Chapter 8: General insurance products Flashcards Preview

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Flashcards in Chapter 8: General insurance products Deck (24)
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1
Q

Liability insurance

A

provides indemnity where the insured, owing to some form of negligence, is legally liable to pay compensation to a 3rd party.

2
Q

Motor 3rd liability insurance

A

perils include motor accidents caused by the insured

3
Q

Public liability insurance

A

Perils depend on the type of policy (e.g. dog bites, falling objects)

4
Q

Product liability

A

Perils include faulty design, manufacture, packaging and misleading instructions.

5
Q

Professional indemnity

A

Perils depend on the profession of the insured.

6
Q

5 Types of liability insurance

A
  • employers’ liability
  • motor 3rd party liability
  • public liability
  • product liability
  • professional indemnity
7
Q

Employers’ liability insurance

A

Perils include accidents in the workplace due to the negligence of an employer or employee, exposure to harmful substances/working conditions.

8
Q

Property damage insurance

A

Indemnifies the insured against loss of, or damage to , their own material property.

9
Q

6 Types of property damage insurance

A
  • residential building
  • moveable property (contents)
  • commercial building
  • land vehicles (car)
  • marine craft
  • aircraft
10
Q

Financial loss insurance

A

Indemnifies insured against financial losses arising from a peril covered by the policy.

11
Q

3 Types of financial loss insurance

A
  • pecuniary loss
  • fidelity guarantee
  • business interruption
12
Q

Pecuniary loss

A

perils include bad debts or failure of 3rd parties, includes mortgage indemnity guarantee insurance.

13
Q

Fidelity guarantee

A

perils include dishonest actions by employees such as fraud/embezzlement

14
Q

Business Interruption

A

a. k.a. consequential loss

- perils include fire in the insured’s own property or in a neighbouring property.

15
Q

3 Types of fixed benefits insurance

A
  • personal accident
  • health
  • unemployment
16
Q

Personal accident insurance

A

perils include loss of limb or other specified injuries from an accident.

17
Q

Unemployment insurance

A

The peril is redundancy.

18
Q

Key features of property insurance

A
  • Generally for a period of 1 year, and are not guaranteed renewable
  • May be multiple claims in the period
  • The cover may be offered on commercial lines or personal lines
  • Underwriting on personal lines business will be standardised, while underwriting on commercial lines will be more individual and extensive
  • Classic short-tailed business (reporting & settlement)
  • Precisely what is covered will vary and will be specified in the policy document
  • Excesses are common to reduce the number of small claims and keep the cost of insurance down.
  • Buildings and contents cover can be sold separately
  • Premiums based on the sum insured (value of contents) or proxies (number of bedrooms)
  • Principle of average applies
19
Q

Cover for buildings is done on what basis…

A

Replacement basis, with the value of the property being based on the cost of rebuilding

20
Q

Likely basis for commercial contents insurance

A

indemnity basis

21
Q

Likely basis for household contents insurance

A

indemnity basis

or replacement basis

22
Q

Principle of average

A

Used to discourage under-insurance.

Paid = claim * sum_insured / current_value

23
Q

Perils covered under property insurance

A

the policy document will specify which perils will be covered

typically includes:

  • Fire
  • Theft
  • Burst pipes
  • Storm/flood/lightning/other weather damage
  • Natural disasters
  • Explosions
  • Damage caused by measures taken to put out a fire
  • Subsidence
24
Q

Risks faced by the insurer under property insurance

A

COMPANY

  • Insufficient, inadequate or appropriate past data to price the contract
  • Insufficient experience to design an appropriate product
  • May struggle to administer the business appropriately

OTHERS

  • Competitors may react to the insurer’s entry to the market by lowering prices / making market share difficult
  • Legislative or taxation changes may impact on profitability.

CUSTOMERS

  • Anti-selection
  • New business strain
  • Low volumes may mean the insurer is unable to recoup its initial expenses
  • Withdrawals may be higher than expected

COSTS

  • Claims may be higher than expected
  • Investment returns may be lower than expected
  • Expense risk (higher than expected)