Property And Liability Insurance Principals

Front 1

Insurance is these four things

Back 1

1. Risk management technique
2. Transfer system
3. Business
4 Contract

Front 2

Law of large numbers

Back 2

A mathematical principal stating that as the number of similar but independent exposure units increase, the relative accuracy of predictions about future outcomes (losses) based on these exposure unites also increase

Front 3

Three major types of losses

Back 3

1. Property loss
2. Liability loss
3. Personal and personnel loss

Front 4

Personal loss exposure

Back 4

Any condition or situation that presents the possibility of financial loss to an individual or family by such causes as death, sickness, injury or unemployment

Front 5

Personnel loss exposure

Back 5

Any conditions or situation that presents the position of a financial loss to a business because of death, disability, retirement or resignation of key employees

Front 6

Six ideally insurable loss exposures

Back 6

1. Pure, not speculative risk
2. Accidental loss
3. Definite in time and measurable
4. Large number of similiar but independent exposures
5. Not subject to simultaneously affect many other similar exposures
6. Economically feasible to insure

Front 7

Three types of private insurers

Back 7

1. Stock insurers
2. Mutual insurers (owned by policyholders)
3. Reciprocal insurance exchanges

Front 8

Nine benefits of insurance

Back 8

1. Indemnifying for the cost of covered losses
2. Reducing the insured's financial uncertainty
3. Promoting insurers' loss control activities
4. Using resources efficiently
5. Providing support for credit
6. Satisfying legal requirements
7. Satisfying business requirements
8. Providing a source of investment funds
9. Reducing social burden

Front 9

Five costs of insurance

Back 9

1. Premiums paid by insureds
2. Operating costs of insurers
3. Opportunity costs
4. Increased losses
5. Increased lawsuits

Front 10

Six types of property insurance

Back 10

1. Fire and allied lines
2. Business income
3. Crime
4. Ocean marine
5. Inland marine
6. Auto physical damage

Front 11

Fire and allied lines insurance

Back 11

Covers direct damage to or loss of insured property

Front 12

Four types of liability insurance

Back 12

1. Auto liability
2. Commercial general liability
3. Personal liability
4. Professional liability

Front 13

Three types of life insurance

Back 13

1. Whole life
2. Term
3. Universal life

Front 14

Whole life insurance

Back 14

Life insurance that provides lifetime protection, accures cash value, and has premiums that remain unchanged during the insured's lifetime

Front 15

Term insurance

Back 15

Life insurance that provides coverage for a specific period, such as ten or twenty years, with no cash value

Front 16

Universal life insurance

Back 16

Insurance that provides life insurance protection and a savings component

Front 17

Stock insurance

Back 17

Insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit

Front 18

Four ways private insurers differ

Back 18

1. Purpose for which they were formed
2. Legal form of organization
3. Ownership
4. Method of operation

Front 19

Mutual insurer

Back 19

Insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them

Front 20

Demutualization

Back 20

The process by which a mutual insurer owned by its policyholders becomes a stock company which is then owned by its stockholders.

Front 21

Reciprocal insurance or interinsurance exchange

Back 21

An insurer owned by its policyholders, formed as an unincorporated association for the purpose of providing insurance to its members

Front 22

Subscribers

Back 22

Policyholders of a reciprocal insurance exchange

Front 23

Four thing Social Security provides

Back 23

1. Retirement benefits for the elderly
2. Surivorship benefits for the dependents of deceased workers
3. Disability payments for disabled workers
4. Medical benefits for elderly

Front 24

Five common types of state goverment insurance programs

Back 24

1. Workers' comp
2. Unemployment
3. Automobile insurance plans
4. Fair Access to Insurance Requirements
5. Beachfront and windstorm pools

Front 25

Guaranty fund

Back 25

A state fund that provides a system to pay the claims of insolvent insurers, generally funded by assessments collected from all insurers licensed in the state

Front 26

Three primary objectives of insurance regulation

Back 26

1. Rate regulation
2. Solvency surveillance
3. Consumer protection

Front 27

National Association of Insurance Commissioners

Back 27

Association of commissioners from each state who coordinate regulation activities among various state insurance departments

Front 28

Model law

Back 28

Document drafted by NAIC that reflects the NAIC's propsed solution to a given problem and provides common basis to states for drafting laws that affect the insurance industry

Front 29

Actuarial equity

Back 29

A ratemaking concept though which actuaries base rates on calculated loss experience to place insureds with similar characteristics in the same rate class

Front 30

Social equity

Back 30

A rating concept that holds that rate structures discriminate unfairly if they impose a higher rate on a insured for factors beyond the insured's control

Front 31

Six types of insurance rating laws

Back 31

1. Prior-approval
2. Flex rating (approval only if rate is above/below certain amount)
3. File-and-use
4. Use-and-file
5. Open competition / no-file
6. State-mandated

Front 32

Insurance Regulatory Information System

Back 32

An information and early-warning system established and operated by the NAIC to monitor the financial soundness of insurers

Front 33

Five ways regulators protect consumers

Back 33

1. Licensing insurers
2. Licensing insurer repesentatives
3. Approving policy forms
4. Examining market conduct
5. Investigating consumer complaints

Front 34

Foreign insurer

Back 34

Licensed to operated in a state but incorporated in another state

Front 35

Alien insurer

Back 35

Licensed in a U.S. state but incorporated in another country

Front 36

Excess and surplus lines insurance

Back 36

Insurance coverages unavailable in the standard market that are written by nonadmitted insurers

Front 37

Five classes of business often insured in E&S market

Back 37

1. Unusual or unique loss exposures
2. Nonstandard business
3. Insureds needing high limits
4. Insureds needing unusually broad coverage
5. Loss exposures that require new forms

Front 38

Earned premium

Back 38

Portion of the written premium that apply to the part of the policy period that has already occured

Front 39

Incurred losses

Back 39

Paid losses + Changes in loss reserves

Front 40

Loss reserves

Back 40

Amounts designated by insurers to pay claims for losses that have already occurred but are not yet settled

Front 41

Three underwriting expenses (not losses or LAE)

Back 41

1. Acquisition expenses
2. General expenses
3. Premium taxes, licenses and fees

Front 42

Net investment income

Back 42

Investment income - Investment expenses

Front 43

Net underwriting gain or loss

Back 43

Earned premium - losses and underwriting expenses

Front 44

Overall gain or loss from operations

Back 44

Net investment gain or loss + Net underwriting gain or loss

Front 45

Admitted assets

Back 45

Types of property, such as cash and stocks, that regulators allow insurers to show as assets on their financial statements

Front 46

Nonadmitted assets

Back 46

Types of property, such as office furniture and equipment, that regulators do not allow insurers to show as assets on financial statements because thee assets cannot readily be converted to cash

Front 47

Unearned premium reserve

Back 47

Total of an insurer's unearned premium on all policies at a particular time

Front 48

Policyholders' surplus

Back 48

An insurer's total admitted assets minus its total liabilities

Front 49

Loss ratio

Back 49

Incurred losses (including LAE) / Earned premiums

Front 50

Expense ratio

Back 50

Incurred underwriting expenses / Written premium

Front 51

Dividend ratio

Back 51

Policyholder dividends / Earned premium

Front 52

Combined ratio

Back 52

Loss ratio + Expense ratio

Front 53

Investment income ratio

Back 53

Net investment income / Earned premiums

Front 54

Overall operating ratio

Back 54

Combined ratio - Investment income ratio

Front 55

Capacity ratio

Back 55

Written premiums / Policyholders' surplus

Front 56

Five duties on insurance agents

Back 56

1. Loyalty
2. Obedience
3. Reasonable care
4. Accounting
5. Relaying information

Front 57

Principal

Back 57

In the agency relationship, the party that authorizes the agent to act on its behalf.

Front 58

Three types of authority for an agent

Back 58

1. Express
2. Implied
3. Apparent

Front 59

Express authority

Back 59

The authority that the principal specifically grants to the agent

Front 60

Implied authority

Back 60

The authority implicitly conferred on an agent by custom, usage or a principal's conduct indicating intention to confer such authority

Front 61

Apparent authority

Back 61

A third party's reasonable belief that an agent has authority to act on the principal's behalf.

Front 62

Four insurance marketing systems

Back 62

1. Independent agency
2. Exclusive agency
3. Direct writing
4. Alternative distribution channels

Front 63

Independent agency

Back 63

A business, operated for the benefits of its owners that sells insurance, usually as a representative of several unrelated insurers

Front 64

Insurance broker

Back 64

An independent business owner or firm that sells insurance by representing customers rather than insurers

Front 65

Direct writing system

Back 65

A system of insurance marketing that uses sales representatives who are employees of the insurer

Front 66

Five alternative distribution channels

Back 66

1. Direct response
2. Internet
3. Call centers
4. Group marketing
5. Financial institutions

Front 67

Direct response

Back 67

A system of insurance marketing that relies primarily on mail, phone and/or Internet sales without the services of an agent

Front 68

Contingent commission

Back 68

A commission that an insurer pays, usually annually, to an independent agency that is based on the premium volume and profitability level of the agency's business with that insurer.

Front 69

Marketing representative

Back 69

An insurer employee who visits agents representing the insurer, develops and maintains sound working relationships with those agents , and motivates the agents

Front 70

Production underwriter

Back 70

Insurer employee who works in the insurer's office in an underwriting position but also travels to visit and maintain rapport ith agents and sometimes clients.

Front 71

Unfair trade practices law

Back 71

State law that specifies certain prohibited business practices

Front 72

Four unfair trade practices

Back 72

1. Misrepresentation and false advertising
2. Tie-in sales
3. Rebating
4. Other deceptive practices

Front 73

Rebating

Back 73

A practice, prohibited in most states, of offering a cash payment or something of value to an applicant as an inducement to buy or maintain insurance

Front 74

Adverse selection

Back 74

A situation that occurs because people with the greatest probability of loss are the ones most likely to purchase insurance

Front 75

Capacity

Back 75

The amount of business an insurer is able to write, usually based on a comparison of the insurer's written premiums to its policyholders' surplus

Front 76

Three ways insurers protect their acailble capacity

Back 76

1. Maintaining a spread of risk
2. Optimizing use of available resources
3. Securing reinsurance

Front 77

Merit rating plan

Back 77

A rating plan that modifies class rates to reflect loss characteristics of a particular insured

Front 78

Judgement rate

Back 78

A type of individual rate that is used to develop a premium for a unique exposure for which there is no established rate

Front 79

Treaty reinsurance

Back 79

An arrangement whereby a reinsurer agrees to automatically reinsure a portion of all eligible insurance of the primary insurer

Front 80

Five underwriting management responsibilities

Back 80

1. Participating in the insurer's overall management
2. Arranging reinsurance
3. Delegating underwriting authority
4. Developing and enforcing underwriting guidelines
5. Monitoring underwriting results

Front 81

Facultative reinsurance

Back 81

An arrangemtn whereby the primary insurer choose which policies to submit to the reinsurers and the reinsurer can accept or reject any policies submitted

Front 82

Four steps of the underwriting process

Back 82

1. Gathering underwriting information
2. Making the underwriting decision
3. Implementing the underwriting decision
4. Monitoring the underwriting decision

Front 83

Four types of hazards

Back 83

1. Moral hazard
2. Attitudinal (morale) hazard
3. Physical hazard
4. Legal hazard

Front 84

Moral hazard

Back 84

A condition that may lead a person to intentionally cause or exaggerate a loss

Front 85

Attitudinal (morale) hazard

Back 85

A hazard that involved carelessness about, or indifference to, potential loss on the part of an insured or application

Front 86

Physical hazard

Back 86

A tangible characteristic of property, persons or operations that tends to increase the frequency or severity of loss

Front 87

Legal hazard

Back 87

A characteristic of the legal or regulatory environment that hampers an insurer's ability to collect a premium commensurate with the exposure to loss

Front 88

Two examples of underwriting activity regulation

Back 88

1. Prohibition of unfair discrimination
2. Restrictions on cancellation and nonrenewal

Front 89

Public adjuster

Back 89

A person hired by an insured to represent the insured in handling the claim

Front 90

Third-party administrator

Back 90

An organization that contracts to provide administrative services, including claims handling to other businesses

Front 91

Four steps to claims handling process

Back 91

1. Verifying coverage
2. Determining cause of loss
3. Determining the amount of damage or extent of loss
4. Negotiating and settling (or denying) the claim

Front 92

Reservation of rights letter

Back 92

A notice sent by the insurer advising the insured that the insurer is proceeding with a claim investigation but that the insurer retains rights to deny coverage later

Front 93

Four questions claims rep must answer for a property insurance claim

Back 93

1. Does the insured have an insurable interest in the property?
2. Is the damaged property covered by the policy?
3. Is the cause of loss covered by the policy?
4. Do any additional coverages, endorsements or coverage limitations apply?

Front 94

Actual Cash Value

Back 94

The cost to replace property minus an allowance for the property's depreciation

Front 95

Replacement cost

Back 95

The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation

Front 96

Three ways replacement cost of real property is determined

Back 96

1. Square footage of the property
2. Type and quality of construction
3. Construction cost per square foot

Front 97

Salvage rights

Back 97

The insurer's rights to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss or a constructive total loss

Front 98

Constructive total loss

Back 98

A loss such that property cannot be repaired for less than its actual cash value minus the anticipated salvage value

Front 99

Damages

Back 99

Money claimed by, or a monetary award to, a party who has suffered bodily injury or property damage for which another party is legally responsible

Front 100

Two types of damages

Back 100

1. Compensatory damages
2. Punitive damages

Front 101

Compensatory damages

Back 101

Damages intended to compensate a victim for actual harm suffered; these damages include special damages and general damages

Front 102

Special damages

Back 102

Compensatory damages for specific, out-of-pocket expenses, such as doctor and hospital expenses

Front 103

General damages

Back 103

Compensatory damages awarded for losses that do not have a specific economic value, such as pain and suffering.

Front 104

Punitive damages

Back 104

Damages awarded by a court to punish wrongdoers who cause bodily injury or property damage to others and to defer others from committing similar wrongs

Front 105

Case reserve

Back 105

A loss reserve assigned to an individual claim.

Front 106

Unfair claim practice laws

Back 106

A state law that specifies illegal claim practices

Front 107

Four prohibited claim practices

Back 107

1. Misrepresentation of material facts or insurance policy provisions relating to coverage at issue in a claim
2. Failure to acknowledge and promptly respond to communications about claims arising under insurance policies
3. Actions that compel an insured to sue to recover amounts due under insurance policies by offering amounts that are substantially lower than the amounts ultimately recovered in legal actions brought by such insureds
4. Refusal to pay claims without first conducting a reasonable investigation based on all available information.

Front 108

Four elements of a contract

Back 108

1. Agreement (offer and acceptance)
2. Competent parties
3. Legal purpose
4. Consideration

Front 109

Consideration

Back 109

Something of value given by each party to a contract

Front 110

Six characteristics of an insurance contract

Back 110

1. A conditional contract
2. A contract involving fortuitous events and the exchange of unequal amounts
3. A contract of adhesion
4. A contract of indemnity
5. A nontransferable contract

Front 111

Conditional contract

Back 111

A contract in which one or more parties must perform only under certain conditions

Front 112

Utmost good faith

Back 112

An obligation to act in complete honesty and to disclose all relevant facts

Front 113

Contract of adhesion

Back 113

A contract to which one party (the insured) must adhere as written by the other party (the insurer)

Front 114

Valued policy

Back 114

A policy in which the insurer pays a stated amount in the event of a speified loss (usually a total loss), regardless of the actual value of the loss.

Front 115

Eight reasons for exclusions

Back 115

1. To eliminate duplicate coverage
2. To assist in managing moral hazards
3. To avoid insuring other losses that are deliberate
4. To assist in managing attitudinal (morale) hazards
5. To avoid covering losses that are not economically feasible
6. To eliminate coverage that most insureds do not need
7. To eliminate coverage for exposures that require special handling by the insurer
8. To keep premiums reasonable

Front 116

Policy condition

Back 116

Any provision that qualifies an otherwise enforceable promise of the insurer

Front 117

Manuscript policy

Back 117

A insurance policy that is specifically drafted according to terms negotiated between a specific insured (or group of insureds) and an insurer

Front 118

Self-contained policy

Back 118

A single document that contains all the agreements between the insurer and the insured; forms a complete policy by itself.

Front 119

Modular policy

Back 119

A policy consisting of several different documents, none of which by itself forms a complete contract.

Front 120

Short rate refund

Back 120

A refund of premium that is less than what the pro rata refund would be; sometimes used when the insured cancels a policy midterm.

Front 121

Liberalization clause

Back 121

A policy condition that if a policy form is broadened at no additional premium, the broadened coverage automatically applies to all existing policies of the same type.

Front 122

Three aspects of property loss exposure

Back 122

1. Types of property
2. Cause of loss
3. Financial consequences

Front 123

Seven types of property

Back 123

1. Buildings
2. Personal property (contents) contained in buildings
3. Money and securities
4. Motor vehicles and trailers
5. Property in transit
6. Ships and their cargoes
7. Boilers and machinery

Front 124

How is a peril different from a hazard?

Back 124

A peril is actual means by which property is damaged or destroyed. Hazard is anything that increases the frequency or severity of a loss.

Front 125

Two important differences between named perils and special form coverage when it comes to burden of proof

Back 125

1. With a named perils policy, for coverage to apply, the insured must prove that the loss was caused by a covered cause of loss.
2. With a special form policy, if a loss to covered property occurs, it is initially assumed that coverage applied. However, coverage may be denied if the insurer can prove that the loss was caused by an excluded cause of loss.

Front 126

Four parties affected by a property loss

Back 126

1. Property owners
2. Secured lenders of moeny to the property owner
3. Property users
4. Property holders

Front 127

Bailee

Back 127

A person or busines in possession of property entrusted to them by others

Front 128

Floater

Back 128

A policy designed to cover property that floats, or moves, from location to location

Front 129

Three levels of property insurance policies

Back 129

1. Basic form coverage
2. Broad form coverage
3. Special form (open perils) coverage

Front 130

Proximate cause

Back 130

The event that sets in motion an uninterrupted chain of events contributing to a loss

Front 131

Vandalism

Back 131

Willful and malicious damage to or destruction of property

Front 132

Sinkhold collapse

Back 132

A cause of loss involving the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or similar rock formation

Front 133

Mine subsidence

Back 133

A cause of loss involving the sinking of ground surface when underground open spaces, reulting from the extraction of coal or other minerals, are gradually filled in by rock and earth from above.

Front 134

Three additional causes of loss covered in broad form coverage

Back 134

1. Falling objects
2. Weight of snow, ice, or sleet
3. Sudden and accidental water damage

Front 135

Burglary

Back 135

The taking of property from inside a building by someone who unlawfully enters or exits the building

Front 136

Robbery

Back 136

The taking of property from a person by someone who has caused or threatened to cause the person harm

Front 137

Five maintenance perils

Back 137

1. Wear and tear
2. Marring and scratching
3. Rust
4. Gradual seepage of water
5. Damage by insects, birds, rodents, or other animals

Front 138

First named insured

Back 138

The person or organization whose name appears first as the named insured on a commercial insurance policy; this person or organization is usually responsible for paying premiums and has the right to receive any return premiums, to cancel the policy, and to receive the notice of cancellation or nonrenewal

Front 139

Mortgage clause

Back 139

A clause in a property insurance policy that protects the insurable interest of the mortgagee by giving it certain rights, such as the right to be named on claim drafts for losses to insured property and the right to be notified of policy cancellation.

Front 140

Six insurable interests of the mortgagee under the mortgage clause

Back 140

1. The insurer promises to pay covered claims to both the named insured and the mortgage as their interest may appear
2. The insurer promises to notify the mortgagee before any policy cancellation or nonrenewal
3. If the insurer cancels the policy and neglects to inform the mortgagee, the mortgagee's interest is still protected, even if the named insured no longer has coverage.
4. The mortgagee has the right to pay the premium to the insurer if the insured fails to pay the premium so the policy remains in effect.
5. In case of loss, the mortgagee may file a claim if the insured does not.
6. If a claim is denied because the insured did not comply with the terms of the policy, the mortgagee may still collect under the policy

Front 141

Loss payee

Back 141

A lender named on an insurance policy, who is loaned money o personal property

Front 142

Three options insurer has to settle a loss

Back 142

1. Paying the value of the lost or damaged property
2. Paying the cost to repair or replace the property
3. Repairing, rebuilding, or replacing the property with other property of like kind and quality

Front 143

Insurance-to-value provision

Back 143

A provision in property insurance policies that encourages insured to purchase an amount of insurance that is equal to, or close to, the value of the covered property.

Front 144

Six provision relating to the payment of a loss

Back 144

1. Policy limits
2. Valuation provisions
3. Settlement options
4. Deductibles
5. Insurance-to-value provisions
6. "Other insurance" provisions

Front 145

Coinsurance

Back 145

An insurance-to-value provision in many property insurance policies providing that if the property is underinsured, the amount that an insurer will pay for a covered loss is reduced.

Front 146

Three things the United States law derives essentially from

Back 146

1. The Constitution, source of constitutional law
2. Legistlative bodies, soure of statutory law
3. Court decisions, source of common law

Front 147

Statutory law

Back 147

The formal laws enacted by federal, state or local legislative bodies

Front 148

Common law, or case law

Back 148

A body of principals and rules established over time by courts on a case-by-case basis

Front 149

Criminal law

Back 149

The category of law that applies to wrongful acts that society deems so harmful to the public welfare that government takes the resposibility for prosecuting and punishing wrongdoers

Front 150

Civil law

Back 150

The category of law that deals with the rights and responsibilities of citizens with respect to one another

Front 151

Two elements of liability loss exposure

Back 151

1. The legal basis of a claim by one party against another for damages
2. The potential financial consequences of liability loss exposure

Front 152

Tort

Back 152

A wrongful act, other than a crime or breach of contract, committed by one party against another.

Front 153

Negligence

Back 153

A person or an organization's failure to exercise the level of care that a reasonably prudent person would have exercised under similar circumstances

Front 154

Four elements of proof required based on negligence

Back 154

1. Duty owed to another
2. Breach of that duty
3. Injury or damage
4. Unbroken chain of events between the breach of duty and the injury or damage

Front 155

Vicarious liability

Back 155

Legal responsibility that occurs when one party is held liable for the actions of another party.`

Front 156

Defamation

Back 156

An intentional false communication, either written or spoken, that damages another's reputation or good name

Front 157

Strict liability

Back 157

Legal liability that arises from inherently dangerous activities or dangerously defective products that result in injury or harm to another, regardless of how much care was used in the activity.

Front 158

Hold-harmless agreement

Back 158

A contractual provision that obligates one party to assume the financial consequences of legal liability for another party.

Front 159

Statutory liability

Back 159

Legal liability imposed by a specific statue or law

Front 160

Nine liability exposures

Back 160

1. Automobiles
2. Premises
3. Business operations
4. Completed operations
5. Products
6. Advertising
7. Pollution
8. Liquor
9. Professional activities

Front 161

Personal injury

Back 161

Injury, other than bodily injury, arising from intentional torts such as libel, slander, or invasion of privacy.

Front 162

Four types of advertising injury

Back 162

1. Libel and slander
2. Publication of material that consitutes an invasion of privacy
3. Misappropriation of advertising ideas or business style
4. Infringement of copyright, trade dress or slogan.

Front 163

Six exclusions on a liability insurance policy

Back 163

1. To avoid covering uninsurable losses
2. To avoid insuring losses that could be prevented
3. To eliminate duplicate coverage
4. To eliminiate coverage that most insureds do not need
5. to eliminate coverage for exposures that require special handling by the insurer
6. To keep premiums reasonable

Front 164

Two covered costs in liability policies

Back 164

1. The damages that the insured is legally liable to pay
2. The cost of defending the insured against the claim

Front 165

Supplementary payments

Back 165

Various expenses the insurer agrees to pay under a liability insurance policy (in addition to the liability limits) for items such as premiums on bail bonds and appeal bonds, loss of the insured's earning because of the attendance at trials, and other reasonable expenses incurred by the insured at the insurer's request

Front 166

Prejudgement interest

Back 166

Interest that may accrue on damanges before a judgment has been rendered

Front 167

Postjudgement interest

Back 167

Interests that may accur on damages after a judgment has been entered in a court and before the money is paid.

Front 168

Medical payments coverage

Back 168

Coverage that pays necessary medical expenses incurred within a specified period by a claimant (and in certain policies, by an insured) for a covered injury, regardless of whether the insured was at fault

Front 169

Occurrence basis coverage

Back 169

Coverage for liability claims that occur during the policy period, regardless of when the claim is submitted.

Front 170

Claims-made coverage

Back 170

Coverage for liability claims that are first made against the insured during the policy period for covered events that occur on or after the retroactive date and before the end of the policy period.

Front 171

Retroactive date

Back 171

The date in claims-made policy on or after which injury or damage must occur in order to be covered.

Front 172

Split limits

Back 172

Separate limits for bodily injury and property damage liability coverage

Front 173

Single limit

Back 173

The maximum amount an insurer will pay for the inured's liability for both bodily injury and property damage that arise from a single occurence

Front 174

Six steps to the risk management process

Back 174

1. Identifying loss exposures
2. Analyzing loss exposures
3. Examining the feasibility of risk management techniques
4. Selecting the appropriate risk management techniques
5. Implementing the selected risk management techniques
6. Monitoring results and revising the risk management program

Front 175

Loss severity

Back 175

Monetary amount of damage that results from a loss.

Front 176

Five risk control techniques

Back 176

1. Avoidance
2. Loss prevention
3. Loss reduction
4. Separation
5. Duplication

Front 177

Loss prevention

Back 177

A risk control technique that seeks to lower the frequency of loss from a particular loss exposure

Front 178

Loss reduction

Back 178

A risk control technique that seeks to lower the severity (decrease the dollar amount) of losses.

Front 179

Risk financing

Back 179

A risk management technique that includes steps to pay for or transfer the cost of losses.

Front 180

Noninsurance transfer

Back 180

A risk financing technique in which on party transfers the potential financial consequences of a particular loss exposure to another party that is not an insurer.

Front 181

Four informal guidelines to risk management

Back 181

1. Don't retain more than you can afford to lose.
2. Don't retain large exposures to save a little premium.
3. Do not spend a lot of money for a little protection
4. Do not consider insurance a substitute for loss control

Front 182

Four decisions risk managers make

Back 182

1. What should be done
2. Who should be responsible
3. How to communicate the risk management information
4. How to allocate the cost of the risk management program