S1: Liability Insurance

Question 1

Liability Insurance

Answer 1

protect insured against third party injuries

Question 2

2 main components of liability insurance

Answer 2

1. provide defence in cases where policyholder alleged to be responsible for accident to third party (insured represents insurer)
2. Policyholder found guilty, and insurer is responsible for damages up to policy limit

Question 3

Characteristics of Liability Insurance (3)
___ frequency of claims
___ severity of claims
___ litigation costs

Answer 3

low frequency claims
high severity claims
high litigation costs

Question 4

Claims-made-basis

Answer 4

insured only covered for losses if claims reported during policy period

Question 5

claims-occurence-basis

Answer 5

events that occur during policy period are covered irrespective of report date. Insurer is responsible for claims that happened years ago and not reported until now

Question 6

tail-coverage

Answer 6

endorsement that allows for excluded coverage after policy end date

Question 7

Defence costs in policy limit: Purpose and examples

Answer 7

reduce insurers risk etc product liability, errors and omissions, medical malpractice, cyber-liability etc