Property vs Casualty: What is considered property?
Structure & Personal Property
Property vs Casualty: What is considered casualty?
Non-property losses. Legal liability to others. 3rd Party
Risk
uncertainty of financial loss
Pure Risk
Chance of Loss
Speculative Risk
Chance of Loss or Gain (Gamble)
Insurance (covers which type of risk?)
Pure Risk Only
How does the law of large numbers apply in insurance?
Actuaries use the law of large numbers to estimate claims
What is the law of large numbers?
as the number of a similar loss exposure increases, the more accurate claims can be predicted from the group.
What is a peril?
cause of loss
What is a hazard?
things that increase the chance of a peril happening
Three types of hazards
Physical: visible characteristic (dead tree)
Moral: Dishonest tendencies
Morale: Attitude of carelessness
Proximate Cause
First cause in an unbroken chain of events
Elements of a legal contract (CALC)
C - Competent parties (18/Right frame of mind)
A - Agreement (Both parties agree)
L - Legal Purpose (The risk is LEGAL)
C - Consideration (It has to be fair)
What is representation?
Information believed to be true.
What is misrepresentation?
Information that is not true. False information.
What is material misrepresentation?
Information that is not true but would have caused the insurer not to issue the policy. (4 prev spd tix)
What is fraud?
An all out effort by one party to deceive and cheat the other.
What is warranty?
Guarantee that an insured will or will not do something
What are the four major parts to an insurance policy structure? (DICE)
D - Declarations Page (First Page)
I - Insuring Agreement (Insurers promise to pay)
C - Conditions (Rules)
E - Exclusions (Not covered)
What information is on the declarations page? (Remember 6 Ps)
Policy Number
Parties
Property Description/Location
Policy Term
Policy Limits/Deductibles
Premium
What is Limit of Liability?
The max amount of coverage agreed to be paid per loss
What is Aggregate Limit?
The max amount of the total of all claims paid per policy period
Insuring Agreement?
Insurers promise to pay
Conditions
Contains the duties and rights of both parties
What are the Insured's duties after a loss?
Submit a proof of loss or sworn statement within 91 days. Protect property from further damage. Cooperate with the insurer.
What is the Mortgage Clause?
Nothing the insured does, even dishonestly, can prevent the mortgagee from collecting under the policy
What are the two types of termination of a policy?
Cancellation - occurs when the insured/insurer cancels the contract before the end of the policy period.
Non-Renewals - occurs at the end of the policy period.
Cancellation Requirements
Insurer - must provide a 10 day advance written notice to the insured that the policy will be cancelled.
Insured - no notice required
Non-Renewal Requirements
Insurer - must provide a 30 day advance written notice to the insured.
Insured - no notice required
Arbitration
Deal with disagreements on coverage issues
What is "Other Insurance"?
This provision applies when the insured has more than one policy covering the same loss
Primary & Excess
Primary pays to limit
Excess pays what is left
Pro Rata
Primary pays their percentage of loss
Other insurance pays their percentage of loss
What does vacant mean?
Empty building. No people/No contents for 60 days.
What does unoccupied mean?
No people present when loss occurs but contents still remain.
Abandonment
insured cannot abandon partially damaged property and expect to be paid for its full value
What is salvage value?
after paying the insured for a loss as if it was totally destroyed the insured must give the insured what's left.
What is the most common casualty coverage?
Liability (3rd party)
What is the definition of liability?
Individual or organizations maybe held responsible for action resulting in bodily injury or property damage to others.
What are the two types of liability?
Criminal & Civil
What is a tort?
A civil wrong
Direct Liability
Insured is the wrongdoer (Tortfeasor)
Vicarious Liability
Insured is responsible for the actions of the wrongdoer
Contractual Liability
Insured assumes another's liability under a written agreement
Absolute Liability
Liability without fault (Child drowns in pool)
Strict Liability
Product defect claims
Negligence
Failure to do or not to do something that ordinarily should be or not be done that results in a loss
Legal Duty
Owe an obligation to act or not act
Breach of Duty
Failure to comply with a duty
Actual Loss
Another suffers a loss
Proximate Cause (Regarding Duties)
Breach of duty is the direct cause of loss
Bodily Injury
Injuries including pain and suffering
Property Damage
Damages including loss of use
Personal Injury
Damage to a persons character or reputation
What is an accident?
an event that is sudden and unexpected
What is occurrence?
an event that happens over time
Compensatory Damage
To indemnify the injured party
Punitive Damages
To punish the wrongdoer due to gross negligence
Domestic
Same state
Foreign
Another state
Alien
Another country
Stock Insurers
Owned by stockholders/shareholders
For profit company
Mutual Insurers
Owned by policyholders
Incorporated/Managed by board of directors chosen by policy holders
Self-Insurance
Business organizations that set up their own savings accounts to pay for their own claims, property damage, or liability.
Residual Markets
Government (Fed & State) help provide insurance that is not ordinarily available from private insurers.
Fed Ex. National Flood Insurance Program (NFIP) and Federal Crop and Hail Insurance
State Ex. Texas Auto Insurance Plan Assoc (TAIPA), Texas Windstorm
Three Federal Regulation Sources
Fair Credit Reporting Act
Terrorism Risk Insurance Act
Gramm Leach Bliley Act
Fair Credit Reporting Act
to protect consumers when adverse action (increase in rates) resulting from review of credit
Terrorism Risk Insurance Act
has to be certified by sec of state, sec of treasury, and attorney general as an eligible act not the president.
Will not pay more than 100 billion in aggregate.
What does the commissioner do?
Runs the Texas Department of Insurance (TDI)
A new commissioner is appointed by the governor for 2 yr term, ending Feb 1st of each odd numbered year.
Investigations and Examinations by the Commissioner
At least once every five years or more often if deemed necessary
What is the Texas Property and Casualty Insurance Guaranty Association
Protects claimants and policy holders in the event of insurer insolvency (cannot pay claims).
Governed by a board of directors - 5 members from insurers and 4 members from the public
Private Companies not TDI that publish the financial strength ratings include:
A.M. Best (A++ to F)
Moody's
Standard and Poor's
Definition of agent
Anyone who solicits insurance or aids in placing risk, delivering policies, or collecting policies on behalf of an insurance company.
Temporary Agents License
Issued for period of 90 days; No renewal
Only 1 every 6 months
Cannot be paid any commission for sales
Must have a company or agent sponsor
Must complete 40hrs of study within 14days of applying for the license
No test required
License Renewals
Most renew every 2 years on anniversary date
If license lapse:
-May renew within 90 days, subject to $50 late fee penalty
-If license expires after 90 days, may apply for new license without having to retest, up to 1 yr following the expiration
-After one
Continuing Education
30 hrs required during license cycle
50% Classroom setting/ Classroom equivalent
2 hrs of Ethics
Keep records for at least 4 yrs in case of audit
No grace period given for completing continuing education
Termination of Appointment
If an agency contract has been in place for two years or longer agent is entitled to a 6 months advanced notice.
Reason for termination must be provided
Examples of License Revocation or Renewal Refused
-Violation of insurance laws
-Misappropriation of funds or defraud a policyholder(cannot reapply for five years)
-License suspension - stopped from selling for period of time
-Failure to complete continuing education, $50 fine per hour not completed
-Perf
Twisting
Using misrepresentation to induce a person to drop existing insurance coverage and purchase new insurance with a new producer and company when it is not in the best interest of that person
Defamation
Making oral or written statements that are false, malicious, or derogatory to the financial condition of any insurer or agent
Disparagement
Dishonesty about competition including their services or business methods
Adjusters must meet the following time requirements in Texas
-15 days to acknowledge claim, commence investigation and request all information (Proof of loss notice)
-15 business days to accept or deny the claim, once all required information is received
-5 business days to write the check after liability is determ
Persons Insured
Any person driving with the insureds permission
Includes residents spouses permission
Part A (personal auto policy)
Liability
Part B one (personal auto policy)
Medical Payments
Part B two (personal auto policy)
Texas Personal Injury Protection
Part C (personal auto policy)
Uninsured and Underinsured Motorist
Part D (personal auto policy)
Damage to your auto
Bodily Injury (personal auto policy)
Bodily harm, sickness or disease including death
Bodily Injury covers injuries caused by the insured including what?
Medical Expenses, Lost Wages, Pain & Suffering
Property Damage (personal auto policy)
Includes physical injury to, destruction of, or loss of use of tangible property
Property damage covers damages caused by insured including what?
Damage to another vehicle, damage to a building, damage to a wall or fence
Minimum Limits of Liability in Texas
30/60/25
30,000 bodily injury per person
60,000 bodily injury per accident
25,000 for damage per accident
Types of Supplementary Payments (personal auto policy)
Bonds - premiums for appeal and bail bonds (up to $250)
Loss of Earnings - up to $200 per day, if insured misses work due to trial
Liability Exclusions
Use of vehicle without permission
Use of vehicle used as a public or taxi transporter
Use of vehicle in prearranged racing or speed contest
Loss caused intentionally by the insured
Damage to property owned or being transported by the insured
Motorized veh
Other Insurance Clause
Any insurance the company provides for a vehicle that is not owned by the insured will be considered excess to other insurance
Medical Payments
Pays for:
Insured occupying an auto or as a pedestrian
Pays regardless of fault up to three years
Minimum limit is $500 per person
Texas Personal Injury Protection (PIP)
Pays for:
Insured occupying an auto or as a pedestrian
Insures the guest passenger
Pays regardless of fault up to three years
Medical and funeral expenses
80% of lost wages OR essential services
A person cannot collect both lost wages and essential servic
Uninsured Motorist Coverage
Provides coverage when at-fault third party does not carry liability insurance
Includes hit and run
Physical contact with another vehicle must occur
Underinsured Motorist Coverage
Provides coverage when at-fault third party does not carry enough liability insurance
Uninsured/Underinsured Coverage Limits
Min 30/60/25 or combined single limit of $85,000
Must be included in all liability policies issued in Texas unless the insured rejects the coverage in writing
Collision (Physical Damage)
Covers specified perils only (collision with another veh or object)
Upset of the vehicle (overturned)
Exclusions:
-Sound and video equipment - unless permanently installed. If permanently installed - $1500 max.
-Personal property in the car
-Customized eq
Comprehensive Loss
Covers Fire, Explosion, Wind, Hail, Earthquake, Flood, Vandalism, Theft, Glass Breakage, Contact with bird or animal
Transportation Expenses Coverage
If you have comprehensive coverage and have a total theft, you can get $20/day max $600 per loss after 48hrs of loss
Newly Acquired Vehicles
If you have comp/coll = automatic coverage is provided for 14 days. (Must notify within 14 days)
If you have no comp/coll = only covered for 4 days with broadest coverage on policy. (Must notify within 4 days)
Auto Policy - Insurer Cancellation
Insurer can only cancel within 60 days with underwriting reason or non-payment and 10 day notice to insured.
After 60 days - Insurer can only cancel with 10 day notice for non-payment, DL suspended/revoked, fraudulent claim, or veh registration suspended/