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Flashcards in Hamilton & Ferguson 6 & 9 Deck (16):

Briefly describe the FAIR plan:

Property owner unable to get coverage through voluntary market applies to FAIR plan via an authorized agent or broker


Describe how the FAIR plan operates:

-FAIR plan may operate as a policy issuing syndicate
-For a percentage of premium, servicing carries u/w, service, and settle claims
-Either the staff of the FAIR plan, or a contracted insurer
would handle the above
-In almost all plans, insurers share risk in proportion to
market share


What types of property are considered to be
uninsurable under FAIR:

-Vacant or open to trespass
-In poor physical condition or has unrepaired fire damage
-Subject to poor housekeeping (including overcrowding,
storage of trash, flammable materials)
-In violation of law or public policy
-Not built in accordance with building and safety codes


List some Perils covered under FAIR:

-Fire, lightning, windstorm or hail, explosion, riot, aircraft,
vehicles, smoke, and vandalism or malicious mischief
-Some states include crime, sprinkler leakage, and earthquake


What types of properties are covered by Beach and
Windstorm Plans:

Properties along Atlantic and Gulf Coasts vulnerable to
windstorm loss


Describe the Operation of Beach and Windstorm Plans:

-LA and MS use single servicing carrier for u/w, services, and claims
-Other states, the plan issues and services policies
-In all plans, property insurers share in plan losses according to premium volume


What types of properties are eligible for Beach and
Windstorm Plans:

-Plans offer coverage only in designated coastal areas
-Each plan requires buildings that are constructed or rebuilt after certain date to conform to applicable building code


What types of properties are not eligible for Beach and
Windstorm Plans:

-In poor physical condition or with unrepaired previous
-Subject to poor housekeeping
-In violation of law or public policy


3 exceptions to the rule that Cancellation of for Beach
and Windstorm Plans are subject to 30-day statutory

1. Nonpayment of premium
2. Material misrepresentation
3. Evidence of arson at direction of or by the owner/occupant


List 4 types of residual auto plans:

1. assigned risk plans
2. reinsurance facilities
3. JUAs
4. Maryland Automobile fund


Describe how the Assigned Risk Plans work:

-When rejected in voluntary market, driver applies for
coverage through plan
-Plan assigns application to insurer
-Insurer obligated to accept specified percentage based on market share
-Insurer handles policy as if written voluntarily (Receives
premium, services, pays losses; retains profit/ loss; Voluntary insureds required to subsidize assigned risk drivers)
-Rates in a state are usually uniform


3 Objectives of Reinsurance Facility:

1. Achieve more equitable pricing
2. Improve service
3. Avoid stigma associated with being in assigned risk plan


Explain how the Reinsurance Facility plan works:

-Premiums and losses are ceded to facility
-Producer accepts application for auto insurance and submits to insurer
-Insurer can choose to Handle submission as voluntary
business OR Cede premium to facility and just service the policy
-When claim occurs, servicing insurer handles and pays claim (Insurer is reimbursed by facility)
-Operating losses and expenses of the facility are shared by all insurers based on a formula
-Insured cannot readily detect whether he is in the shared market
-Rates are not uniform


Explain how the JUA works:

-Limited number of servicing insurers are designated to
handle all residual auto insurance business
-Servicing carriers get fee for handling policies
-Applicants found unacceptable to voluntary insurer are
forwarded to JUA servicing carrier
-Servicing insurer issues policy, collects premium, provides service, pays claims
-Results of business in pool shared by all insurers based on voluntary market share


List some properties of rates in the JUA:

-Based on experience of the pool
-Uniform for all servicing insurers
-Like auto insurance plans, higher than voluntary market


Explain how MAIF works:

-To be insured with the fund, motorist must first provide:
-- Evidence of cancellation from one insurer
-- Evidence that application has been rejected by two other private insurers
-All services, including claims, are handled by personnel of MAIF