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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.