Unit 3

Question 1

duties after loss

Answer 1

condition lists the named insureds responsibilities after a property insurance loss
PPC & MSP

Question 2

provisions

Answer 2

conditions section of a property insurance policy, lists the duties and right of both the named insured and insurer

Question 3

loss provisions

Answer 3

contracts include conditions that specify what the named insured and insurer must do when a loss occurs

Question 4

contribution by equal shares provision

Answer 4

all insurers pay equal amounts, up to the limit of the policy with the smallest limit 
prevents gain (indemnity)

Question 5

property insurance

Answer 5

covers personal belongings and real property
“my stuff”
loss caused by covered peril
first party losses - insurer pays insured

Question 6

casualty insurance

Answer 6

casualty = liability
always pays the other guy
third party losses

Question 7

first party

Answer 7

insured

Question 8

second party

Answer 8

insurer

legally representing or defending the insured

Question 9

third party

Answer 9

the other guy

Question 10

E xlusions

Answer 10

not covered

DICEE

Question 11

E ndorsement

Answer 11

changes to original policy
add, modify or take away coverage
DICEE

Question 12

C onditions

Answer 12

rules for the policy, duties

DICEE

Question 13

I nsuring Agreements

Answer 13

promise to pay and perils covered
contractual agreement between insured and insurer
DICEE

Question 14

D eclarations

Answer 14

who, what, when, where and how much

DICEE

Question 15

additional/ supplementary coverage

Answer 15

payment for additional expenses not normally covered

may have separate limit of insurance

Question 16

first- named insured

Answer 16

first in the declarations when there is more than one named

Question 17

policy territory

Answer 17

where a loss must occur

Question 18

additional insured

Answer 18

added by endorsement

Question 19

named insured

Answer 19

in the declarations

person, business or other entity

Question 20

policy period

Answer 20

when the policy begins and ends

date and time, where, and what timezone

Question 21

deductible

Answer 21

• amount of the loss paid by the insured out of pocket
• the higher the deductible, the lower the premium
• paid by insured before insurer pays any expenses

Question 22

primary/ excess

Answer 22

primary policy pays first

excess pays what is left (if any)

Question 23

other insurance provision

Answer 23

• multiple policies insuring the same loss

- how reimbursement will occur

Question 24

pro rated basis

Answer 24

the insured will receive a portion of the premium back depending on when the policy is cancelled

Question 25

equal shares

Answer 25

each policy pays the same up to the smallest policy's limit

Question 26

pro rata

Answer 26

each policy pays its share according to the total insurance | calculate: policy limit of one company/ policy limit of all companies X loss

Question 27

nonconcurrency

Answer 27

- result of two or more policies covering the same property but providing different or non-identical coverage - commonly seen on commercial policies

Question 28

nonrenewal process

Answer 28

insurer may choose to not renew a policy for another term or the insured may choose to end their coverage and not pay the premium - state rules must be followed

Question 29

flat cancellation

Answer 29

policy is cancelled on the effective date, by either the insurer or the insured

Question 30

short- rated basis

Answer 30

surcharge or penalty for each cancellation, applied to an account when an insured cancels the policy before the expiration date

Question 31

cancellation

Answer 31

- occurs before the policy expiration date - company cancellation requires advanced notice - full refund of unearned premium (pro rata) - named insured cancellation requires no advanced notice - partial refund of unearned premium - short rate

Question 32

nonrenewal

Answer 32

occurs at the expiration date company must give advanced notice no advanced notice required by insured

Question 33

unearned premium

Answer 33

paid premiums in advance for future months, any unused premium must be returned to the insured upon cancellation of a policy

Question 34

underwriting expenses

Answer 34

cost to acquire and keep policies | advertising/licensing etc

Question 35

earned premium

Answer 35

premium the company actually earned by providing insurance protection for the designated preiod

Question 36

incurred losses

Answer 36

amounts paid and reserved on claims for covered losses and various expense related to handling claims

Question 37

combined ratio

Answer 37

- 100% is breakeven point - combined ratio = loss ration + expense ratio - greater than 100% = underwriting loss - less that 100% = underwriting gain

Question 38

retrospective rating

Answer 38

bases the insured's premium on losses incurred during the policy period

Question 39

schedule rating

Answer 39

applies a system of debits or credits to reflect characteristics of a particular insured

Question 40

written premium

Answer 40

``` gross amount of premium income received from insureds - new policies - policy endorsements - renewals ```

Question 41

judgement rating

Answer 41

no set rates | based upon underwriter's experience

Question 42

manual (class) rating

Answer 42

set rates for specific risk classes

Question 43

experience rating (merit)

Answer 43

based on insured's claim history increases or decreases premium usually a three year period rate per unit X number of units = premium

Question 44

loss costs

Answer 44

pure claims data no operating expense included no profits included

Question 45

rate components

Answer 45

loss reserves ( estimate of claim costs) claims handling costs operating expenses profit

Question 46

fair credit reporting act (FCRA)

Answer 46

- all insurers and producers must comply - notice to the applicant within three days after report was requested - maximum penalty $5000, 1 year in prison or both

Question 47

Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPPA)

Answer 47

- result of 9/11 attacks on U.S. - congress re-enacted until 2020 - limits exposure of insurers in case of another terrorist attack - triggering event- $100 million

Question 48

Gramm-Leach-Bliley act

Answer 48

- a consumer is any one about whom information is collected - a customer is someone who has an ongoing relationship with a financial institution - the opportunity to opt out must be offered by financial institutions when an account is established, and annually thereafter

Question 49

fraud and false statements

Answer 49

- it is illegal to make false statements - if guilty: fine, up to 10 years in prison or both up to 15 years in prison if false statements jeopardize insurer

Question 50

underwriting

Answer 50

- process of evaluating a risk - field underwriting is performed by the agent or producer - application is the primary source of information - company underwriters decide if a policy is to be issued

Question 51

application

Answer 51

primary source of underwriting information

Question 52

binder

Answer 52

- temporary insurance - usually given by the agent verbally or in writing - can be canceled by the company - does not guarantee a policy will be issued - automatically ends if a policy is issued by the underwriter

Question 53

loss ratio

Answer 53

compares company's operations year over year

Question 54

expense ratio

Answer 54

cost of doing business

Question 55

insurable interest

Answer 55

- financial risk of loss | - must be present at time of loss and application

Question 56

subrogation

Answer 56

insurer has the right to sue an at-fault party for damages the insurer had to pay the insured common when at-fault party does not have insurance

Question 57

liberalization

Answer 57

extended coverage to insured no additional premium charged no action required by insured

Question 58

salvage

Answer 58

insurer has right of salvage, not the insured | salvaged property can lower claim cost for the insurance company

Question 59

abandonment

Answer 59

insured cannot abandon property that can be repaired and expect to be paid as if the loss was total

Question 60

assignment

Answer 60

policy cannot be transferred without written consent from insurer

Question 61

C ooperate

Answer 61

with insurer

Question 62

S ubmit

Answer 62

to examination under oath (if required)

Question 63

M ake

Answer 63

property available for inspection

Question 64

C omplete

Answer 64

fill out proof of loss

Question 65

P rotect

Answer 65

property from further damage

Question 66

P rompt

Answer 66

notice to insurer