S1: Intro and Automobile

Question 1

Insurance Mechanism (2 main components)

Answer 1

1. Law of Large Numbers
2. Decrease Marginal Utility

Question 2

Law of Large Numbers

Answer 2

As observation increase, average of results should converge to expected value

Question 3

Decreasing Marginal Utility

Answer 3

As extra unit of income added, utility or satisfaction derived from units decrease

Question 4

Risk Adverse

Answer 4

Tendency when faced with two scenarios to choose less risky one. Pay more than expected loss as utility gained from not incurring loss

Question 5

Insurable Risk (6)

Answer 5

Economically Feasible
Economic value calculated
Loss is definite
Loss is random
exposures homogenous
Exposure units spatial and independent

Question 6

Anti Selection

Answer 6

policyholder knows more information and withholds from insurer

Question 7

Insurance Short Term Products

Answer 7

6-12 months, insure auto, property, homeowner, marine, workers comp, fire,

Question 8

Insurance Long Term Products

Answer 8

year - decades till claim. Life Products: medical, dental, disability, life, vision and health

Question 9

Automobile:
Section A
Section B
Section -
Section C

Answer 9

A: Third Party Liability
B: Medical Benefits
- : Uninsured and underinsured motorist
C: collision and other than collision

Question 10

Section A:
Third Party Liability

Answer 10

indemnification (compensation) to third party (innocent) for accident

Question 11

What if accident was intentional by insured or covered under workers compensation?

Answer 11

Insurance company will not pay

Question 12

Section A:
Bodily Injury (TPLBI) and examples

Answer 12

cost associated with injuries of third party -> medical, funeral, emergency

Question 13

Section A:
Property Damage (TPLPD) and examples

Answer 13

cost associated with repairs or replace property of third party ex car, house, lawn damages

Question 14

Insured is sued…what is the process? What if insured is liable?

Answer 14

• will provide legal defence for their insured if not settled before court
• if liable insurance pays damages (compensation)

Question 15

Section A:
Split limits
what is it written in
example 50/100/10

Answer 15

• Liability limits are separated (policy limit of insurance paying out)
• written in thousands
• 50000 to person, 100000 to BI, 10000 to PD

Question 16

What does automobile premium depend on (3)

Answer 16

rating factors, coverage limits, and deductibles,

Question 17

Section B: Medical Payments are payments to….

Answer 17

Payments to insured, not third party

Question 18

Section B: Medical Payments
Other names for section B

Answer 18

Medical Payment (MP), Personal Injury Protection (PIP), Accident Benefit (AB)

Question 19

Section B: Medical Payments
What name do we used in Canada?
What name is no fault system?

Answer 19

Accident Benefit
Personal Injury Protection

Question 20

Section B: Medical Payments
At-Fault (Tort)

Answer 20

insured party is required to prove other party is at fault to receive compensation

Question 21

Section B: Medical Payments
At-Fault (Tort) - You at fault in accident or with injured then you are insured….

Answer 21

up to policy limit for section B and Property for C

Question 22

Section B: Medical Payments
At-Fault (Tort) - You are not fault in accident or with injured then your insurer…

Answer 22

covers expenses up to limit while obtaining compensation from at fault party

Question 23

Section B: Medical Payments
No-Fault
1. Definition
2. What is received?
3. what does insurer pay?

Answer 23

1. Insured party doesn’t need to sue or prove other party is at fault to receive compensation.
2. Personal Injury Protection received
3. Pays their own policyholder damages

Question 24

Section B: Medical Payments ?
What system is used in Canada

Answer 24

No-Fault

Question 25

Section B: Medical Payments Threshold no-fault

Answer 25

similar to no fault but if cost of injuries > policy limit, then injured party can sue at fault party for compensation

Question 26

Section B: Medical Payments Government Monopoly etc MPI what does the at-fault determine?

Answer 26

Government is sole provider of auto insurance. Determines who pays deductible and new premium for at fault driver

Question 27

Section - : Uninsured and Underinsured Motorist Coverage

Answer 27

protects insured and family members from unidentified, underinsured or uninsured motorists in case of accident

Question 28

Section - : Uninsured and Underinsured Motorist Coverage How is insured covered

Answer 28

covered by their own insurer for amount that liable motorist is personally responsible for

Question 29

Section C: Collision and Other than Collision: Collision

Answer 29

indemnifies insured if covered auto is damaged by colliding with object, vehicle or person

Question 30

Section C: Collision and Other than Collision: Collision Limit - Insurer pays (cheapest of)

Answer 30

1. loss to insured 2. cost to repair/replace vehicle

Question 31

Section C: Collision and Other than Collision: Other Than Collision (OTC)

Answer 31

Damage to vehicles by other perils etc hail, theft, fire, vandalism

Question 32

Section C: Collision and Other than Collision: What is not included in OTC

Answer 32

War, Wear and Tear, Nuclear

Question 33

Section C: Collision and Other than Collision: Comprehensive Coverage

Answer 33

Coverage provided for all perils not collision and ones excluded

Question 34

Section C: Collision and Other than Collision: Specified Perils

Answer 34

Coverage provided for specific perils listed on the policy

Question 35

Factors not included in OTC

Answer 35

Claim History, Use of vehicle, age, gender, marital status

Question 36

Subrogation

Answer 36

ability of insurer to assume their insured rights to sue an at fault party to recover indemnification costs

Question 37

Subrogation Benefits (2)

Answer 37

lower premium for collision, raise premium for liability,

Question 38

Salvage

Answer 38

Insurer must indemnify full value of vehicle, insurer has right to salvage components to recover remaining value.

Question 39

When is a car written off

Answer 39

cost to recover > value of vehicle