PC1 - A13 - A14 Flashcards
What are recoverables
Salvage, subrogation, deductibles, generally marked as negative paid loss
2 approaches to calculating current period incurred loss
1) Actual Claim Activity - good for quick reporting claims, IBNR - use 30% earned premium
2) Accrual of Incurred - based on formula for example loss ratio * earned premium
Ceded reinsurance
entries recorded in same place as direct entry, but as an offset
purchase of reinsurance is an asset
in US ceded amounts are negative on the income sheet, and an asset on the balance sheet
Prospective vs retrospective reinsurance
prospective - assumed and ceded
retrospective - loss portfolio transfer. Over time or to a limit. No discounting
Deposit Accounting
no risk transfer exists. Timing risk exists though. Reinsurance is retroactive
amount received recorded as deposit liability
deposit liability decreased by more payments
3 approaches: bank deposit (initial deposit grows w/ interest), prospective (deposit changes with predicted future losses), and retrospective (focus on past and future cash flow)
Insurance contract has these characteristics (7)
Indemnity
Utmost good faith
Fortuitous losses
Contract of Adhesion (must accept as written, nvm manuscript forms)
Exchange of unequal amounts
Conditional
Non-transferable
Policy Provisions (6)
Declarations - policy #, term, agent name, premium
Definitions
Insuring Agreements - limited (named peril) or comprehensive (special form)
Exclusions - don’t intend to cover these
Conditions
Misc - right to vote in mutual insurers
Legal basis for Insurable Interest
Ownership
Contractual Obligations (repossessing house)
Exposure to Legal Liability
Factual Expectancy - financial harm done
Representation of another party
Types of multiple party insurable interest (4)
joint tenancy (pay to 1st named insured, survivorship)
tenancy by entirety (married, same as above)
tenancy in common (equal or unequal share, 2+ people, no survivor rights)
tenancy in partnership (survivor rights)
Co-insurance
most common is 80, 90 or 100%
amt payable = (limit / value * coinsurance) * amt of loss
“did over should times loss”
HO and BOP - usually pay ACV is underinsured
Property Valuation Methods (4)
ACV - replacement cost minus depreciation (some court consider this market value)
Replacement - usually on buildings and personal prop
Agreed - comm. watercraft, fine art. Pay agreed total
functional value - when ACV won’t work and the item is hard to replace (burned down antique building) pay no more than cost to replace
Valuation of liability claims
compensable amount of claim
depends on settlement, or what jurors award
claimant has burden on proof on damage
personal lines - defense costs don’t apply to limits
comm lines - applied to limits
SIR (self insured retention)
in lieu of a liability deductible
insurer only pays if loss exceeds SIR, won’t defend below this amount
full policy limit payable on top of this
common for professional liability/umbrella
Components of a PAP Policy
Dec page (auto schedule and lienholders), agreement, definitions, 6 sections
A - liability
B - Med Pay
C - Uninsured
D- Damage
Newly Acquired auto coverage
Coverage for 14 days
If you had collision already, you get it automatically
If not, you get it for 4 days
Prejudgement interest on auto
Applies to the limit
Supplementary payments on auto
loss of earnings while @ trial ($200)
cost of bail bonds ($250)
interest after a judgement
MedPay on auto
expenses w/in 3 years of accident
no fault required
covers everyone in car, if it’s your car
only you if it’s someone else’s car
if 2 coverages applies, they split it proportionally
Uninsured motorist does not apply if
the car was owned by family
owned by the govt or on rails/treads
covered under sefl-insurer
transportation expenses
rental car $20 a day (2 day waiting period if it’s stolen)
max paid for a non-owned trailer
$1,500
Auto policy termination
Cancel: if in force less than 60 days -> 20 day notice, if non-pay then 10 days notice
otherwise can only cancel for non-pay, suspended license or fraud
Non-renew - 20 day notice
Auto terminate if fail to pay renewal
Misc type vehicle endorsements
adds motorhome, motorcycle, golf cart
excludes luggage/stuff
physical damage = amount shown on dec or ACV
optl: ‘passenger hazard exclusion’
snowmobile endorsement
wheels or treads for snow
excluded if part of a business, or in a race
only covers named insured when renting/leasing
Extended non-owned coverage
vehicles furnished for regular use, cars you drive that arent yours
Named non-owner coverage
for when you only sometimes drive, family not covered
limited mexico coverage
within 25 miles of border, for less than 10 days
must also have valid mexico insurance too
Transportation Netowrk Coverages
public/livery exclusion - no cov when logged into transport network
transport net (no passenger) good to go if no passenger, carpool okay
limited transport net (no passenger) - coverage ends when passenger is accepted
