8. General insurance products

Question 1

What are the four groups of generic general insurance products?

Answer 1

• Liability=> employers’, motor third party, public, product and professional indemnity
• Property damage=> residential buildings, commercial buildings, moveable property (contents), land vehicles, marine craft and air craft
• Financial loss=> pecuniary loss, fidelity guarantee, business interruption, cyber insurance
• Fixed benefit=> personal accident, health and unemployment

Question 2

What is indemnity? Give examples of where insurance does not fully indemnify the pH.

Answer 2

• Compensation or reimbursement for a loss.
• The insured should be restored to the same financial position before the loss event.
• Examples of insurance that not fully indemnify=>
• Fixed benefit insurance
• Policy excess
• Maximum level of cover
• New for old household contents insurance

Question 3

What are the features of liability insurance?

Answer 3

• Indemnity where the insured=> some form of negligence is legally liable to pay compensation to a third party.
• Legal expenses relating to such a liability are usually covered
• Illegal acts of negligence=> invalidate the cover
• International or national law may apply
• Benefits may be retsicted by a maximium limit and/or excess
• Claim => result in cancelation of future cover or for a reinstatement premium to be paid
• Claims are medium to long tail=> real in nature e.g. linked to court-award, earnings or property price inflation

Question 4

What perils are covered by the following types of insurance?

Answer 4

• EL=> accidents caused by negligence of employer, exposure to harmful substances and exposure to harmful working conditions
• Motor third party=> motor accidents caused by the insured
• Public liability=>Depends on type of policy=> object falling or dog bite
• Product liability=> faulty product, manufacture or packaging, misleading or incorrect info
• Professional indemnity=>depends on profession=> wrong medical diagnosis, error in medical op, error in actuarial report

Question 5

What are the perils covered by the following list of property damage cover?

Answer 5

• Building=> fire, explosion, lightning, storm, flood.
• Contents=> theft and same as building
• Marine hull cover=> perils of sea, fire, explosion, jettison, piracy

Question 6

What are the perils covered by the following types of insurance?

Answer 6

• Fidelity guarantee=> dishonest employee action e.g. fraud/embezzlement
• Business interruption=> being unable to conduct business, e.g. due to a fire in insured’s property
• Pecuniary loss=>bad debts, third party failure

Question 7

What are the perils covered for fixed benefit insurance?

Answer 7

• Personal accident=> accident resulting in loss of limbs or other specified injury
• UI=> retrenchment or redundancy
• Health insurance => need for treatment in a hospital

Question 8

What are the types of GI reserves and methods of calculating them?

Answer 8

• Outstanding reported claims reserve - Case by case estimate
• Incurred but not reported - Statistical approach/analysis
• Unexpired risk reserve (annual premium received but risk event hasnt happened) - proportionate approach
• Catastrophe reserve
• Claims handling expense reserve

Question 9

What costs may be covered by cyber insurance?

9

Answer 9

• Cost of identifying and repairing any breaches
• Cost of buying new computers and hardware
• Business interruption losses, while the insured’s systems are down
• Consequential losses/compensation payments to customers
• Fines imposed by regulators as a consequence of attack
• Costs associated with the loss of client information
• Costs associated with damage to insured’s reputation
• Costs arising from onward transmission of a virus i.e. to third parties
• Loss of intellectual property