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Property & Casualty > Unit 3 > Flashcards

Unit 3 Flashcards

Basics of Property and Casualty Insurance

1
Q

duties after loss

A

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

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2
Q

provisions

A

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

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3
Q

loss provisions

A

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

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4
Q

contribution by equal shares provision

A 
all insurers pay equal amounts, up to the limit of the policy with the smallest limit 
prevents gain (indemnity)
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5
Q

property insurance

A

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

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6
Q

casualty insurance

A

casualty = liability
always pays the other guy
third party losses

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7
Q

first party

A

insured

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8
Q

second party

A

insurer

legally representing or defending the insured

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9
Q

third party

A

the other guy

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10
Q

E xlusions

A

not covered

DICEE

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11
Q

E ndorsement

A

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

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12
Q

C onditions

A

rules for the policy, duties

DICEE

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13
Q

I nsuring Agreements

A

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

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14
Q

D eclarations

A

who, what, when, where and how much

DICEE

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15
Q

additional/ supplementary coverage

A

payment for additional expenses not normally covered

may have separate limit of insurance

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16
Q

first- named insured

A

first in the declarations when there is more than one named

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17
Q

policy territory

A

where a loss must occur

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18
Q

additional insured

A

added by endorsement

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19
Q

named insured

A

in the declarations

person, business or other entity

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20
Q

policy period

A

when the policy begins and ends

date and time, where, and what timezone

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21
Q

deductible

A
  • 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
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22
Q

primary/ excess

A

primary policy pays first

excess pays what is left (if any)

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23
Q

other insurance provision

A
  • multiple policies insuring the same loss

- how reimbursement will occur

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24
Q

pro rated basis

A

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

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25
Q

equal shares

A

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

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26
Q

pro rata

A

each policy pays its share according to the total insurance

calculate: policy limit of one company/ policy limit of all companies X loss

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27
Q

nonconcurrency

A
  • result of two or more policies covering the same property but providing different or non-identical coverage
  • commonly seen on commercial policies
28
Q

nonrenewal process

A

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

29
Q

flat cancellation

A

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

30
Q

short- rated basis

A

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

31
Q

cancellation

A
  • 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
32
Q

nonrenewal

A

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

33
Q

unearned premium

A

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

34
Q

underwriting expenses

A

cost to acquire and keep policies

advertising/licensing etc

35
Q

earned premium

A

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

36
Q

incurred losses

A

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

37
Q

combined ratio

A
  • 100% is breakeven point
  • combined ratio = loss ration + expense ratio
  • greater than 100% = underwriting loss
  • less that 100% = underwriting gain
38
Q

retrospective rating

A

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

39
Q

schedule rating

A

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

40
Q

written premium

A 
gross amount of premium
income received from insureds
- new policies
- policy endorsements
- renewals
41
Q

judgement rating

A

no set rates

based upon underwriter’s experience

42
Q

manual (class) rating

A

set rates for specific risk classes

43
Q

experience rating (merit)

A

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

44
Q

loss costs

A

pure claims data
no operating expense included
no profits included

45
Q

rate components

A

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

46
Q

fair credit reporting act (FCRA)

A
  • 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
47
Q

Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPPA)

A
  • 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
48
Q

Gramm-Leach-Bliley act

A
  • 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
49
Q

fraud and false statements

A
  • 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
50
Q

underwriting

A
  • 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
51
Q

application

A

primary source of underwriting information

52
Q

binder

A
  • 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
53
Q

loss ratio

A

compares company’s operations year over year

54
Q

expense ratio

A

cost of doing business

55
Q

insurable interest

A
  • financial risk of loss

- must be present at time of loss and application

56
Q

subrogation

A

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

57
Q

liberalization

A

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

58
Q

salvage

A

insurer has right of salvage, not the insured

salvaged property can lower claim cost for the insurance company

59
Q

abandonment

A

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

60
Q

assignment

A

policy cannot be transferred without written consent from insurer

61
Q

C ooperate

A

with insurer

62
Q

S ubmit

A

to examination under oath (if required)

63
Q

M ake

A

property available for inspection

64
Q

C omplete

A

fill out proof of loss

65
Q

P rotect

A

property from further damage

66
Q

P rompt

A

notice to insurer

Property & Casualty (9 decks)

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