Ch 8 General Insurance

Question 1

What are perils

Answer 1

This is a risky event such as fire and floods that cause loss to happen

Question 2

What is a hazard

Answer 2

Conditions that make perils worse or cause perils

Question 3

Who needs general insurance

Answer 3

Individuals and companies

Question 4

What are the four main types of general insurance products

Answer 4

Property damage insurance
Financial loss
Fixed benefits
Liability insurance

Question 5

Explain property damage insurance

Answer 5

When individuals are at risk of property damage, loss or stolen property. They get it insured in order to indemnify the policyholder against loss

Question 6

What is financial loss

Answer 6

Cover against things that cause financial loss

Question 7

What is pecuniary loss

Answer 7

When a company suffer due to a debtor not paying what is owed

Question 8

What is fidelity guarantee

Answer 8

When money is stolen or embezzled by employees

Question 9

What is business interruption

Answer 9

Company suffers losses due to a result of having to suspend work

Question 10

What are fixed benefits

Answer 10

Sum assured for an event that occurs if an agreed event occurs such as body parts

Question 11

What is liability insurance

Answer 11

Provided to indemnity where the insured is legally liable to pay compensation to a third party

Question 12

What are the types of liability insurance

Answer 12

Employers liability
Motor third party liability
Public liability
Product liability
Professional indemnity

Question 13

Explain employers liability

Answer 13

Protects employer from employees demanding compensation for work accidents

Question 14

Explain motor party liability

Answer 14

Protects vehicle owners from damage caused by them to other drivers, pedestrians, property

Question 15

Explain public liability

Answer 15

Protects companies from paying compensation to members of the public as a result of something that is seen as company’s fault

Question 16

Explain product liability

Answer 16

Protects companies from damage their products may have caused to the public

Question 17

Explain professional indemnity

Answer 17

Protects professionals such as actuaries, doctors , lawyers from claims against them as a result of advice or services rendered

Question 18

Explain policies as combinations of cover

Answer 18

When events lead to several different types of claims. So police’s can be sold as a package to meet all the needs of the policyholder

Question 19

How to access general insurance products

Answer 19

Brokers - give you an idea of multiple products
Contact directly
Aggregator websites - obtain several quotes on the website

Question 20

What are the characteristics of general insurance policies

Answer 20

Premiums are payable either as a single premium in advance or a regular premiums

Short term policy

Any amount of claims

Claim frequency and amount are uncertain

Question 21

What is long tail in GI

Answer 21

When there are policies that take a long time for the claim to be reported

Question 22

What are risk factors

Answer 22

Characteristics of the policyholder that precisely define how much risk he or she is exposed to

Question 23

What are rating factors

Answer 23

Approximation of risk factors

Which are easily measurable
Roughly proportional to risk
Difficult to misrepresent

Question 24

What is the measure of exposure

Answer 24

Value component of the policy and a way to standardise the premiums

Question 25

What needs to be determined when pricing a policy

Answer 25

What is insured What are the perils Probability and present value Measure of exposure Risk factors Rating factors Adjustment to the probability of the event we make for each rating factor

Question 26

What are some features of general insurance policies that affect claims

Answer 26

Excess No claims bonus

Question 27

Explain excess

Answer 27

Where the policyholder pays an agreed amount and the insurer covers the rest of the claim.

Question 28

Advantages of excess

Answer 28

Policyholder pay lower premiums Insurers process less claims

Question 29

Explain no claims bonus

Answer 29

Policyholders get paid a bonus if there are no claims during a period of

Question 30

Advantages of no claims

Answer 30

Policyholders don’t claim on small losses which reduces number of claims for insurers

Question 31

What are IBNR claim reserve

Answer 31

Claims which insurer expects already happened but not reported

Question 32

What are outstanding reported claims reserve

Answer 32

Claims which insurer knows about but has not paid

Question 33

What is the catastrophe reserve

Answer 33

A reserve to assist insurer in case a catastrophic event occurred

Question 34

Why is general insurance possible

Answer 34

Despite being dynamic risks , insurers take advantage of short term policies to be able to review and change policy prices year after year