Caib 2- Chapter 2

Front 1

3 advantages of using fact find or survey

Back 1

1. Assists brokers when identifying potential loss

2. Assists brokers not to sell coverages clients do not need

3. Assists brokers in collecting information needed by insurance companies

Front 2

3 benefits of commercial property checklists and which is most important to brokers

Back 2

1. Assists brokers when identifying potential loss

2. Assists brokers make sure coverages are not overlooked

3. Assists brokers in reducing errors and omissions losses

Front 3

Explain characteristics of:

A) FIRE RESISTIVE

B) NON-COMBUSTIBLE

Back 3

A. This means the building has achieved standard set in hours to remain structurally sound when attacked by fires

B. These buildings are slightly below standard of fire resistive structures

Front 4

5 areas insurers request additional information when buildings are over 25 years old?

Back 4

WHORP

1. Wiring

2. Heating

3. Over current protection

4. Roof

5. Plumbing

Front 5

5 hazards common to commercial buildings

Back 5

1. Heating (furnace, heaters)

2. Occupancy (welding shops)

3. Protection

4. Electrical Services

5. Detachment (customers building and distance to next building)

Hint 5

Hazard = HOPED

Front 6

What is a detachment?

Back 6

This is the distance of insured building (or property) to commercially rated buildings

Front 7

2 types of protection

Back 7

1. Private (steps taken by insured within building to reduce frequency and severity of losses such as sprinklers)

2. Public (this refers to protection methods used by municipalities, or outside steps such as fire station)

Hint 7

Sprinklers and fire stations

Front 8

4 functions of underwriters

Back 8

1. Risk selection (choosing business most profitable to the company and primary duty of insurer)

2. Risk classification

3. Rating and rate making

4. Policyholders Services (paperwork, renewal, endorsements)

Front 9

Define adverse selection

Back 9

This happens when only those accounts exposed to certain perils are the Accounts applying for coverage such as those near rivers are the only accounts applying for flood coverage

Front 10

Define risk classification

Back 10

Taking all accounts similar to each other and placing them in categories based on their likelihood for loss

Front 11

Main advantage of risk classification

Back 11

This allows insurers to calculate proper premiums to charge

Front 12

Identify an internal source underwriters utilize when rate making?

Back 12

Staff inspectors

Front 13

Identify an external source underwriters utilize when rate making

Back 13

IAO Insurers Advisory Organization

Front 14

2 influences which cause premiums to change from year to year

Back 14

1. Increasing claims paid due to inflation

2. Rates of return on insurance companies investments

Front 15

What are characteristics of soft market?

Back 15

Heavy competition among insurers as well as lower premiums

Front 16

What characteristics of hard markets?

Back 16

Underwriting standards become more strict and premiums rise

Front 17

What is a physical hazard?

Back 17

These are hazards arising from the use of insureds property which cause perils to occur

Front 18

6 type of physical hazards common to all commercial risk

Back 18

1. Protection (fire extinguishers)

2. External exposures (being next to restaurants)

3. Type of building construction (fire resistive vs frame)

4. Housekeeping (general cleanliness)

5. Occupancy (library vs welding shops)

6. Geography (restricted access)

Hint 18

PHYSICAL HAZARD = PET HOG

Front 19

What is moral hazard?

Back 19

These are subjective characteristics of clients which may cause losses to occur

Front 20

5 moral hazards

Back 20

1. Indifference to loss (doesn't care)

2. Financial condition (financial hardships)

3. Moral character (authorities questions client)

4. Associates (being with known criminals)

5. Poor management (lack of prevention)

Hint 20

MORAL HAZARD = IFMAP