RMIN 5100 Test 2

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ropa1712
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71339
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RMIN 5100 Test 2
Updated:
2011-03-08 23:35:26
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RMIN Risk Management
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Test 2
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  1. Underwriting Cylce
    alternating soft (low prices, high supply) and hard (high prices, low supply) markets
  2. Combined Ratio
    • underwriting profitability measure;
    • =(losses + expenses) / (premiums)

    Usually >1, but ideally it would be <1 because we want premiums > losses
  3. CPP (Commercial Package Policy)
    organization gets to basically pick and choose components of coverage; commercial property insurance, boiler and machinery insurance, commercial crime insurance, commercial inland marine insurance, farm insurance
  4. Common Declarations
    • apply to the entire policy; a summary of the entire package; typically includes:
    • 1. Name and Address of Insured
    • 2. Policy Period
    • 3. Business Description
    • 4. Coverage Parts that Apply
    • 5. Premium
    • 6. Forms Applicable
  5. Commercial Property Declarations
    specific to the coverage; summary of the specified part (in this case CP); goes into more detail about the coverage and usually includes deductible and limits of insurance
  6. Common Conditions (6)
    • 1. Cancellation
    • 2. Changes
    • 3. Examination of Books/ Records
    • 4. Physical Inspections
    • 5. Premiums
    • 6. Assignment
  7. Commercial Property Declarations (7)
    • 1. Named Insured
    • 2. Description of Premises
    • 3. CP Coverages
    • 4. Deductibles, Limits, Coins
    • 5. Causes-of-Loss Forms Applicable
    • 6. Optional Coverages/ Endorsements
    • 7. Mortgage Holders (if any)
  8. Commercial Property Conditions (8)
    • 1. Concealment, Misrepresentation or Fraud
    • 2. Control of Property
    • 3. Insurance Under 2+ Coverages/ Other Insurance
    • 4. Legal Action Against "Us"
    • 5. Liberalization
    • 6. No Benefit to Bailee
    • 7. Transfer of Rights of Recovery Against Others to Us (Subrogation)
    • 8. Policy Period and Coverage Territory
  9. What are the 3 broad categories of covered property under BPP coverage form?
    • 1. Building
    • 2. "Your" buisness personal property
    • 3. Personal Property of Others
  10. Cancellation (Common Condition)
    • tells insured what the rules are and how to cancel the policy; usually if premium isnt paid an insurance company can cancel policy with 10 days notice to the insured.
    • *insurer and cancel for any other reason with 30 days notice, but this varies by state (in GA insurers must give 45 days notice)
  11. Changes (Common Condition)
    states that they must be done in writing to be valid; however, insurance companies are still on the hook if an agent makes a promise about a policy without putting it in writing first (this is the reason for E&O insurance)
  12. Examination of Books/ Records (Common Condition)
    states that if a company is buying an insurance policy from the insurer it must allow the insurer to see all records relvant/ pertaining to the policy
  13. Physical Inspections (Common Condition)
    states that a company must let an insurer physically inspect the property that is referenced in the written policy
  14. Premiums (Common Condition)
    basically says that the named insured is on the hook for paying premiums of the policy bc his or her name is on the declarations page
  15. Assignment (Common Condition)
    Insurance policies follow individuals, NOT property! When property is sold, insurance doesnt transfer to the new owner unless the insurer wants to renew with said new owner.
  16. Concealment (CP Condition Part 1)
    when the insured fails to bring up or omits pertinent info regarding a policy; if the omitted fact is material, the insurer reserves the right to deny the claim and/or cancel the policy
  17. Misrepresentation (CP Condition Part 1)
    basically a lie when you sign up for your policy; if the lie is material, the insurer reserves the right to deny the claim and/or cancel the policy
  18. Control of Property (CP Condition)
    for property to be covered, the insured (or a representative of the insured) must maintain in physical control of said property
  19. Insurance Under 2 or More Policies/ Other Insurance (CP Condition)
    if property suffers a loss and is covered by multiple policies, the loss is paid for either by the equal shares rule, the pro-rata rule, or the excess sharing rule. However, the insured cannot be overindemnified for the loss.
  20. Equal Shares Rule
    n insurers, each insurer pays (1/n) of the loss (loss is spread equally between insurers), this method is uncommon
  21. Pro-Rata Rule
    each insurer pays their proportion of the loss; i.e. insurer A pays (Insurer A's limit/ Total Insurance Limit) and the other insurers pay their fraction of the limit.
  22. Excess Sharing Rule
    when there are primary and excess policies (the most specific policy is usually the primary policy), the primary pays for a loss first, and excess policies pay any amount over the primary policy limit.
  23. Legal Action Against "Us" (CP Condition)
    sets a statute of limitations for an insured suing an insurer; usually 2 years
  24. Liberalization (CP Condition)
    in force for the entire policy period; if the base policy changes to include broader coverage at no additional premium, then the insured would also receive this extra coverage at no additional premium; converse of this is not true (if base coverage narrows, insured's premiums wont rise and coverage will stay the same)
  25. No Benefit to Bailee (CP Condition)
    insurance coverage does not extend to the person in possession of your property
  26. Transfer of Rights of Recovery Against Others to Us (Subrogation) (CP Condition)
    insured transfers the rights of recovery to insurer in order to collect from liable party
  27. Policy Period and Coverage Territory (CP Condition)
    • policies generally last 1 year, but they can span from 2-5 years
    • policies generally start at 12:01 AM
    • 3 countries are generally covered: US, Puerto Rico, Canada
  28. Things Included Under Building Section of BPP
    • building/structure described in the declarations
    • completed additions
    • permanently installed fixtures, machinery, and equipment
    • outdoor fixtures
    • personal property owned by you used to service/maintain the premises
    • additions under construction, alterations, and repairs to the building or structure
    • materials, equipment, supplies and temporary structures within 100 feet of the premises used for additions, alterations, or repairs to the building or structure
  29. Are foundations covered under the BPP?
    No; foundations (i.e. anything below the bottom floor) are not covered bc it is difficult to assess the damage to it
  30. Things Included Under Your Personal Property Section of BPP
    • furniture and fixtures
    • machinery anf equipment
    • stock/ inventory
    • all other personal property owned by you and used in your buisness
    • leased personal property
    • improvements and betterments
    • labor, materials, or services furnished on property of others
  31. Whata are the characteristics of the Personal Property of Others Section of the BPP?
    • payment is made to the owner of the property, not the insured
    • payment is not based upon legal liability
    • $2500 sublimit
    • ordinarily purchased by those with a bailment exposure
  32. Exclusions to the Building Section of the BPP
    • land
    • water
    • bridges
    • roadways, walks, patios
    • retaining walls
    • piers, wharfs, or docks
    • cost of excavations, grading, back fillings, or filling
    • pilings
    • underground foundations
    • underground pipes, flues, or drains
  33. Personal Property Exclusions to the BPP
    • Vehicles
    • Animals
    • Contraband
    • Valuable Papers and Records
    • DEMCABS
    • Property Covered Elsewhere
  34. Additional Coverages (6)
    • make it easier to handle certain claims bc they eliminate 'ands' and 'buts'
    • 1. Debris Removal
    • 2. Pollutant cleanup and removal
    • 3. Preservatin of Property
    • 4. Fire department service charge
    • 5. Increased cost of consrtuction
    • 6. Electronic Data
  35. Coverage Extenstions (6)
    • 1. Newly acquired or constructed property
    • 2. Personal effects and property of others
    • 3. Valuable papers and records
    • 4. Property off-premises
    • 5. Outdoor property
    • 6. Non-owned detached trailers
  36. How are deductibles applied to a loss?
    on a per occurance basis, only applied ONCE p/o; deducted from the LOSS amount, NOT the LIMIT amount
  37. What does coinsurance help to prevent?
    underinsurance
  38. How is the indemnity amount calculated when there is a coinsurance clause?
    {[limit amount / (coinsurance amount in decimal form)(value of property at the time of loss)] * loss amount} - deductible

    • AKA
    • [(did/should) * loss] - deductible
  39. What is an OFC (optional federal charter)?
    pertains to the last in class article; allows insurance cos to purchase one charter that allows them to operate nationally instead of having to obtain 50 individual state licenses
  40. How are debris removal costs calculated?
    • 1. smaller of 25% of the loss amount or the remaining policy limit
    • 2. up to $10,000 additional insurance if needed
  41. What does DEMCABS stand for?
    • Deeds
    • Evidence of Debt
    • Money
    • Currency
    • Accounts
    • Bills
    • Securities
  42. What is the exception to the vehicle exclusion of the YPP section?
    • 2 stipulations:
    • 1. vehicle is not licensed for the road AND 2. vehicle is used to service the premises
    • ex: mall security vehicles
    • ALSO, vehicles that are part of inventory (like boats)
  43. Pollutant Cleanup and Removal Coverage
    $10,000 per year, ATL; usually only covered when it stems from a covered peril (like a fire); reinforces an exclusion
  44. Preservation of Property Coverage
    subject to regular limit; insurer will pay (up to the limit amount) for expenses incurred to help preserve damaged property/ reduce the loss amount
  45. Fire Department Service Charge Coverage
    $1,000 ATL, P/O
  46. Increased Cost of Construction Coverage
    smaller of 5% of the limit or $10,000 ATL, P/O; excluded as a peril and reniforces an exclusion; example of coverage would be if a building needs to be brought up to code
  47. Electronic Data Coverage
    $2,500 aggregate ATL; difficult loss to assign value to bc often intangible; reinforces and exclusion
  48. Newly Acquired or Constructed Property Extension
    • Buildings: $250,000 P/O, ATL
    • Personal Property: $100,000 P/O, ATL
    • temporary solution; only extension that may be subject to an explicit extra premium (sometimes enforced retroactively)
  49. Personal effects and property of others Extension
    $2500 P/O, ATL; not for businesses who regularly care for others' property (e.g. dry cleaners)
  50. Valuable Papers and Records (Non Electronic) Extension
    $2,500 ATL, per loss, per location; reinforces an exclusion
  51. Property Off-Premises Extension
    $10,000 P/O, ATL; protects property when it is not in your control and is off you property premises; exclusions to this: 1. property is in your control (unless at a trade show) or 2. property is in transit
  52. Outdoor Property Extension
    • $1,000 P/O, ATL
    • $250 limit per tree/ shrub (so max of 4)
    • Only 5 perils are covered, the rest are excluded (LFEAR)
  53. What does LFEAR stand for and what does it pertain to?
    • pertains to the outdoor property coverage extension;
    • Lightning
    • Fire
    • Explosion
    • Aircraft
    • Riots
    • these are the only 5 perils covered under the extension
  54. Non-Owned Detached Trailers Extension
    $5,000 P/O, ATL; trailer is not yours and is not attached to anything

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