Insurance Flashcards
15% (33 cards)
Name the two parties typically involved in a commercial insurance agreement (p.19)
The organization and the insurance company
What three forms of coverage are provided by automobile insurance? (p.19)
- property coverage
- liability coverage
- medical coverage
What is insurance? (p.19-20)
a mechanism for transferring an unknown loss exposure into a known cost
Explain the principle of ‘good faith’ (p.20)
Insurance relies on honesty and disclosure of relevant facts from both parties
What does indemnification mean? (p.20)
to be returned to the original position prior to the loss
Name three reasons why claims are denied (p.20)
misrepresentation
concealment
breach of warranty
What is contained in contract conditions? (p.20)
the insured and insurance company’s obligation
Explain the difference between an insurance agent and an insurance broker (p.20)
Insurance agent: licensed to sell insurance
Insurance broker: does not work for insurance company but shops for ideal coverage/rates for the insured
What are the functions of a claims adjuster? (p.20)
The adjuster determines whether the loss is covered by the policy and the value of the loss
When might a ‘reservation of rights’ letter be issued? (p.20-21)
if the responsibility is unclear and the insurer needs to conduct additional research
Which risks should be divested? retained? (p.38)
The more unmanageable a risk appears
Which broad criteria apply to insurable risks? (p.38)
- the loss must occur by chance
- the rate of loss must be predictable
- the loss must be definite and definable
- the loss must be significant
- the loss must not be catastrophic
Should insurance coverage change as business needs change? Explain (p.39)
Yes coverage should change as the business grows
What is an insurance claim? (p.39)
a formal written demand to an insurance company for reimbursement for loss or damage to an insured object
What does the insurer do upon receipt of a claim? (p.39)
send an adjuster to assess the damages
What are the 6 ways that insurers can use to dispose of a claim? (p.40)
- accept
- deny
- reserve rights
- subrogate
- litigate
- settle
When are claims accepted? (p.40)
- loss details are reported in a timely manner
- data provided can accurately assess the claim
- facts of the incident are indisputable
- coverage under policy is clear
- no basis for voiding coverage
When is a claim denied? (p.40)
- loss is not covered under the insurance policy
- person who suffered the loss is not insured under the policy
- policy holder engaged in misconduct that voided coverage
- claim was caused by carelessness or intentional
- claim caused by an unavoidable act of god
Define ‘reservation of rights’ (p.41)
a notice (letter) that even though the insurance company is processing the claim, certain losses may not be covered by the policy
Who should be consulted in the decision to sue or settle? (p.41)
fleet manager, lawyer, risk manager and financial advisor
What are two decision traps to avoid? (p.41)
Escalation psychology and loss aversion
What is the concept of escalation psychology? (p.41)
driving decision makers to spend more than they normally would
What are the three reasons making the decision whether to repair or replace a damaged vehicle is difficult and time-consuming? (p.43)
- information required for the decision is not readily available
- process is tedious with salvage vendors and research
- fleet manager may manually plug the data into formulas or calculations
What are the five essential steps involved in the repair versus total decision? (p.43)
- assess the damage
- establish vehicle pre-crash condition and worth
- secure and review repair estimates
- compare the actual cash value to repair estimates
- repair or total the vehicle
