Chapter 10

Question 1

Among brokers underwriters and claims adjusters. Identify which of is the first, second, and third point of contact with the insured and how they work together during to complete life cycle of an insurance contract

Answer 1

brokers are agents are the first point of contact in the insurance transaction, the insurance professionals who first participate in the underwriting and claims process

underwriters are the second point of contact in the transaction. They received the risks that have been first underwritten by the brokers or agents, they review the risks to determine whether they are acceptable to the insurer and they become involved with their adjuster colleagues in the claims process

claims adjusters are the third point of contact in the insurance transaction. They work with insurance, the brokers or agents, and the underwriters.

Question 2

Explain why brokers also need to underwrite risks. How is it different from the way underwriters under risks, how is it the same?

Answer 2

The broker agent under rights for the insured and the insurer, underwriter under rates for the insurer.

Question 3

Explain the differences and point of view that can lead to conflict between an underwriter and a broker

Answer 3

the underwriter knows the types of risks then sure needs to ensure to generate a profit. The underwriter can also see why certain risks may not be appropriate for the insurer. This difference in perspective can sometimes cause conflict between the broker or agent and the underwriter

Question 4

Explain how brokers and agents negotiate

Answer 4

brokers and agents negotiate terms and conditions for new policies, endorsements, and renewals with the insurers. To do it this, the broker agent compares the client’s needs with the insurance requirements. Part of the negotiation is to pre-qualify the client for the insurer in accordance with the insurers underwriting rules and guidelines and the authority granted to the broker or agent by its contract with the insurer

Question 5

Role of underwriters, what is their goal? What do they do? how do they incorporate the interest strategy to meet their goal?

Answer 5

The role of the underwriters goal is to survive and make a profit.

Underwriters accept our reject risk on the behalf on the insurer. underwriters are in effect investing the insurers capital in those risks and accept the decline to invest capital in those risks they reject

To build a profitable portfolio, the insurer needs an underwriting strategy. That strategy will involve, identifying the types of risk the insurer wants to pursue, the lines of insurance it wants to underwrite, the reinsurance it can arrange, the amounts of insurance it will offer for risks of different types of sizes and the approach it will take to pricing, among other considerations

Question 6

List three parts to the underwriting process

Answer 6

1. Evaluating the risk
2. Making the underwriting decision
3. Pricing the risk

Question 7

List six considerations in evaluating a property risk

Answer 7

Acceptable and unacceptable risks
Claims history
Financial factors
Physical factor
C o p e and a single family dwelling
Heritage and historic dwellings

Question 8

Who creates the insurers strategic plan for gaining business? What is the purpose of the underwriting God and the line guide?

Answer 8

and determining acceptable and unacceptable risks, the underwriting process is guided by criteria determined by the insurer. This criteria are part of the insurers strategic plan. They are often specified in an underwriting guide issued by the insurers head office underwriting department.

the underwriting guide describes the types of risk the insurer is prepared to consider. In addition to the underwriting guide is the line guide, which describes the maximum amount of exposure and insurance company is prepared to accept on various classes of risk

Question 9

How is a client’s claim history used in underwriting?

Answer 9

the record of past losses describes the types of loss and the amounts paid out for each loss. The underwriting process should also determine what preventative measures, if any, have since been taken to help prevent similar loss in the future. This is helpful in assessing how reasonable the coverage and other requested terms are, as well as the price to charge

Question 10

if an applicant indicates no claims history, what should the underwriter investigate further? List several possibilities and indicate what the investigation could uncover

Answer 10

did the applicant have insurance in the past? If not there should be no claims history for the underwriter to base an assessment on

what deductibles do existing policies include? A high deductible May mean the applicant has suffered a previous loss and the current insurer has imposed to higher deductible to return more of a risk to the applicant

• a high deductible may also be a problem if the applicant has decided to repair the damages from losses that fall below the deductible. The underwriter may not learn of such losses and of the hazards that give rise to them. Left unaddressed, those hazards may represent a large loss waiting to happen
• if the applicants current policy carries a large deductible, the insurer should ask about all losses and not only losses in Access of the deductible

the underwriter should check a commercially available database of personal property claims for losses involving theft or a suspicion of fraud on the part of an applicant or insured. if the applicant’s name should be found in the database, then the underwriter may follow up with the broker agent of both the applicants utmost good faith and whether the finding applies a moral hazard

Question 11

Why should any denied claims be investigated?

Answer 11

Denying claims should be investigated because of denied claim me identify a moral hazard. denied a claim could also identify a physical hazard that could cause a legitimate claim if the underwriter were to accept the risk

Question 12

What two metrics should be considered when analyzing a lost history?

Answer 12

Boss experience may be analyzed in two basic elements

Frequency- this is an important measure of how often losses are likely to occur in the future. The more frequent losses are the more likely a severe or shock loss is to occur

Severity- there is less control over severity and frequency period the broker agent and the underwriter have no control over inflation or repairs costs, among the many factors that may determine the final size of the claim.thus, and underwriter might require, as a condition of coverage that the applicant implement recommendations by the loss control inspector to reduce hazards that give rise to a severe loss

Question 13

List five effects of fraudulent claims

Answer 13

1. Increase insurance premiums
2. cause direct economic loss to a community When The fire department, police, and doctors are called on
3. Cause direct economic lost individuals and family through physical damage to insured property
4. cause indirect economic loss by the increase in insurance premiums and the increased cost of products and services needed to repair physical damage
5. result in unnecessary death or bodily injury to the general public and to emergency responders

Question 14

How can the presence of one or more mortgages on a property affect underwriting? Does the mortgage matter?

Answer 14

risks with more than two mortgages must be carefully reviewed and May in any event be unacceptable to many insurers. In addition, any risk with a mortgage that is not a well-known lending institution must also be carefully reviewed

Question 15

List the factors to be assessed in a physical risk can be expressed by the acronym cope what does that mean

Answer 15

C- construction
O- occupancy
P- protection
E- exposure

Question 16

List characteristics of the construction of a property that can affect underwriting

Answer 16

construction includes a description of the types of materials used in the walls and roof of the applicants or the insurance building. Residential homes are primarily constructed of frame or frame with brick veneer or solid brick. High-rise apartments or condominium buildings are primarily of hollow concrete block or fire restrictive construction. Other aspects of construction may include the size of the building, it’s age, the number of stories, and the type of heating system and fuel used

Question 17

What’s the characteristics of the occupancy of the property that can affect under writing

Answer 17

occupancy refers to the use of the property by its occupants. It includes the number of occupants, the space each occupies, the hazards associated with each occupancy, and any measures taken to reduce those hazards.

Question 18

List characteristics in the protection of a property that can affect underwriting explain the graded system.

Answer 18

protection includes both public and private protection. Public fire protection is based on Town grades assigned to each municipality.

A town grade is based in turn on the availability and effectiveness of fire hydrants, the municipal water supply and pressure, and the expertise and response time of the fire department. Town grades 1-4 are considered protected, Town grades 5-8, semi-protected, and town grades 9 and 10, unprotected. Private protection includes sprinklers or other extinguishing systems and fire alarm systems

Question 19

List characteristics of the exposure of a protection that can affect underwriting

Answer 19

exposures refer to the chance the applicant or insured will suffer a loss as a result of proximity to one or more other risks or potential causes of loss to the applicant. Example flood exposure

Question 20

List three main reasons and insurer May hesitate to ensure historic dwelling

Answer 20

1. Heritage buildings carry higher risks due to old wiring, piping, heating sources, foundations, and roofs
2. in the case of a claim, it may be too costly for insurance companies to replace the materials of designated heritage sites
3. heritage buildings may require specific types of repairs with specific materials due to the various acts and bylaws in the different restrictions that apply once a building has been designated a heritage building

Question 21

why is the repair cost of a partial loss of historic dwelling significantly higher than other dwellings? Less characteristics that are more expensive

Answer 21

In the event of a partial loss, the cost of repair is significantly higher than similar repairs to a modern building. It is therefore important that the amount of insurance we adequate to the risk. Obtaining an accurate building replacement cost is important and requires the skills of a knowledgeable appraiser who understands such nuisances of heritage construction and reconstruction such as

Handmade bricks
Ornate hand cut stone work
Elaborate fittings in plaster, stone, cast iron or wood
Antique lighting fixtures
Antique flooring
Antique or stained glass windows
Slate roofing
Custom trim work

Question 22

List three reasons that would force an underwriter to reject a risk

Answer 22

1. the risk is of a class not permitted by the underwriting or line guide or in some other way fall short of minimum requirements specified in the underwriting or line guide
2. market conditions or competitive considerations. For example, if the insurance cycle turns toward a hard market after a period of access capacity in the market, and underwriter may be forced to reject and otherwise acceptable risk simply because the insurer has been forced to keep its total premiums to within an acceptable ratio of its surplus, or capital
3. the risk is, on its own merits, too flawed to be accepted, and it is is not possible to negotiate terms on which the risk should be made acceptable

Question 23

If none of the reasons an underwriter rejects a risk what tools can be used by an underwriter to make terms that are acceptable for underwriting on particular risk?

Answer 23

if none of these consideration obliguese and underwriter to decline a risk outright, then he or she may negotiate terms under which the risk can be made acceptable. There are many tools available to improve the risk, deductibles, premium rights, modifications of coverage, and implementation of recommendations by the loss control department to improve the risk among many others.

Question 24

What is it the underwriter trying to balance when trying to reach terms? Who needs to be kept happy?

Answer 24

making an underwriting decision thus becomes a skillful blending of options in an effort to find terms agreeable to both the insurer and the applicant that will make the risk acceptable

Question 25

What are Insurance prices based on? Who sets the prices? What is the process called?

Answer 25

the price of insurance is based on historical data about incurred losses. Statistical techniques are applied to these data to develop a forecast of the rates needed to provide sufficient premium for future losses. These statistical techniques are applied not by under writers but by actuaries, in a process called rate making

Question 26

What does it mean that pricing is prospective rather than retrospective? Any exceptions?

Answer 26

In rate making, actuaries analyze the frequency and severity of past claims, estimate the ultimate cost of settling outstanding claims, and estimate the cost of future claims. Thus, ratemaking is prospective rather than retrospective; it must use yesterday’s statistics to calculate today’s premiums to pay tomorrow’s losses

Question 27

What are the three major components that make up the price of insurance?

Answer 27

• The anticipated cost of settling claims
• The accusation costs of the businesses, such as commissions
• The cost of administrative the process, including taxes levied on premiums

Question 28

What two assumptions need to be true for the pricing method to be accurate?

Answer 28

• the actuarial forecast of future losses based on past losses is accurate for the population
• The sample represented by a particular book of business is representative of the population

Question 29

Give two hazards and demonstrate the effects they can have on property insurance rates

Answer 29

non hazardous occupancies in well-constructed, well protected buildings with no serious exposures attract lower rates than hazardous occupancies in poorly constructed and protected buildings facing serious exposures

Question 30

Explain the difference between rate making and rating. Who does the rate making who does the rating?

Answer 30

Rate definition: amount charge to an insured that reflects the expectation of loss for a covered risk, insurance companies expenses, and profit. In other words, it is the basis of premium calculation for the insurance provided for the exposure.

Rate making definition: the process of compiling and analyzing data to establish rates that accurately reflect the level of risk period usually performed by actuaries

Question 31

Explain how rating modifies the manual rate to arrive at the appropriate premium for a particular risk

Answer 31

The modified rate for a particular risk is applied to the amount of insurance for that risk to determine the premium. Gus, if the risk were insured against fire for $100,000 at a modified rate of 50 cents per hundred dollars of insurance, the fire insurance premium would be 50 cents per $100 of insurance multiplied by $100 of insurance equals $500

Question 32

Explain the concept of insurance to value. Why might some insurance prefer not to ensure to value?

Answer 32

most fire Insurance losses are partial losses. Recognizing this, many insurance would be inclined to purchase amounts of insurance far below the total value of their property, but adequate for their estimate of the size of loss they’re likely to incur. The premiums of those more willing to gamble on the likely size of a loss would be subsidized by the premiums of those less willing to gamble. And that is unfair

the practical solution to the problem has been for insurers to assume that insurance have bought insurance on the full value of their property

Question 33

What is the best way to determine a property’s replacement cost? why is it often done instead of property is simply or inexpensive enough? Why? What is the danger?

Answer 33

a professional Insurance appraisal is the best way to determine a building’s replacement cost, but most insurance find this too expensive to have done regularly. Instead, for personal property risks and for simple commercial risk, most insurers require completion of an estimator or calculator a formula, devised by professional appraisers, the estimates replacement cost based on features such as size and location of dwelling

The danger is if the calculation is inaccurate you are underinsuring the property

Question 34

Why are brokers uniquely suited to assist with claims

Answer 34

a broker agent’s personal contact with insurance makes them the first point of contact in an insurance transaction, identifying the needs of African orange herds and working closely with underwriters to match those needs with products offered by insurers Insurance are more likely to know the names of their broker or agent than the names of their insurers. They are more likely to call their broker agent when they have questions about their coverage, when they need to make changes to their coverage, and when they want to claim indemnify for a loss

Question 35

List four ways a broker can assist with the claims process

Answer 35

Help resort a loss to the insurer by taking the first notice of loss from the insured and transmitting it to the insurer

Explain the claims process to the insured, thereby reducing anxiety and setting realistic expectations

Monitor the process of the claim as necessary

Advocate on the insureds behalf when the insured has concerns

Question 36

True or false reporting a loss to your broker fulfills the requirement for notice of loss to the insurer

True or false if a claim is reported to a broker, the broker should avoid confirming or denying validity of the loss

Answer 36

First statement is true

Second statement is true

Question 37

List ways of claims professional triages a claim as soon as it is reported

Answer 37

An example as medical professionals triage patients in the emergency room of a hospital, so claims professionals promptly communicate with the insured and assess policy coverage, the seriousness of the claim, what must be done immediately, and who should be assigned to handle the loss that is, who should address the claim

Question 38

Detail the skills, knowledge, and relationships that adjusters need to draw upon to process a claim

Answer 38

property claims adjusters who deal with damage claims for buildings must know about repair techniques in construction. It is crucial that they have a sound knowledge of and strong relationships with respected contractors who have proven themselves to their insurers and their insured they have performed work for in the past.communication skills are essential for a dressers. They must be able to adapt their skills to the party or parties involved. In the end, the message being relayed must be clearly understood by all

Question 39

Give three reasons why an insurer may need to use an independent adjuster

Answer 39

Independent adjusters may be needed where a loss effects so many in church that the insurer by itself cannot deal with all the clans within a reasonable time, and example is the wildfire that swept through fort McMurray in Alberta of May 2016.

Independent adjusters also may offer specialized expertise that the insurance staff adjusters lack for certain kinds of loss

independent claims addresses are required to be licensed and provinces in which they work and most provinces employees of insurance companies do not need to be licensed

Question 40

Explain why the intangibility of insurance makes its value difficult to be recognized and tell a loss occurs

Answer 40

most insurance do not realize it’s true value and tell a loss occurs. The settlement process for any claim often represents the insurance first direct dealing with their insurer. Relationships with claimants can be enhanced by sincere desire to resolve claims promptly and professionally

Question 41

list the skills adjusters and brokers need to use to acknowledge the insurance feelings when a loss is experienced. What can happen if they don’t

Answer 41

• using tact and diplomacy to reassure and calm and insured
• recognizing that everyone reacts differently to a crisis
• acknowledging feelings in a neutral way, rather than ignoring them and creating barriers
• being patient
• showing respect for the person even when feelings and views may not be understood
• being observant
• choosing words carefully, so as not to imply coverage
• listen actively

failure to communicate effectively can lead to level of claims service, which can hamper a successful claim outcome

Question 42

List 10 steps or questions to be answered in the claims process

Answer 42

Step 1: does the loss fall within the policy period ?
Step 2: does the loss fall within the insuring agreement ?
Step 3: do any exclusions apply ?
Step 4: do any endorsements apply ?
Step 5: have all policy conditions been met ?
Step 6: I’d there a deductible to be applied?
Step 7: how much should be paid ?
Step 8: any other reason not to pay the Claim?
Step 9: pay the claim
Step 10; notify the underwriter of any information material to the risk that the insurer may be unaware of

Question 43

how long does the insurer have to provide the insured with a blank proof of loss form? Which province is the exception? Is providing the form considered an admission that the policy is in force?

Answer 43

Common law provinces and territories require that a blank proof of loss form be provided to an insured within 60 days of the notice of loss. If an insured asks for the form, then the interim must promptly comply. Providing a form to the insured is not a requirement in the province of Quebec

Question 44

Under what criteria can the need for a sworn proof of loss report before gone list four

Answer 44

The amount of the lost falls below the specified threshold
There is no suspicion of fraud in the claim
There is no possibility of subrogation
There is no thread of litigation by the insured

Question 45

What details must be confirmed when examining coverage

Answer 45

the circumstances of the claim and the type of property damage must be examined. The application and the policy wording must be examined carefully

Question 46

List the four steps to investigating a loss

Answer 46

1. Obtaining a written statement from the insured
2. Interviewing the insured
3. obtaining photographs of the damage property from before and after the loss
4. Arranging emergency services and assigning a contractor

Question 47

Listen information that should be captured in an insured statement

Answer 47

The insurance name, address, and policy number

The date and time of the loss

The specified location at which the loss occurred

A description of the loss

How the loss was discovered

Weather police were called

Names of the household occupants

a description of the damaged item or items

Question 48

List recommendations for the interviewer

Answer 48

Plan: a checklist should be prepared of subjects to be covered in the interview

Listen: the interviewer should never interrupt the interview subject or start speaking as soon as subjects stops. The subject should be allowed to vent strong feelings and express him or herself freely. The later part of the interview often reveals the most as the subject becomes comfortable with the interviewer and the end of your process.

The interviewer must avoid threatening language or gestures

the interviewer must maintain composure and not get excited or upset

Only one question should be asked at a time

The interviewer should be alert to and prepare to evaluate the body language of the subject

the interviewer should ask for explanations whenever the subject said something unclear

Note should be taken even at the interview is recorded. Note should be reviewed with the interview subject

I respectful attitude must be maintained at all times

Question 49

Explain the use of photographs, before and after the loss.

Answer 49

most adjusters take cameras with them when they visit the side of a loss. Photographs and videos are used to document evidence and remain all parties of what the affected area looked like directly after the loss occurred. They adjust her should also ask the insured for any recent photos of the property before it was damaged. Photographs help to quantify the claim. It is important to ensure that clear, constant resolution be maintained in every photograph taken in order for it to provide any value.

Question 50

how soon should an adjuster visit the law site for a larger loss? How long do they have to agree upon the scope of emergency repairs?

Answer 50

the property claims adjuster assigned to a larger loss will attend the site with the emergency contractor as soon as possible after the loss - on the same day or within 24 hours of assignment. A detailed scope of emergency repair should be agreed to by the insured, the emergency contractor, and the investor within 48 hours of the loss.

the agreed plan of action will provide the adjuster, the emergency contractor, and most important, the client a detailed description of the agreed emergency repairs

Question 51

How might a settlement be reached if the settlement is unfavorable and how might the insured react?

Answer 51

after negotiations are complete and a settlement amount has been agreed to, the claims address sends a check, accompanied by a covering letter, to the claimant.

alternatively, a denial of coverage will be communicated in writing, which could lead to litigation or an alternative dispute resolution process

Question 52

List and explain the two ways underwriting might occur after a claim?

Answer 52

the first way arises when an adjuster finds that there is a substantial change to the risk as presented to the insurer a change of risk

the second way, underwriting may be involved after a loss arises when an underwriter works with a broker to determine what the insured has done to prevent the loss from happening again.