Chp 6: Applications for Automobile Insurance: Underwriting Flashcards
What is an application?
Request by an insured for insurance. Applications may be done verbally in writing or online.
Purpose of Automobile Insurance Applications
Applications contains the info needed to underwrite, rate, and issue the policy. The actual form must be approved by the provincial or territorial insurance regulator and is standard within the given jurisdiction.
In BC, autoplan brokers register, license, and insure vehicles and it is a computerized process so written applications for basic auto coverage are rare.
What roles do brokers and agents play in the insurance application process?
They play an important role in the insurance application process. They must impress upon applicants the necessity of full disclosure and must be careful themselves to pass on all pertinent information to the insurer.
The broker and agent have a professional responsibility to ensure that utmost good faith is upheld.
Does a automobile application need to be signed before a policy is issued?
No, but ideally it is desirable and insurers should insist it. (does not include the mandatory coverage from a government insurer)
If a signed application is not received, the insurer must send a form of the application to the insured so that it can be signed and returned
Misrepresentation on a automobile insurance application
A written application is preferable for preventing fraud or proving misrepresentations, rather than taking an oral application over the phone and having a copy signed later.
Proving an alleged misrepresentation is more difficult when there is no signed or written application. It is the insurers word against the insured’s. If there are any doubts, the court favours the insured.
Electronic signatures are being used more often in the insurance industry. They provide a quicker alternative to process of printing, signing and scanning documents to submit
Regarding misrepresentation, What do section 63 and 75 of the Insurance Vehicle Act state about the automobile insurance application?
Section 63 requires that a warning be stamped or printed on every application and policy to inform applicants of the seriousness of misrepresentation.
Section 75 states that any false statement in the application for insurance can result in forfeiture of a claim. This includes the following actions:
- Applicant falsely describes the vehicle for which the application is being made, or knowingly misrepresents or fails to disclose a material fact
- Insured violates terms or condition or commits a fraud in relation to autoplan or the optional insurance contract
- Insured makes a wilfully false statement concerning a claim
When there is no written application, applicant does not see warning until after policy is delivered. This is another reason written applications are preferred
issuing a policy that differs from the application
When the policy is issued and it differs from the written application in any way, the following provisions apply:
- The insurer must point out to the insured in writing, in what ways the policy differs from the application
- If the insured does not object to the changes by advising the insurer in writing within 7 days, the policy is deemed to cover as it is written.
If insured is not notified of difference, they may insist on coverage in accordance with the written application rather than the policy.
What information is requested on an application for automobile insurance? (12)
Applicants identification and contact information Policy Period Described Automobile(s) Driver information Previous accidents and insurance claims Convictions Vehicle rating information Insurance coverages applied for Remarks Premium Declaration of applicant Report or broker/agent
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Applicants identification and contact information
Identifies the applicant and provides some of the info needed for rating. It is necessary to obtain a drivers abstract (3 year driving record) of the applicants driving record.
Policy Period
Time during which the insurance applies. Coverage begins at the time of day started and ends at 12:01 am
All times are mostly local times at the applicants address shown
Described automobile(s)
Necessary to obtain particulars of the described automobile: The year, make,model. body type, number of cylinders, and serial number of vehicle.
Info is necessary for rating purposes and identification in the event of a claim.
What are some other things you must list when describing your automobile? (6)
If there is a mortgage, or lien, or lease on automobile, the party to whom the debt is owed must be named and their address given.
If vehicle has been modified or customized, details are required
Estimated annual driving distance should be stated if the client wants to obtain low kilometre usage discount. Different rating categories apply depending on what vehicle is used for (pleasure, business) and depending on commuting distance
Application also asks if applicant is both registered owner (Person who’s name appears on ownership registration) and the actual owner(the person who paid for vehicle) of the described vehicle
Application asks if the described automobile will be rented or leased to others or used to carry passengers for compensation or hire. If this is the case, a specific endorsement may be required
The date the car was purchased and purchase price must be shown
Driver information
Asks for the names of all drivers in the household or business and the drivers license number of each and their date of birth.
Required to list any other known drivers that may drive the vehicle.
Insured can purchase unlisted driver premium which will cover any unlisted drivers who may drive the vehicle up to 12 days a year.
Out of all those listed, the registered owner will confirm the primary driver.
BC and Ontario allow an X gender option for fair treatment of some groups of people
Previous Accidents and Insurance claims
Details are required about all accidents or claims arising from ownership, use or operation of any automobile by the applicant.
The vehicle, driver, date, type, and description of the claim, as well as amount paid must be indicated.
ICBC can view past claim history by reviewing data on file and for at fault claims histories, ICBC will only look back to March 1, 2017.
Convictions
In most provinces, this section requires disclosure, for all drivers listed of all convictions arising out of use or operation of automobile during the past three years.
The more convictions you have, the higher the premium.
Vehicle rating Information
Rating information includes the class, driving experience, listed drivers, claims history, list price of new vehicle, vehicle code, rate group, location, territory, and other discounts or add ons.
Main reason for these requirements is to help determine the rate for which the premium is based upon considering the vehicles regular use and the vehicles territory.
The premium (price of insurance) is arrived at by multiplying the rate by the amount of insurance purchased.
Insurance coverages applied for
Some coverages are mandatory while others are optional. They include the following:
-Third Party liability- covers insured that is found legally liable for causing property damage or injury or death of another arising out of use or operation of a vehicle. (min limits are $200,000)
-Accident benefits- Benefits to help insureds who are injured in a motor vehicle crash for medical treatment, rehabilitation, etc. (provides up to $200,000 no fault accident benefits)
Uninsured automobile- provides cover for property damage or injury/death of insured if they are hit by an uninsured motorist or by hit and run ( basic provides up to $200,000)
Underinsured motorist protection- when an at-fault driver does not carry enough liability coverage and injures or kills you. Only covers for injury and not property ( up to $1 million per insured)
Own damage coverage- payments cover direct and accident loss of or damage to described automobile and its equipment
Remarks
This section states additional details relating to the risk for consideration by the underwriter.
Premium
This section makes it clear that if insurer issues a policy and the applicant cancels it, there may be a minimum retained premium shown on the certificate of automobile insurance that will not be refunded.
This retained premium will cover the costs of issuing the policy and processing the cancellation if a policy does not run its full term.
If earned premium < minimum retained premium, insured is still obligated to pay minimum retained premium
Declaration of Applicant
This section contains space for the signature of the applicant, where by signing it, the applicant warrants the truth of the statements made in the application
This is an important section of the application and should be read carefully before an applicant signs. It should be drawn to an applicants attention and the seriousness of its provisions should be emphasized.
The applicants must not knowingly misrepresent or fail to disclose any fact required to be stated in the application.
Applicants must know the exclusions that may apply such as using the automobile for illicit or prohibited trade of for racing.
In the Final part of this section, applicant warrants the truth of the statements by signing and dating it. The applicant also authorizes the insurer to collect, use, and disclose the applicants driver record, auto insurance, and claims history, and those of the drivers listed.
What must the broker be careful of when filling out an application?
Must be careful in errors or omissions claims arising out of them not filling out an application properly. Errors and omissions claims arise when clients or insurers file lawsuits against agent or brokers with allegations that they committed either an error (did something wrong) or an omission (they did not do something they should have done)
Report of broker/agent
In provinces without government schemes, the final section must be completed, signed,and dated by broker or agent. It asks the following questions:
- has the broker or agent bound the risk?
- Is the business new to the agent or broker?
- What type of motor vehicle liability card was issued? (temp, permanent, or none)
- How long has the broker or agent known the applicant?
- How long has broker or agent know the principal driver?
Can provide useful info to underwriters reviewing the application
Define underwrite
To insure, More commonly to scrutinize a risk and then deciding on its eligibility for insurance.
What two levels does underwriting take place at?
Head office and branch level
