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P0 > Unit 2 - Insurance contracts > Flashcards

Unit 2 - Insurance contracts Flashcards

1
Q

For a risk to be insurable

A
  • Policyholder needs to have an interest
  • Risk must be financial and quantifiable
  • Amount paid by insurer should bear some relationship to financial loss
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2
Q

Risk events ideally need to be

A

MUD PPI

  • independent
  • low prob
  • able to be pooled together
  • ultimate limit on liability
  • moral hazard eliminated
  • sufficient data
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3
Q

General insurance characteristics

A
  • Fixed period of cover, then renegotiated
  • Claims not usually fixed amounts, amount of loss needs to be proved
  • Claim occurring doesn’t necessarily mean policy ends
  • Lags in reporting
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4
Q

GI types of cover

A
  • Liability
  • Property damage
  • Financial loss
  • Fixed benefits
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5
Q

Liability insurance - overall

A

Provides indemnity where the insured (owing to negligence) is liable to pay compensation

Benefit paid = amount to cover p/h, may be capped and may have an excess

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6
Q

Liability insurance - types

A
  • Employers
  • Motor 3rd party
  • Public
  • Product
  • Prof indem
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7
Q

Employers liability

A

WHAT - compensation against injury/death owing to neg of employer whilst employed. Normally compulsory

PERILS - accidents at work, harmful substances, harmful wording conditions (e.g. RSI)

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8
Q

Motor 3rd part insurance

A

WHAT - indemnifies owner against comp payable to 3rd parties for personal injury or damage to prop. Normally compulsory

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9
Q

Public liability

A

WHAT - Death/injury to 3rd party/prop damage where liabs not covered by other liab insurane

E.G. dog bite/falling object

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10
Q

Product liability

A

WHAT - indem against death/inj/prop dam from product fault

PERILS - packaging, faulty design, faulty manufacture

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11
Q

Prof indem

A

WHAT - Negligence in provision of service

PERILS - wrong diagnosis, wrong advice

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12
Q

Product insurance - overall

A

Indemnify p/h to damage of own property

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13
Q

Product insurance - types

A 
Household (fire, flood, explosion)
Moveable property (theft)
Motor property (damage, fire, theft - fully comp)
Marine property (hull cover)
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14
Q

Financial loss - types

A
  • Pecuniary loss
  • Fidelity gtee
  • Bus interruption
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15
Q

Pec loss

A

WHAT - e.g. money loss. protects insured against bad debts or failure of 3rd party

PERILS - unemployment, failure of counterparty in contract

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16
Q

Fid gtee

A

WHAT - fin loss from dishonest actions

PERILS - fraud

17
Q

Bus inter

A

WHAT - fin loss where not able to conduct business

PERILS - fire at neighbour premises, flood at premises

18
Q

Fixed benefits - overview

A

Personal accident/health insurance

19
Q

Personal accident insurance

A

WHAT - Fixed amounts if suffer loss of limbs

PERILS - accident

20
Q

Health insurance

A

WHAT - medical treatment, payments whilst in hospital

PERILS - need for treatment

21
Q

Emerging risks

A

Cyber risk/insurance

22
Q

Life insurance characteristics

A
  • One or more premiums paid by consumer

- Insurer pays benefits which are contingent on life

23
Q

Whole life assurance

A
  • Benefit paid on death of life, whenever occurs
  • Surrender normally available
  • No group version
  • Used for funerals, paying off inheritance tax
  • Key risks - mort/investment - depends on age as to which is more important
  • Other risks - inflation, financial risk if -ve asset share early on, anti-selection risk
24
Q

Term assurance

A
  • Benefit payable on death in term
  • No surrender available
  • Group available
  • Decreasing can be used to make sure repayments paid, or to provide income for kids if die
  • Key risks - mortality
  • Other risks - AS risk, financial if -ve asset share (especially if decreasing TA)
25
Q

Convertible term assurance

A
  • TA but can convert to WOL or endowment without further U/W
  • No surrender pre-conv
  • No group (unless convert post employment)
  • Key risks - Same as TA, but more AS risk at conversion
26
Q

Endowment assurance

A
  • Benefit paid on survival to known date, or on death in term
  • Surrender available
  • Group available
  • Used for savings (e.g. pension)
  • Can be with/without profits, unit linked or index linked
  • Key risk - mortality risk
27
Q

Immediate annuity

A
  • Regular payments provided alive, paid for with single premium
  • Can be SL, JL or last survivor
  • Can be temporary
  • No surrender
  • Group available (E.g. pension)
  • Key risk - longevity, investment
28
Q

Deferred annuity

A
  • Pay out regular amounts if alive at end of deferred period
  • Surrender possible in deferred period
  • Group available
  • Can be thought of as an endowment assurance and immediate annuity
29
Q

Different types of life product

A
  • Conventional w/o profit - fully gteed benefits + reg prems (TA)
  • With profits - p/h has share of future surplus (WOL,EA)
    • conventional - bonuses added to sum assured
    • accumulating - bonuses added as addition to prems
  • Unit linked
  • Index linked

P0 (9 decks)

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