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Insurance Fundamentals Insurance Fundamentals

Insurance Fundamentals - PowerPoint Presentation

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Insurance Fundamentals - PPT Presentation

for Policymakers Four assignments Insurance Principles Insurance Coverages Property and Casualty Insurance Coverages Life and Health Insurance Regulation and Legislation Insurance Fundamentals for Policymakers ID: 250950

property coverage amp insurance coverage property insurance amp damage insured loss exposures liability policy coverages auto personal medical reinsurance

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Slide1

Insurance Fundamentals

for PolicymakersSlide2

Four assignments:

Insurance PrinciplesInsurance Coverages: Property and CasualtyInsurance Coverages: Life and HealthInsurance Regulation and Legislation

Insurance Fundamentals for PolicymakersSlide3

The Homeowners Policy

The Personal Auto PolicyThe Surplus Lines MarketReinsuranceWorkers Compensation: Statutes and Methods of Demonstrating Financial SecurityInsurance Coverages

: Property and Casualty TopicsSlide4

Property

and casualty insurance covers real and personal property and the insured’s liability for others’ injuries or property damage.

The Homeowners PolicySlide5

Section I—Property

CoveragesDwellingOther StructuresPersonal Property

Loss of Use

Section II—Liability

Coverages

Personal Liability

Medical Payments to

Others

The Homeowners PolicySlide6

Protects:

House and structures attached to houseDetached structures on premisesPerils insured against depend on policy

Section I—Property

Coverages

, Dwellings and Other StructuresSlide7

Personal Property—property other than dwelling and other structures

Loss of Use—financial losses when an insured residence is uninhabitableReimbursement for living or meal expensesFair rental valueSection I—Property Coverages

, Personal Property and Loss of UseSlide8

Bodily injury or property damage for which the insured is legally

liableInsurer is obligated to defend the insuredSection II—Liability Coverages

, Personal LiabilitySlide9

For persons injured at insured’s

premisesApplies whether or not insured is liableClaim must be made within three years

Section II—Liability

Coverages

, Medical Payments to OthersSlide10

Owner-occupants

Tenants Condominium ownersPolicy Choices—InsuredsSlide11

Perils are causes of

lossNamed perils—Perils listed in the policyOpen perils—All perils not excluded by the policy

Policy Choices—PerilsSlide12

Owner-Occupant PoliciesSlide13

Other PoliciesSlide14

An

individual or family can use a personal auto policy (PAP) to insure against the consequences of losses involving ownership or use of an auto.

The Personal Auto PolicySlide15

Liability

Medical paymentsUninsured/underinsured motoristsPhysical damagePersonal injury

Coverage OptionsSlide16

Covers bodily injury and damage to others’ property caused by an insured in an auto accident.

Insured must be found legally responsible.Applies toCovered vehicles and other vehicles driven by an insuredOccasional drivers of covered vehicles

Liability CoverageSlide17

Covers reasonable and necessary medical expenses for injuries from auto accident to

Insured in any autoInsured pedestrian injured by autoOccupants of insured autoPaid regardless of faultCarries per-person limit

Medical Payments CoverageSlide18

Covers bodily injury caused by

At-fault uninsured motoristHit-and-run driverDriver who is insolvent

Uninsured Motorists CoverageSlide19

Added as endorsement to PAP

Covers insured’s injury caused by underinsured at-fault driverIn some states, also covers property damagePays difference between underinsured motorists coverage limit and at-fault vehicle’s liability limitsUnderinsured Motorists CoverageSlide20

Applies to insured’s covered autos

Applies to certain other autosNonowned auto not for insured’s regular useAuto or trailer used as temporary substitute (loaner)Has a deductiblePhysical Damage CoverageSlide21

Applies when covered auto

Strikes an objectCollides with another vehicleOverturnsPhysical Damage Coverage—CollisionSlide22

Applies to damage not resulting from collision

Examples: damage from fire, theft, vandalism, hail, animal contact, flood, and glass breakagePhysical Damage Coverage—Other Than CollisionSlide23

Pays benefits regardless of fault

Covers medical expenses, income loss, and other losses of injured occupants of covered autoMay restrict victims’ right to sue (“true” no-fault laws)Added by endorsementPersonal Injury Protection Slide24

The

surplus market includes unique or unusual exposures, as well as those exposures that the standard market is unwilling or unable to insure.

The Surplus Lines MarketSlide25

Classes of E&S business

Unusual or unique loss exposuresNonstandard businessInsureds needing higher coverage limits

Insureds

needing unusually broad coverage

Loss exposures that require new forms of coverage

Excess and Surplus Lines (E&S) Slide26

Standard insurance depends on a large number of similar exposures.

Without that, coverage is difficult to price.E&S coverage may be available.Unusual or Unique ExposuresSlide27

Standard insurers may not cover high-loss or uncontrollable-loss exposures.

Premiums may be too high.E&S coverage may be available.Nonstandard BusinessSlide28

In comparison to what the standard market provides, the E&S market provides:

Higher-limit coverages Broader coverage Coverage for new exposuresHigh Limits, Broad Coverage, New ExposuresSlide29

Some states maintain lists of approved E&S insurers.

Other states maintain lists of unapproved E&S insurers.Most states require all E&S business to be placed through an E&S broker. E&S Lines RegulationSlide30

Reinsurance

enables insurers to meet the needs of the public and handle their own risk portfolios efficiently. Reinsurance helped the United States insurance industry withstand such disasters as the September 11, 2001, terrorist attacks and Hurricane Sandy in 2012.

ReinsuranceSlide31

Insurer transfers liability for certain losses to reinsurer.

In exchange, insurer pays reinsurer a ceding commission.Insurer retains some of the loss, and coverage is subject to limits.Reinsurers also use reinsurance (retrocession).Basic Reinsurance ConceptsSlide32

Policyholders cannot collect directly from reinsurers.

Two exceptions:Cut-through endorsementPurchase of reinsurance for captive insurer or pool Indemnification of PolicyholdersSlide33

Workers

compensation (WC) laws provide an exclusive remedy for work-related injuries: employers are required to cover such injuries without regard to fault, and employees’ right to sue in such cases is limited.

Workers CompensationSlide34

Obligate employers to compensate employees for job-related injuries

Limit employees’ rights to sue employers for such injuriesGuarantee prompt payment Reduce court burdens and litigation costsState WC LawsSlide35

Medical expenses and wage loss

Work-related injuries and occupational diseasesScope of CoverageSlide36

Medical benefits

Disability income benefitsRehabilitation benefitsDeath benefitsBenefits PayableSlide37

Covered—Industrial workers and most workers of private employers

Exempt (varies by state)Small businesses with few employeesFarm labor Domestic employeesCasual employeesIndependent contractors

Persons Covered or ExemptSlide38

State laws require employers to demonstrate ability to pay WC claims.

Employers can meet this requirement through insurance or self-insurance.Employers’ Financial SecuritySlide39

Voluntary market—private insurers

Assigned risk planState fundWC Insurance Slide40

Self-insurance plans

Self-insured groupsSelf-Insurance for WCSlide41

Homeowners policies—property damage, loss of use, liability

Personal Auto Policy—losses from ownership/use of autosSurplus lines—unusual or unique exposuresReinsurance—insurance for insurersWC—medical expenses and wage loss

Summary