PC1 - A13 - A14

Question 1

What are recoverables

Answer 1

Salvage, subrogation, deductibles, generally marked as negative paid loss

Question 1

2 approaches to calculating current period incurred loss

Answer 1

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

Question 2

Ceded reinsurance

Answer 2

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

Question 3

Prospective vs retrospective reinsurance

Answer 3

prospective - assumed and ceded
retrospective - loss portfolio transfer. Over time or to a limit. No discounting

Question 4

Deposit Accounting

Answer 4

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)

Question 5

Insurance contract has these characteristics (7)

Answer 5

Indemnity
Utmost good faith
Fortuitous losses
Contract of Adhesion (must accept as written, nvm manuscript forms)
Exchange of unequal amounts
Conditional
Non-transferable

Question 6

Policy Provisions (6)

Answer 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

Question 7

Legal basis for Insurable Interest

Answer 7

Ownership
Contractual Obligations (repossessing house)
Exposure to Legal Liability
Factual Expectancy - financial harm done
Representation of another party

Question 8

Types of multiple party insurable interest (4)

Answer 8

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)

Question 9

Co-insurance

Answer 9

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

Question 10

Property Valuation Methods (4)

Answer 10

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

Question 11

Valuation of liability claims

Answer 11

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

Question 12

SIR (self insured retention)

Answer 12

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

Question 13

Components of a PAP Policy

Answer 13

Dec page (auto schedule and lienholders), agreement, definitions, 6 sections
A - liability
B - Med Pay
C - Uninsured
D- Damage

Question 14

Newly Acquired auto coverage

Answer 14

Coverage for 14 days
If you had collision already, you get it automatically
If not, you get it for 4 days

Question 15

Prejudgement interest on auto

Answer 15

Applies to the limit

Question 16

Supplementary payments on auto

Answer 16

loss of earnings while @ trial ($200)
cost of bail bonds ($250)
interest after a judgement

Question 17

MedPay on auto

Answer 17

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

Question 18

Uninsured motorist does not apply if

Answer 18

the car was owned by family
owned by the govt or on rails/treads
covered under sefl-insurer

Question 19

transportation expenses

Answer 19

rental car $20 a day (2 day waiting period if it’s stolen)

Question 20

max paid for a non-owned trailer

Answer 20

$1,500

Question 21

Auto policy termination

Answer 21

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

Question 22

Misc type vehicle endorsements

Answer 22

adds motorhome, motorcycle, golf cart
excludes luggage/stuff
physical damage = amount shown on dec or ACV
optl: ‘passenger hazard exclusion’

Question 23

snowmobile endorsement

Answer 23

wheels or treads for snow
excluded if part of a business, or in a race
only covers named insured when renting/leasing

Question 24

Extended non-owned coverage

Answer 24

vehicles furnished for regular use, cars you drive that arent yours

Question 25

Named non-owner coverage

Answer 25

for when you only sometimes drive, family not covered

Question 26

limited mexico coverage

Answer 26

within 25 miles of border, for less than 10 days
must also have valid mexico insurance too

Question 27

Transportation Netowrk Coverages

Answer 27

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