P&c Insurance Basics

Front 1

Loss ratio

Back 1

Incurred losses + loss adjusting expense ÷ earned permium

Front 2

Judgement rating

Back 2

Used when credible statistics are lacking

Front 3

Retrospective rating

Back 3

Self rating plan. Either get back unused premium or pay more to insurer

Front 4

Merit rating

Back 4

Based on probability. Auto insurance.

Front 5

Four primary elements in establishing negligence

Back 5

1. Legal duty 2. Standard of care 3. Proximate cause 4. Actual loss or damage

Front 6

Proximate cause

Back 6

Act or event considered natural and reasonably foreseeable cause of damage or event that incurs damage. Must be unbroken chain of events leading to injury or damage

Front 7

Comparative vs contributory negligence

Back 7

Comparative will pay out based on percentage of negligence by each party. Contributory only if completely fault free.

Front 8

Intervening cause

Back 8

If chain of events broken cannot get recovery for loss. I.e. person shovels snow and person falls after it snows again that person cannot seek recovery from insured.

Front 9

Two classes of compensatory damages

Back 9

Special (specific expenses, medical, miscellaneous, loss of wages) and general (pain and suffering, mental anguish, disfigurement, etc.)

Front 10

Absolute liability

Back 10

Not need to prove negligence. Wild animals, explosives, ect.

Front 11

Strict liability

Back 11

Product liability cases

Front 12

Vicarious liability

Back 12

Transfer liability to another person more likely to pay (parent/child, boss/employee)

Front 13

Loss valuation

Back 13

A factor in determining the premium charged and the amount of insurance required

Front 14

Actual cash value

Back 14

Current replacement cost - depreciation = actual cash value

Front 15

Replacement cost

Back 15

Contrary to indemnity. Cost to replace damaged property with like kind and quality at today's price. No depreciation.

Front 16

Guaranteed replacement cost

Back 16

Insurance company must fully replace or rebuild without depreciation. Limit to amount will pay usually up to 20% above amount od insurance on property.

Front 17

Functional replacement cost

Back 17

Cost to replace damaged property with less expensive and more modern construction or equipment. Must not be lower quality only lower cost.

Front 18

Policy structure

Back 18

Dead ice. Declarations Endorsements Additional/supplemental coverage Definitions Insuring agreement Conditions Exclusions

Front 19

Declarations

Back 19

Policy structure. Who what where and how much of a policy

Front 20

Insuring agreement

Back 20

Section of a policy with insurers promise to pay, lists parties to contract, effective and renewal dates, description of coverage, and perils

Front 21

Conditions

Back 21

Policy structure. Rules and procedures insured and insurer must follow

Front 22

Endorsements

Back 22

Policy structure. Printed addendum to a contract

Front 23

Short rate, pro rata, flat rate

Back 23

Short - penalty usually 10%; pro rata - return of unused premium; flat rate - no longer make premium payments

Front 24

Coinsurance

Back 24

Encourages insured to insure to face value (80%)

Front 25

Self insured retention

Back 25

Deductible with umbrella policy

Front 26

Primary vs excess

Back 26

Primary pays first in event of covered loss. Excess only pays after primary has paid to its limit

Front 27

Pro rata share

Back 27

A: A÷(A+B+C)×LOSS ect to determine amount each insurance policy pays

Front 28

Limits of liability

Back 28

Per occurrence, per person, per project/per location, aggregate, submit, split, combined single

Front 29

Individual rating approaches

Back 29

JERMS judgment experince retrospective merit schedule

Front 30

Duties after loss

Back 30

Protect damaged property from further damage, prepare an inventory of damaged property, cooperate with insurer in settling loss, notify police in case of theft, submit signed sworn proof of loss to insurer

Front 31

Assignment

Back 31

Transfer of legal right in insurance policy with written consent of insurer

Front 32

Liberalization

Back 32

Insured right to broader coverage under policy without having to wait for policy to renew

Front 33

Subrogation

Back 33

Insurers right to seek damages from third party

Front 34

Duty to defend

Back 34

Insurance company must take on legal responsibility under insured's coverage. Including pay for attorney. Insurer only bound until liability limit paid

Front 35

Personal property vs real property

Back 35

Personal can be moved. Real property non movable.

Front 36

Standard mortgage clause

Back 36

Mortgagees right to recover is limited to amount of remaining debt.

Front 37

Loss payable clause

Back 37

Used to cover interest of a secured lender in personal property