st7.03 insurance products

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ST7-03: Insurance Products – Types

1.  Liability

  Provides indemnity where the insured, osome form of tort (private or civil wrong

negligence), is liable to pay compensatio

party.

  Workers’ Comp. aka EL, Motor Third Parand Aviation Liability, Public/Product Lia

Professional Indemnity (PI), Directors’ &

(D&O) liability, Environmental Liability

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Benefits may be limited by:

  Maximum indemnity per claim or per event (multiple cla

  An excess (reduces amount, frequency, and propensity t

Employers’ Liab. Indemnifies the insured against legal liabilit

compensate an ‘ee or their estate for bodily injury, disease o

owing to negligence of the employer during employment.

Motor Third Party indemnifies the insured against compensa

to third parties for personal injury or damage to their prope

occurring basis

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Marine & Aviation Liability indemnifies the insured against le

to compensate third parties for bodily injury, death or dama

property arising from operation of the vessel/craft. Losses-o

basis

Public Liability indemnifies the insured against legal liability

compensate third parties for loss/damage of property or bo

Losses-occurring basis

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Product Liability indemnifies the insured against legal liabilit

death or bodily injury or damage to property of third parties

product faults. Claims-made basis

Professional Indemnity insurance indemnifies the insured ag

liability owing to losses resulting from professional negligen

e.g. D&O, E&O Claims-made basis

Claims made basis  – covers all claims reported to an insurer

policy period irrespective of when they occurred. E.g can’t k

date of loss

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Losses-occurring basis  – covers claims occurring in the defin

cover.

Think about WHO will initiate the claim -> motor: losses-occ

b/c insured may strategically choose when to report (NCD).

EL exposure for claim frequency can be person-hours worke

severity can be wage roll b/c compensation will often be sal

Premium is paid on the basis of an estimated payroll for the

end of the year, an adjustment premium is paid/refunded d

actual payroll was higher/lower.

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Motor Third Party exposure is vehicle-year i.e. amount per v

Marine & Aviation exposure could be passenger kilometres/

service vessels/aircrafts/seats. BUT turnover is commonly us

to use an average of past years as written on losses occurrin

Public & Product Liability exposure is usually turnover

Professional Indemnity (PI) exposure is usually turnover (or f

management for a fund manager)

Need to think about rating factors (underwriters use to set p

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EL & PL   Type of industry or occupation

  Claims experience

  Exposure

  Location

  Frequency of visitors to the site

  Materials handled

  Processes involved

  Safety precautions and standards

  Size of the deductible

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Motor Third

Party, Marine &

Aviation

  Loss history

  Type of vehicle or vessel

  Commercial strategy (if comme

  Whether commercial/private u

  Number of drivers

  Gender of driver

  Age of driver (or license years)

  Location

  Distribution channel  Value & nature of cargo (storag

Professional

Indemnity

  Nature of profession

  Size of firm

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  Maximum loss

Directors’ and

Officers’ 

  Nature of company

  Past experience

  State of economy

2.  Property Damage

Indemnifies the insured against financial loss resulting fr

loss of the insured’s own property.

Includes residential, commercial, moveable property (hocontents, goods in transit), marine craft, aircraft, constru

suretyship(3 parties, building contracts) , extended warr

Can have accumulations of risk e.g geographical location

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Can have long settlement & reporing delays -> marine &

Extended warranty can have volatile reporting pattern (d

in batches)

Householdproperty

  Amount of sum insured

  Number of rooms

  Location (subsidence, theft, floo

  Voluntary/compulsory use of a

  Voluntary/compulsory use of a   Owner occupied or rented

  House or flat

  Type of property (detached, sem

 Age of building

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  Type of construction

  Preventative measures(burglar

Commercial

Property

  Value of property

  Type of work/trade

  Estimated maximum loss

  Age of building

  Fire protection equipment

  Excesses

  LocationNot all risk factors can be used as rating factors. Need measu

quantifiable risk factors to form rating factors

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Motor Property   Type of cover e.g. third party, t

  Excess (reduce freq, and severit

  Vehicle type, age, size of engine

  Use of vehicle (private/business

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3.  Financial Loss (losses-occurring basis)

  Fidelity guarantee

o  Dishonest actions of employees

  Credit insurance

o  Risk that debtors will not pay their debt

indemnity, trade credit)

  Creditor insurance

o  Credit card loans

  Business interruption cover (aka consequential losso  Loss due to being unable to conduct bus

  Legal expenses cover

o  Legal expenses incurred from legal proc

initiated against the insured or by the in

h l d f h d f l l f

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Such policies indemnify the insured against financial loss arising fro

perils:

  Fidelity guarantee

o Fraud and embezzlement

  Credit insurance

o  Failure of 3rd

parties to meet credit oblig

  Creditor insurance

o  Accident or sickness resulting in loss of i

debt  Business interruption cover (aka consequential loss

o  Fire or supplier failure

  Legal expenses cover

o  Taken to court

i i l l l i d b h il d

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Financial loss claims tend to be short tailed.

Fidelity guarantee claims could take years to settle and be la

Creditor insurance claims tend to be a series of payments un

insured recovers or limit is reached.

4 Fi d B fi

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4.  Fixed Benefits

Claims arise under personal accident insurance

Benefits are usually fixed amounts in the event that the

from a specified injury or accidental death. Is NOT indem

as it is not possible to quantify the loss e.g. limb.

May need to wait some years for condition to stabilise ->

settlement periods, but usually quick. Frequency tends t

but claims can be large.Risk factors include: age, gender, health condition, empl

dangerous past-times.

It i t f t f li i t b bi d

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It is not uncommon for types of policies to be combined e.g.:

  Motor insurance for third party liability or property dam

personal accident cover.

  Aviation policies can include public liability cover.