Term
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Definition
- Pure Risk: when there is a chance of loss and no chance of profit (ex auto collision
- Speculative Risk: when there is a chance of loss and a chance of profit (playing casino game where there is a chance to win or lose)
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Term
| Difference between Peril and Hazard |
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Definition
- Peril: an event that may cause a loss (ex.fire)
- insurance is provided against loss arising from the occurrence of an insured peril
- Hazard: condition that may cause a peril to occur or make the loss more severe
- Hazards can be divided into physical hazards and moral hazards
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Term
| Five Categories of Post loss Objectives for risk management |
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Definition
- Social Responsibility
- Survival
- Operational continuity
- Stable Earnings
- Sustained growth
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Term
| 5 Steps in Risk Management Process |
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Definition
- Identify and analyze exposure - to determine which perils could occur
- Formulate options- loss control, loss financing
- Select the best techniques- consider overall objectives and cost effectiveness
- Implement the Risk Management Plan- implementation plan, communication plan, method to allocate costs
- Monitoring Results - monitor and change plan if new exposures develop or are eliminated
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Term
| Risk Exposures For Golf Course and loss control and financing techniques |
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Definition
- Stray golf balls- install nets at each hole
- Heart attack: install emergency contact equipment (defibrillators), CPR certify employees
- Serving tainted food: train in food safety, use trusted food suppliers
- Severe weather events causing injury: policy to close course when severe weather occurs
- Theft of golf carts: theft insurance, store unused carts in secure area
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Term
| Spread of Risk by Insurers |
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Definition
- Volume: insuring a large number of risk
- Diversity of type of risk: write insurance on as many different types of risk as possible
- Diversity of location- write in as many different places as practical
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Term
| 5 Secondary Functions of Insurance |
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Definition
- Aiding Security
- Aiding Credit
- Promoting loss prevention
- Providing Capital
- Providing employment
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Term
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Definition
- Fire
- Liability
- Automobile
- Crime
- Floater
- Homeowners/tenant/condo insurance
- Aviation
- Marine
- Casualty
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Term
| Components of Insurance Model |
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Definition
- group of people who are exposed to loss
- pay into a pool of funds(through paying premiums)
- pool of funds is managed by the insurer
- fund used for member of the group who suffer a loss
- to be indemnified
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Term
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Definition
- adjuster
- underwriter
- accountant
- agent/broker
- actuary
- lawyer
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Term
| General Insurance Examples |
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Definition
- auto insurance
- homeowner/tenant/condo insurance
- real property (bridges, tunnels,)
- floater policies
- Accident insurance
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Term
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Definition
- not an insurance company--an insurance market
- consists of independent businesses that provide capital to the market and underwrite in syndicates
- known for providing specialist insurance and reinsurance
- Lloyd's does not deal with clients directly, but through a global network of insurance brokers
- syndicates are groups of members that employ professional underwriters to accept risk on their behalf
- each syndicate is run by a managing agent
- syndicates can compete for business or work together
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Term
| How Stock Insurance Companies use Shareholder Capital |
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Definition
- insurance company organized as a stick company has the same capital structure as any other capital enterprise
- shareholders have an equitable interest in the corporation and hope to make a reasonable profit
- stock insurers seek returns from both underwriting profit and investment income
- after company is established is is anticipated that the insurer's income will cover its expenses
- in theory if a company expenses exceed income it must draw on paid up capital and accumulated surplus to cover the difference
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Term
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Definition
- based on a very large number of insured risks; it should be possinle to estimate future losses with some degree of accuracy
- by increasing # of policies accuracy of predicting loss estimates increased
- can attract investors because of degree f accuracy of prediction
- degree of accuracy will never reach certainty
- random forces, human error, an increasingly complez commercial infrastructure, changing standards of social behaviour and costly global environmental changes mean can never be certain
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Term
| Role of Actuarial Department |
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Definition
- actuaries analyze the data and perform calculations that determine the price of insurance
- actuaries are responsible for basic ratemaking
- determine the amount of money that is adequate to cover certain required reserves
- pricing actuaries are responsible for analyzing and performing calculations to price insurance
- reserving actuaries determine the amount of money to be held in bulk claim reserves
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Term
| Role of Claims Department |
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Definition
- investigate and pay losses to indemnify insureds who suffer loss
- head office responsible for admin and efficiency of the company's claim function
- branch offices may have considerable autonomy in some cases
- all contact with adjuster would be through branch
- branch claims handle claims in their jurisdiction
- investigate, negotiate and settlement of the claim according to the provisions of the contract take place in the branch
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Term
| Role of Finance, Accounting, and Investment Department |
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Definition
- responsible for keeping the books of account and producing financial statements and income tax returns
- handles accounts payable/receivable
- files statistical reports
- branch handles day to day transactions
- investment department manages investment portfolio
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Term
| Independant Brokerage System |
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Definition
- large insurance companies market their policies through the independent brokerage system
- appoint independent brokers to be their sales force to bring clients to them
- pay commission for each policy they issue on behalf of the broker's clients
- client list belongs to brokers
- broker can represent more than one insurer or a single insurer
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Term
| Implied vs Express Contract |
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Definition
- express: contract where the terms of the agreement have been specifically stated and agreed to by both parties. Can be oral or written
- written avoids any misunderstanding on responsibilities and obligations
- Implied: parties acted in such a way as to imply that a principal agent relationship exists even though there may not have been an expressed statement by either party
- could result in dispute due to lack of specific terms
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Term
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Definition
- capacity to confirm to people applying for insurance that they have coverage against certain happenings or events that if they occur cause loss
- gives authority to intermediary to bind an insurer to a contract of insurance and to issue a binder
- Agents/brokers can bind up to a certain limit
- binding authority is stated in the agency agreement or contract
- if loss occurs before actual policy is issued but the binder has been issued the loss is covered in the same manner as if the policy had been issued.
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Term
| Principal- Agent Relationship: Broker Responsibility |
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Definition
- act within terms of contract between them and their principals
- follow instruction as to what type of risk is to be written
- collect premiums and hold in trust until the are sent to insurer
- send premiums to insurer within a specified time limit
- submit application promptly
- advise the insurer of all claims notified to the agent or broker
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Term
| Key Responsibilities of Brokers to Clients |
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Definition
- Assist in completion of insurance contracts between clients and insurers
- act within the scope of the contract and with the insurer and within the authority of their license
- broker's responsibility to the client is based on the business relationship that exists between them
- client places trust in broker so the broker's activities must be above reproach from both client and insurer
- public look to brokers for advice as to what insurance is most suitable for their needs
- avoid acting for both insured and insurer at the same time to avoid conflict of interest
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Term
| What is makes a successful broker |
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Definition
- identify needs of clients
- match needs with products from insurers
- operate with the scope of their contract with insurer
- act within binding authority
- use good business sense
- time manage effectively and look for new business
- listen to customers
- be efficient
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Term
| Office of the Superintendent of Financial Institutions(OSFI) |
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Definition
- regulate and monitor federally chartered and foreign insurance companies
- supervise and enforce safeguards so that inadequately financed insurancee companies are not established and existing ones remain healthy
- works with Insurance Companies Act
- concerned with supervision and control that will affect admin of company funds and ensure that public is adequately protected against misuse or mismanagement of funds
- there to ensure financial integrity of insurer
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Term
| Role of Provincial/Territorial Insurance Acts |
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Definition
- superintendent issue licenses for private sector insurance companies operating in the province or territory,brokers agents and adjusters
- sets out basic provisions of life insurance, accident and sickness insurance, fire insurance and automobile insurance policies
- prescribes statutory conditions required to form part if each of these policies
- each province has its own act
- general rules such as what is a contract, basic contents of a policy, grounds fro voiding policy
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Term
| Self Regulation of Insurance Brokers |
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Definition
- provincial/territorial regulators must permit self regulation before it can occur
- Set qualification standards
- set operational requirements
- police their own memberships
- registration replaces licensing
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Term
| Personal Information Protection and Electronic Documents Act(PIPEDA) |
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Definition
- act that governs the collection and use of personal information
- federal statute
- personal information collected must be relevant
- all info collected, being collected, or has been collected or will be collected must be held in strict confidence
- can only be used for purpose it is collected for
- must obtain permission to use for any other purpose
- exception: when agents and brokers are required by a court of law to disclose the clients information
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Term
| Accidental and Deliberate Privacy Breach |
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Definition
- Accidental: employee loses a memory stick or laptop containing client's personal information
- Deliberate: hacker gains unauthorized access to a firm's information systems to steal its customers' banking information
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Term
| Principle of Contribution |
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Definition
- when more than one insurance contract is covering a loss an insured may only collect an amount equal to the loss
- if these contracts or applicable statute law contain no provision forbidding other insurance; the insured could choose to collect the applicable amount from each of them
- if insureds were to collect from each this would be against principle of indemnity
- contribution is the sharing of loss or liability between two or more insurance companies covering the same risk
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Term
| Elements to form insurance contract |
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Definition
- common law:offer/acceptance, considerations, genuine intent to form legal contract, legal capacity, legality of purpose
- Quebec: consent, capacity to contract, cause of contract, object of contract
- distinct elements specific to insurance: insurable interest, indemnity,utmost good faith
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Term
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Definition
- indemnify is to place people back in the same financial position that they were in immediately before the loss
- principle of indemnity is that the insured are to collect the amount of their financial loss-no more no less
- methods of calculating indemnity include actual cash value and replacement value
- amount of indemnity owed is usually the subject of some negotiation between parties to the contract
- insurance policies of compensation are not contracts of indemnity
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Term
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Definition
- Classify risks
- Gather stats on past losses
- calculate pure premium
- determine total premium, including loadings
- Calculate the rate or unit cost
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Term
| Reasons for underwriters to reject risk |
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Definition
- insurer may not insure that class of business
- risk may be too hazardous: if more hazardous than average then the potential for loss is almost certain
- risk may be substandard
- potential for improving or upgrading may exist, but the applicant is not prepared to carry out suggested improvements
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Term
| Information needed on insurance app |
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Definition
- Named insured
- Policy term
- Subject of insurance
- Loss Payees
- Loss history
- Prior insurance
- Broker's report
- Signature
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Term
| Function of Insurance Policies |
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Definition
- evidence of the insurance contract that states the terms and provisions of the agreement made between insurer and insured
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Term
| Certificates of Insurance |
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Definition
- modified form of a policy that certifies its existence, issued as a convenience to a party with an interest in the insurance
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Term
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Definition
- Cover note: a form of temporary insurance issued by agents and brokers to confirm to the insured that the described insurance has been set up
- Binder: a form of temporary insurance issued to record the agreement to insure a risk pending the writing of a policy
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Term
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Definition
- any writing on the back of a policy that varies the terms of the contract
- in practice usually an attachment to a policy
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Term
| How to terminate insurance |
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Definition
- termination conditions state requirements that must be met for a policy to be cancelled
- for fire, a&s and auto these conditions are in the Statutory Conditions/General Conditions
- most casualty policies even if not subject to Statutory Conditions contain a termination clause
- insurer can cancel by giving a set number of days notice in writing by registered mail or hand delivery and returning the pro rata premium
- insured can cancel anytime, but the insurer will retain premium collected on a short rate basis
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Term
| 5 sections of insurance policies |
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Definition
- coverage summary:parties to the contract,inception-expiry, term,premium and rate, amounts insured
- insuring agreement: subject matter of the insurance, perils insured against, exclusions, circumstances under which insured may receive proceeds of insurance
- Statutory conditions:fire,auto,a&s policies, must be printed
- policy conditions: provisions that state the rights and duties of the insured and insurer
- signature clause: policy is signed by insurer only
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Term
| Pro Rata/short rate Cancellation |
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Definition
- pro rata policy holder is fully refunded premium pid
- short rate policy holder is refunded premium with penalty
- courts will construe policy conditions strictly against the insurer
- if it has not complied with every detail of the conditions a policy's cancellation will not be effective and will remain in force until conditions are met
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Term
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Definition
- name and address of insured
- address at which risk is located
- time and date of commencement/expiry
- amount of insurance bound
- name of insurer bound
- exact type and form of contract under which the risk is bound
- any special terms, such as deductible
- any other information required to meet provincial legislation
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Term
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Definition
- an insured property is not totally destroyed or lost, some portion of the property remains and usually has some value
- if the insured is reimbursed for the loss as though the property were totally destroyed-a total loss- the insurer is entitled to possession of the property remaining
- the insurer can then sell that property and retain the proceeds as salvage
- this enables the insurer to reduce its loss
- if insured wants to keep salvage then its value is deducted from the total loss settlement so that the insured does not profit from the loss
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Term
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Definition
- allow a person to make a claim at any time after an event has occurred would be unjust and would produce chaos
- difficult to investigate, prove or disprove claim if it were reported years after events occurred
- many actions could be started long after the parties concerned and witnesses have disappeared
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Term
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Definition
- each coinsurance clause contains provisions stating when adequate insurance is considered to exist
- may be expressed as a % of the value of the property or as a specifically stated amount
- percentage required is mainly governed by the type of property covered, 100, 90, 80, 50 are usual
- when a dollar amount is stipulated it is called a stated amount coinsurance clause
- if at the time of loss the insured is carrying an amount of insurance that is less than the policy coinsurance requirement, the coinsurance penalty will apply
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Term
| Key Steps in Claims Process |
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Definition
- insured reports loss to broker, agent, insurers online reporting tool or call centre
- claims handler records the prelim information and asks for details of incident
- claims handler does an initial check of policy coverage
- if loss looks covered, a loss adjuster is assigned to the claim to the claim and proceeds with next steps
- verify coverage, investigate loss,evaluate/asses/deny claim, arrive at settlement, recommend payment, review for subrogation, salvage, and contribution
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Term
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Definition
- assist the client in reporting the loss to the insurer
- explain the claims process to the client, thereby reducing anxiety and settling realistic expectations
- monitor the progress of the claim
- advocate on the insured's behalf when the client has concerns
- advocate for the insurance carrier when needed
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Term
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Definition
- make sure they have authority to handle claim
- supply the insurer with relevant docs such as preliminary notice of loss or accident report
- investigate(interview insured, visit scene of loss, contact third parties, witnesses, police officers, others who may have info on loss)
- keep insurer informed of all developments and follow the insurer's instructions-how this is done is dependent on the type of adjuster
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Term
| Insurance Bureau of Canada |
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Definition
- advocate industry positions with consumers, government, members, and other stakeholders
- identify/monitor issues,develop policy positions, respond to legal developments
- stay on top of issues of strategic importance to industry
- investigative services- insurance crime related investigations, auto theft, and loss recovery services, info exchange, public affairs and marketing
- insurance information- access to web based business apps and other info related to auto insurance in canada
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Term
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Definition
- all drivers must be able to obtain insurance
- to ensure access to insurance for high risk drivers industry developed a pooling arrangement where all high risk drivers could be underwritten in a common pool
- profits or losses of the pool are shared by all auto insurers in the province or territory where it is operating
- under the pooling arrangement several companies become servicing carriers and are available to those drivers who are experiencing difficulty obtaining insurance
- all agents and brokers in the province or territory have one of these servicing carriers to underwrite and provide all necessary insurance services
- premiums are higher to reflect loss exp of high risk drivers
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Term
| Elements of Good Client Service by Agents/Brokers |
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Definition
- Reputation as a dependable source of insurance advice
- adequate capacity and range of coverages
- accurate and adequate accounting and office methods
- good handling of claims
- appropriate handling of complaints
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Term
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Definition
- broker: clients can engage with broker who may assist in resolving issues
- insurer complaint handling protocol:client can deal directly with insurer through its own system of complaint handling
- Ombudsman:in some jurisdictions an ombudsman employed by the insurer or by the insurance regulator is available to answer insurance queries or to help resolve claims complaints
- Consumer Information Centre:IBC maintains a national telephone hotline to answer any consumer questions
- General Insurance Ombudservice(GIO):claims problems that are not resolved are referred to the GIO after the insurer issues a final position letter
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Term
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Definition
- legal right held by most insurance companies to pursue a third party that caused an insurance loss to the insured
- done in order to recover the amount of the claim paid by the insurer to the insured for the loss
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