Study 1 - Cards 1-5

Question 1

Claims-made policy

Answer 1

Refers to an insurance policy that provides coverage when a claim is made during the policy period, regardless of when the claim event took place. A claims-made policy is most likely to be purchased when there is a delay between when claims occur and when they are filed.

Question 2

2 variations of claims-made policies

Answer 2

Narrow & Broad

Question 3

Narrow Policy aka claims-made and reported policy

Answer 3

States that “the claim must be made against the insured and reported to the insurer” within the policy period. No IBNR exposure.

Question 4

Broad Policy aka claims made policy

Answer 4

States that “the claim must be made against the insured during the policy period”. No mention as to when the incident must be reported to the insurer.

Question 5

Retroactive Date

Answer 5

Claims-made policies make provision for a retroactive date - a cut-off date before the inception date of the policy defining the period of time for which an incident will qualify for coverage.

Retroactive dates precede the inception date of the policy by a period of time that the insurer is prepared to accept. The date usually coincides with the date the coverage was first put in place by the insured.

Question 6

Extended Reporting Period

Answer 6

Aka tail cover. Commonplace on claims-made policies due to claims only being covered if they are made during the policy period.

Question 7

Ratemaking

Answer 7

The process of compiling and analyzing data to establish rates that accurately reflect the level of risk. Usually performed by actuaries.

Question 8

Pure Loss Premium

Answer 8

The amount of premium available to pay losses and loss expense.

Pure Loss Premium = GWP - All Expenses other than loss expense
Rate = (Loss + Loss Expense) / Pure Loss Premium

Question 9

Gaps in Coverage

Answer 9

Can arise whenever:
- A policy is renewed with a different company
- When multiple policies are required to provide the limits needed by the insured
- When an occurrence form is substituted for a claims-made form or vice-versa.

Question 10

Switching to Claims-Made on the CGL

Answer 10

• Only affects the BI & PD insuring agreement
• Personal injury, medical payments, and tenants legal liability remain the same whether the CGL is occurrence or claims-made