fire & Intrusion detection equipment)
- Public Protection (ex. Fire department, nearest fire hydrant, police)
Identify 4 activities that are common to all underwriters
- Risk Selection (adverse selection)
- Risk Classification
- Rating & Rate-Making
- Policyholders Service
Define Adverse Selection
Adverse selection occurs when the applicants for insurance are largely those most likely to suffer a loss
Identify 2 factors which normally affect the premium charged by Insurers
Soft Market
Hard Market
Identify six types of Physician Hazards
(HOT PEG)
Housekeeping
Occupancy
Type of Building Construction
Protection
External Exposures
Geography
Identify 3 types of Moral Hazards
- Financial Condition
- Associates
- Moral Character
Identify 2 types of Morale Hazards
- Indifference to loss
- Poor Management
Identify 4 ‘External Sources of Information’ available to an underwriter:
- The Broker
- Government Records
- Financial Rating Services
- Consumer Investigation Records
Identify seven ‘internal sources of information’ available to an underwriter:
a) Loss Experience Data
b) Inspection Reports
c) Field Representatives
d) Claims Information
e) Production Records
f) Underwriting Guides and Manuals
g) Other Underwriters
Identify the four parameters within which an underwriter makes a decision about a particular risk:
a) Accept as presented.
b) Reject the risk.
c) Accept with an increase in rate.
d) Accept with an increase in deductible.
