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General Insurance
OTL 1. Introduction to General Insurance
| Term | Definition |
|---|---|
| Insurance | risk-sharing into an organized pool ; shifting financial responsibility for a loss |
| Sept. 1668 | birth of fire insurance in London, England |
| 5 Functions of Insurance | 1. Spread of Risk 2. Basis of credit system 3. Eliminates Worry - Encourage Entrepreneurship 4. Loss Prevention and Loss Reduction 5. Source of Employment and Investment Capital |
| Insurance (Insurance Act) | the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which an object of insurance may be exposed |
| Insurance (Insurance Act) | or to pay a sum of money or other thing of value upon tghe happening of a certain event |
| Major Function of insurance | to share the loses of the few among the many |
| Function of Insurance #2. Basis of credit system | consumer access to insurance frees up credit; availability of insurance to protect the investments of lenders helps to facilitate the granting of credits |
| Risk | means the object of an insurance |
| Peril | the cause of loss (e.g., fire, wind, and hail) |
| principle of Indemnity | people receives the actual amount no more no less |
| amount of indemnity | determined the value of the property as it existed immediately prior to its loss; can be sum of money or other thing of value |
| insurance pay/indemnity | for losses of accidental and future not deliberate or occured in the past |
| Property and Casualty (P&C) Insurance in Canada | 1. auto insurance, 2. property insurance and 3. liability insurance |
| Autmobile insurance | largest single class of property and casualty in Canada; highest in premiums |
| Property Insurance | insurance for habitational and business properties; 2nd largest source of premiums |
| Liability Insurance | provides protection when insureds are responsible for the damage; 3rd major source of premiums |
| 2 types of Insurance orgs in Canada | 1. Private Insurers and 2. government insurers (PG) |
| 2 types of Private Insurers | 1. Stock companies and 2. mutual fund companies (SM) |
| Stock companies | owned by shareholders or from private funds ex - Aviva |
| Mutual companies | owned by policyholders; they give dividends ; |
| Government Insurers | feds and provl government provides 1. medical insurance (OHIP), 2. employment insurance (EI) and 3. workers insurance (WSIB) |
| Provinces that provides compulsary auto insurance coverages | BC, Saskachewan, Manitoba and Quebec - (BSMQ) In Saskachewan - govt competes with private insurers for property and other classes of insurance |
| 3 ways How Insurance is Distributed | 1. Direct writing system; 2. Independent brokerage system and 3. Agency system (DIA) |
| 1. Direct writers | producers are employees of insurers - give salaries or commissions; owns all business written and admin functions - eg RBC insurance, Desjardins, belair |
| 2. Independent brokerage system | 80% of all P& C insurance is sold thru this system; represents more than 1 company as well as Facility association ; not an employee of insurer; paid by commissions; |
| 3. Agency System | agents like direct writers represent one insurer and Facility Assoc; agents are small business owners; paid commissions and bonuses and has ownership in their book of business - Statefarm, CAA |
| Lloyds of London | - not an insurance company; established in 17th centruy to write marine insurance |
| Lloyds Corporation | composed of underwriters |
| Syndicates | composed of underwriting members or names |
| Slip | the underwriting details presented as a folded sheet of paper; if 100% of risk subscribed - slip is forwarded to Police Signing OfficePortfolios of underwriters |
| Portfolios of Lloyds underwriters | ex commercial aircraft, satellite risks, hot air balloons, oil rigs nuclear power plant, voice of opera singer |
| Renewal process begins | 1. expiration date distributed ==contact before expiration (2 or 3 mos before) == if after expiration and you have changes you either endorsed, rewritten ormay need added or delete changes |
| Methods of Organizing Staff | 1. Line of business division of responsibility 2. Functional division of responsibilty |
| 2 Processing departments | 1. Personal lines insurance 2. Commercial lines insurance |
| Functional division examples | Sales, marketing, admin, underwrtiting |
| Major section of Insurance contract | 1. Brokers authority 2. Ownership of expirations 3. Commissions, 4., Expenses 5. Termination |
| 1. Brokers Authority | provide guidelines of rules and rates, types of risk permitted to be bound and limits for reach type |
| 2. Ownership of Expirations | shld make clear which party owns the expiration and who will continue to provide coverage; will provide the insurer with OE when failed to remit premiums |
| 3. Billing procedures | 1. Account Current 2. Insurer statement 3. Direct bill |
Created by:
Grace Solangon
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