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Gie81 part1


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Gie81 part1

  1. 1. <ul><li>INTRODUCING THE INSURANCE BUSINESS </li></ul><ul><li>WHAT IS INSURANCE </li></ul><ul><ul><li>Insurance defined </li></ul></ul><ul><li>INSURANCE CONTRACT </li></ul><ul><ul><li>Who </li></ul></ul><ul><ul><li>What </li></ul></ul><ul><li>RISK – AN ESSENTIAL FACTOR IN INSURANCE </li></ul><ul><ul><li>Insurance risk </li></ul></ul><ul><ul><li>Dealing with risk </li></ul></ul><ul><ul><li>Determining the chance of loss </li></ul></ul><ul><li>PERIL AND HAZARD </li></ul><ul><li>BASIC INSURANCE RELATIONSHIPS </li></ul><ul><li>HOW RATES AND PREMIUMS ARE DETERMINEDFUNCTIONSOF INSURANCE </li></ul><ul><li>FUNCTIONS OF INSURANCE </li></ul><ul><ul><li>Spread of risk </li></ul></ul><ul><ul><li>Aid to security </li></ul></ul><ul><ul><li>Aid to credit </li></ul></ul><ul><ul><li>Loss prevention activities </li></ul></ul><ul><ul><li>Source of capital </li></ul></ul><ul><ul><li>Source of employment </li></ul></ul><ul><li>GENERAL INSURANCE </li></ul>
  2. 2. WHAT IS INSURANCE? <ul><li>It is a way of sharing the losses of a few people among many </li></ul><ul><li>Insurance Act of Ontario </li></ul><ul><ul><li>Insurance means the undertaking[ 承诺 ] by one person to indemnify[ 补偿 ] another person against loss and liability for loss in respect of a certain risk or peril[ 危险 ] to which the object of the insurance may be exposed, or to pay a sum of money or other thing of value upon the happening of a certain event </li></ul></ul><ul><li>An insurer must make good the amount of the insured’s financial loss </li></ul><ul><ul><li>no more no less </li></ul></ul><ul><ul><li>No insurance again loss </li></ul></ul><ul><ul><li>Insurance indemnity an insured when a loss occurs </li></ul></ul><ul><li>WHAT IS INSURANCE? </li></ul><ul><ul><li>Insurance requires a group, with each group member contributing to a fund </li></ul></ul><ul><ul><li>The few members of this group who suffer a loss are then reimbursed from the fund </li></ul></ul><ul><ul><li>“ The premiums of the many pay for the losses of the few” </li></ul></ul><ul><li>The insurance company’s role is to “manage” the fund </li></ul><ul><ul><li>invest wisely </li></ul></ul><ul><ul><li>pay expenses </li></ul></ul><ul><ul><ul><li>commission </li></ul></ul></ul><ul><ul><ul><li>salaries </li></ul></ul></ul><ul><ul><ul><li>rent </li></ul></ul></ul><ul><ul><ul><li>office operating costs </li></ul></ul></ul><ul><ul><li>pay claims </li></ul></ul>
  3. 3. INSURANCE CONTRACT <ul><li>Who? </li></ul><ul><ul><li>First party - Insured : the individual or firm wanting protecting against loss. </li></ul></ul><ul><ul><li>Second party - insurer : the insurance company which issues the policy </li></ul></ul><ul><ul><li>Third party – persons who claim against a policy but who are not a party to it </li></ul></ul><ul><li>What? </li></ul><ul><ul><li>Contract of Insurance: Insurer agrees in return for a Consideration called the premium to indemnify insured against loss or damage or liability arising out of the happening of a specific event or events </li></ul></ul><ul><ul><li>Consideration: One party gives or promises to give in exchange for the act or promise of the other party to the contract </li></ul></ul><ul><ul><li>Indemnify: insureds, up to the limit of the policy, are fully compensated[ 代偿的 ]for actual cash value of what they have lost, so what they neither gain nor lose as a result of the loss </li></ul></ul><ul><ul><li>Actual cash value: the current cost of replacing an article which similar one in the same condition </li></ul></ul><ul><ul><li>The event insured against must be a future event </li></ul></ul><ul><ul><li>The future event must be fortuitous [ 偶然的 ], it must be accidental and must not occur as result of or through means involving the will, co-operation, design or intent of the person whose future need to be met </li></ul></ul><ul><ul><li>An insurance policy is technically the written evidence of the contract of insurance and thus contains all the terms and conditions of contract </li></ul></ul>
  4. 4. RISK – AN ESSENTIAL FACTOR IN INSURANCE <ul><li>Risk : chance of loss </li></ul><ul><li>Speculative[ 投机的 ] risk : there is always the possibility of profit or loss </li></ul><ul><li>Pure Risk : entails a chance of loss but no chance of profit </li></ul>
  5. 5. RISK – AN ESSENTIAL FACTOR IN INSURANCE (Con’t) <ul><li>Insurable Risk </li></ul><ul><ul><li>Insurance is concerned only pure risk. </li></ul></ul><ul><ul><li>Example of insurable risks </li></ul></ul><ul><ul><ul><li>Personal Risks compass the chance of loss arising from one’s own bodily injury or loss of life or loss of income. </li></ul></ul></ul><ul><ul><ul><ul><li>Premature death </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Physical disability </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Old age </li></ul></ul></ul></ul><ul><ul><ul><ul><li>unemployment </li></ul></ul></ul></ul><ul><ul><ul><li>Property Risks encompass the chance to or destruction of or damage to property </li></ul></ul></ul><ul><ul><ul><ul><li>Direct losses are those involving damage to or destruction of the property insured </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Indirect losses occur as a consequence of direct losses </li></ul></ul></ul></ul><ul><ul><ul><li>Liability Risks encompass the chance of loss arising from an individual’s obligation to pay damages because of injury or death of another or damage to another’s property </li></ul></ul></ul><ul><ul><ul><ul><li>His or her conduct </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The operation of automobiles, aircraft, boats, snowmobiles </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The ownership or occupancy of property </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The manufacture of products </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The rendering of professional services </li></ul></ul></ul></ul><ul><ul><li>Categories of Risks ( line ) </li></ul></ul><ul><ul><ul><li>Personal Lines </li></ul></ul></ul><ul><ul><ul><ul><li>Insurance relating to individuals in their private capacity </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Included are: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>the home, its contents, autos, boats, cottages, </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>jewellery, furs & vacation travel insurance </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Commercial Lines </li></ul></ul></ul><ul><ul><ul><ul><li>Insurance relating to commercial operations such as stores, professional offices, trucking operations, and other similar businesses </li></ul></ul></ul></ul><ul><ul><ul><li>Special Risks </li></ul></ul></ul><ul><ul><ul><ul><li>Insurance relating to large industrial firms such as factories, multi-location stores, high rise properties and many industrial operations </li></ul></ul></ul></ul>
  6. 6. RISK – AN ESSENTIAL FACTOR IN INSURANCE <ul><li>Deal with risk </li></ul><ul><ul><li>Eliminate or reduce the risk by preventive effort . This simple means analysing the risk and doing everything possible to prevent mishaps from occurring </li></ul></ul><ul><ul><li>Assume or retain the risk. </li></ul></ul><ul><ul><ul><li>Bear the cost of loss from your own pocket at that time </li></ul></ul></ul><ul><ul><ul><li>Self-insure. Captive insurance company is owned by the insured </li></ul></ul></ul><ul><ul><li>Transfer the risk </li></ul></ul><ul><ul><ul><li>Shift it from one person to another – a better financial ability to withstand a possible loss </li></ul></ul></ul><ul><ul><ul><li>This is insurance </li></ul></ul></ul>
  7. 7. RISK – AN ESSENTIAL FACTOR IN INSURANCE <ul><li>Determining the chance of loss </li></ul><ul><ul><li>Insurance premiums are based on the principles of probability applied to past experience </li></ul></ul><ul><ul><li>Principles of probability a fraction =number of time the event happens / number of time the event may happens </li></ul></ul><ul><ul><li>The larger the group studied the more reliable (accurate) the probability </li></ul></ul><ul><ul><li>Insurance operates mainly on a combination of risks approach. </li></ul></ul><ul><ul><li>Chance or degree of probability vs. degree of uncertainty: compare 100 samples and 1000 samples, Chance or degree of probability same, degree of uncertainty reduced. </li></ul></ul><ul><ul><li>The Law of Large numbers is the principle that the reliance to be placed upon a given probability is increased when the number of trials or cases is increased. </li></ul></ul><ul><ul><ul><li>i.e. predictions [ 预测 ] are more accurate </li></ul></ul></ul><ul><ul><li>The function of insurance is primarily the reduction [ 减少 ] of the uncertainty, and only incidentally the reduction of the probability </li></ul></ul><ul><ul><li>The essence of the combination of risks is the application of the Law of large number ( law of averages ) </li></ul></ul><ul><ul><li>If the risks of a large number of people are combined, the actual losses will be approximately the same as the probable losses anticipated through studying past occurrences ( principles of probability ) </li></ul></ul>
  8. 8. PERIL AND HAZARD <ul><li>A Peril is an event which may cause a loss to occur </li></ul><ul><li>In property insurance the peril of fire is usually combined with damage caused by lightning and by explosion of natural or manufactured gas </li></ul><ul><li>Insurance against loss bi additional perils referred to as extended coverage </li></ul><ul><ul><li>Explosion </li></ul></ul><ul><ul><li>Falling object </li></ul></ul><ul><ul><li>Impact by aircraft or land vehicle </li></ul></ul><ul><ul><li>Lightning damaging electrical devices or appliances </li></ul></ul><ul><ul><li>Vandalism [ 故意毁坏 ] or malicious [ 恶意的 ] acts </li></ul></ul><ul><ul><li>Water escape, rupture [ 断裂 ] , freezing </li></ul></ul><ul><ul><li>Windstorm or hail [ 雹子 ] </li></ul></ul><ul><ul><li>Riot [ 暴乱 ] </li></ul></ul><ul><ul><li>Smoke </li></ul></ul><ul><li>Damage resulting from wear [ 磨损 ] and tear [ 撕裂 ] or war are not covered. Under such insurance coverage is determined by the exclusions </li></ul><ul><li>Crime insurances: Burglary [ 行窃 ], robbery, theft </li></ul><ul><li>Breakdown and explosion are perils covered by boiler and machinery [ 机械 ] insurance </li></ul><ul><li>All perils, collision, upset, fire, theft, are referred to in automobile insurance </li></ul><ul><li>Negligence , being the doing of something a reasonable person would not do or the omission to do something a reasonable person would do is the peril insured in liability insurance </li></ul>
  9. 9. PERIL AND HAZARD <ul><li>A condition which may cause a peril to occur or make the loss more severe </li></ul><ul><li>PHYSICAL HAZARDS : refers to the subject matter of insurance and concerns those facts which can be ascertained by inspection of the risk. </li></ul><ul><ul><li>Construction </li></ul></ul><ul><ul><li>Age </li></ul></ul><ul><ul><li>Heating System </li></ul></ul><ul><ul><li>Condition of property </li></ul></ul><ul><ul><li>Location </li></ul></ul><ul><ul><li>Type of Processing </li></ul></ul><ul><li>MORAL HAZARDS: relates to conditions attributable to the human element of risk </li></ul><ul><ul><li>Dishonesty </li></ul></ul><ul><ul><li>Carelessness </li></ul></ul><ul><ul><li>Poor Management </li></ul></ul><ul><ul><li>Harder to detect and extremely and difficult or impossible to eliminate or reduce </li></ul></ul>
  10. 10. BASIC INSURANCE RELATIONSHIPS <ul><li>Insured : pay premiums, receive reimbursement if loss </li></ul><ul><li>Insurer : manage fund, collect premium, settle. Consider income and outgo </li></ul><ul><li>The income of the fund must be sufficient to meet the loss paid out. </li></ul><ul><li>On the outgo side, it is important that proper settlement of losses is made </li></ul><ul><li>The contract is the agreement enforceable at law, which sets out in detail the arrangement between insured and insurer concerning premiums, the contingency insured against, and the manner and method of settling losses </li></ul><ul><li>The evidence of that contract is the insurance policy </li></ul><ul><li>Agent / Broker is to act as intermediary. Duties and responsibility defined in Insurance Act </li></ul><ul><li>Agent represents one insurer. The insurer they usually represent are known as Direct Writers company </li></ul><ul><li>When loss, staff adjuster and independent adjuster. Public adjuster is an independent businessperson who may engaged by the insurer to help in the settlement of a claim </li></ul><ul><li>Direct Writing: Insurer Employs staff to sell their insurance products to the public </li></ul>
  11. 11. HOW RATES AND PREMIUMS ARE DETERMINEDFUNCTIONSOF INSURANCE <ul><li>The rate is the price of unit of insurance (usually $100 or $1000) for a period of one year. It is expressed either in dollars and cents or as a percentage </li></ul><ul><li>The premium is the amount of money in insurance company charges to provide coverage for a specific item or policy </li></ul><ul><li>The determination of the amount of premiums required is an application of the law of averages and the theory of probability . From data pertaining to a sufficient number of events in the past, it can be predicted that a similar number of events (fires) will likely occur in the future </li></ul><ul><li>The reliability of this prediction is dependant upon several factors: </li></ul><ul><ul><li>The size of the sample </li></ul></ul><ul><ul><li>Time period over which sample was taken </li></ul></ul><ul><ul><li>Conditions in the past relative to future condition </li></ul></ul><ul><li>Process </li></ul><ul><ul><li>A classification of risks is established based on </li></ul></ul><ul><ul><ul><li>Type of objects insured and </li></ul></ul></ul><ul><ul><ul><li>Hazards of exposure </li></ul></ul></ul><ul><ul><li>Statistics on losses, based on insurers’ classifications of risk </li></ul></ul><ul><ul><li>Pure premium is the premium required to meet the losses that occur </li></ul></ul><ul><ul><li>Total premium or rate of premium is determined by add loading for trends in accidents and repair costs, inflation, plus expense such cost of production, overhead and profit </li></ul></ul>
  12. 12. FUNCTIONS OF INSURANCE <ul><li>Spread of Risk (primary): loss of the few are shared by many </li></ul><ul><ul><li>Volume - insuring a large number of risks </li></ul></ul><ul><ul><li>Diversity of type of risk – writing insurance on as many different kinds of risk as possible </li></ul></ul><ul><ul><li>Diversity of location – writing insurance in as many different locations as practicable </li></ul></ul><ul><li>Aid to Security </li></ul><ul><li>Aid to Credit </li></ul><ul><li>Loss Prevention Activities </li></ul><ul><ul><li>Fire Protection – research and recommendations to prevent fires and spread of fires </li></ul></ul><ul><ul><li>Safe driving – campaigns to encourage safe driving, … </li></ul></ul><ul><li>Source of Capital </li></ul><ul><ul><li>Outstanding loss reserves – to meet future losses which may arise during the period of insurance; to represent the amount estimated on claims in the process of be settled or losses which have occurred but not yet been reported </li></ul></ul><ul><ul><li>Unearned premium reserve – refund premiums which have not yet earned, in case policies are cancelled </li></ul></ul><ul><ul><li>The balance makes up working capital </li></ul></ul><ul><li>Source of Employment </li></ul>
  13. 13. GENERAL INSURANCE <ul><li>NOT Life and health insurance </li></ul><ul><li>General </li></ul><ul><ul><li>Fire </li></ul></ul><ul><ul><li>Extended Coverage (E.C.) </li></ul></ul><ul><ul><li>Business Interruption </li></ul></ul><ul><ul><li>Surety Bonds </li></ul></ul><ul><ul><li>Liability Insurance </li></ul></ul><ul><ul><li>Automobile Insurance </li></ul></ul><ul><ul><li>Accident Insurance </li></ul></ul><ul><ul><li>Crime Insurance </li></ul></ul><ul><ul><li>Floater </li></ul></ul><ul><ul><li>Commercial property floaters </li></ul></ul><ul><ul><li>Inland Transportation </li></ul></ul><ul><ul><li>Personal articles and personal effects </li></ul></ul><ul><ul><li>Homeowners’, Tenants’, Condominium unit owners’ </li></ul></ul><ul><ul><li>Aviation </li></ul></ul><ul><ul><li>Marine </li></ul></ul><ul><ul><li>Real property </li></ul></ul><ul><li>Casualty insurance is a term used to describe certain classes of insurance not particularly or directly concerned with life insurance or fire insurance </li></ul>
  14. 14. 2. INSURANVE INTERMEDIARIES <ul><li>BROKER AND AGENTS </li></ul><ul><li>PRINCIPLE – AGENT RELATIONSHIP </li></ul><ul><ul><li>Agents’ / brokers’ authority </li></ul></ul><ul><ul><li>Agents’ / brokers’ responsibilities </li></ul></ul><ul><li>AGENT – CLIENT RELATIONSHIP </li></ul><ul><li>BINDING AUTHORITY </li></ul><ul><li>THE BROKER/AGENT AND PREMIUMS </li></ul><ul><li>REGULATION OF INSURANCE AGENTS/BROKERS </li></ul><ul><li>AGENCY/BROKERAGE ORGANIZATION </li></ul><ul><ul><li>Finances </li></ul></ul><ul><ul><li>Production </li></ul></ul><ul><ul><li>General management </li></ul></ul><ul><ul><li>Accounting Claims Handling </li></ul></ul>
  15. 15. BROKER AND AGENTS <ul><li>In some provinces all agents and brokers are licensed by the government body responsible for insurance. In some provinces brokers are self-regulated and only agents are licensed by the government </li></ul><ul><li>A broker is an independent business person who may place business with any number of insurers </li></ul><ul><li>An agent represent one company only or sells only life insurance </li></ul><ul><li>A general agent is one who has authority to manage all of a company’s business within his or her territory, to appoint other agents and settle claims. Provincial Agent / Provincial Manager. Differ: General Insurance Agent – general insurance agent or life insurance agent! </li></ul>
  16. 16. PRINCIPLE – AGENT RELATIONSHIP <ul><li>Civil code of Quebec and common law which applies throughout the rest of Canada </li></ul><ul><li>Civil Code: A mandate is a contract by which a person called the mandator ( principle ) commits a lawful business to the management of another called the mandatary ( agent ), who by his/her acceptance obliges him/herself to perform it </li></ul><ul><li>An intermediary may be: </li></ul><ul><ul><ul><li>An independent business person who works on behalf of a number of insurers ( broker ) </li></ul></ul></ul><ul><ul><ul><li>An independent businessperson who works exclusively on behalf of one insurer ( agent ) </li></ul></ul></ul><ul><ul><ul><li>An employee of an insurer (direct writer ) </li></ul></ul></ul><ul><li>Agents’/Brokers’ Authority </li></ul><ul><ul><li>An express[ 特定 ] contract is one in which the terms of arrangement have been specifically stated and agreed to by both parties either orally or in writing </li></ul></ul><ul><ul><li>An implied[ 隐含 ] contract is one in which the parties have acted in such a way that it is understood that a principal – agent relationship exists, even through there may have been no expressed statement by either </li></ul></ul><ul><li>Agents’/Brokers’ Responsibilities </li></ul><ul><ul><li>Act within the terms of the contract between them </li></ul></ul><ul><ul><li>Follow instructions as to type of business which may be written, for example, to write only the classes of risk acceptable to the insurer and not exceed the limits of coverage authorized </li></ul></ul><ul><ul><li>Collect premiums and hold these amounts in trust until they are remitted to the insurer </li></ul></ul><ul><ul><li>Remit premiums collected within a specified time limit </li></ul></ul><ul><ul><li>Advise the insurer of business written or submit application promptly </li></ul></ul><ul><ul><li>Advise the insurer promptly[ 迅速 ] of all claims notified to the agent/broker </li></ul></ul>
  17. 17. AGENT – CLIENT RELATIONSHIP <ul><li>To assist in the completion of insurance contracts between their clients and insurers </li></ul><ul><ul><li>Take the form of application and submit it to insurer to make decision </li></ul></ul><ul><ul><li>Does every thing leading up and including the issuing of insurance policy </li></ul></ul><ul><li>The intermediary is required to operate: </li></ul><ul><ul><li>Within the scope of the contract with the insurer </li></ul></ul><ul><ul><li>Within the authority of the intermediary’s licence </li></ul></ul><ul><li>Intermediaries may be acting </li></ul><ul><ul><li>solely as representatives of a insurer </li></ul></ul><ul><ul><li>They may be brokers, acting solely on behalf of their clients in arranging insurance contracts with insurers </li></ul></ul><ul><li>They avoid acting for both sides at the same time </li></ul>
  18. 18. BINDING AUTHORITY <ul><li>Binder authority is the capacity to confirm to applicants that they have coverage against certain happenings or events which, if they occur, may cause financial loss. It gives an intermediary the authority to bind an insurer to a contract of insurance </li></ul><ul><li>A binder is the confirmation that insurance coverage is in effect. It can be oral or written </li></ul><ul><li>Agents/brokers may have the power to bind or hold covered the insured on behalf of the insurers they represent up to certain limits. </li></ul><ul><ul><li>They can confirm that a client has insurance coverage without first checking with insurer that will later issue the policy </li></ul></ul><ul><li>A cover note is a notice and confirmation to the insurer that it has been bound to a contract of insurance with the details given. </li></ul><ul><li>When an agent/broker binds coverage, a good rule to follow is to prepare a cover note right away and mail a copy to the insurer . A copy also should send to insured and it will be reserved as a written binder. This action should never be delayed longer than necessary as a loss could occur before an actual policy is issued. </li></ul>
  19. 19. THE BROKER/AGENT AND PREMIUMS <ul><li>A trust account in which to deposit premiums collected and from which the insurers would be paid for policies issued </li></ul><ul><li>An operation account which would be the general business account. </li></ul><ul><li>Commission is the share of the premium allowed to the broker/agent for having produced the business. It is stated as percentage and stipulated[ 规定 ] </li></ul><ul><li>Agent represents the insurer and a broker represents the insured. </li></ul><ul><li>In the collection of premiums, both agents and brokers considered to be the representatives of the insurer in all cases </li></ul>
  20. 20. REGULATION OF INSURANCE AGENTS/BROKERS <ul><li>Qualification </li></ul><ul><ul><li>Knowledge of insurance business </li></ul></ul><ul><ul><li>Government regulations pertaining to insurance intermediaries </li></ul></ul><ul><li>Licensing </li></ul><ul><ul><li>All provinces require individuals to have a license to operate as insurance intermediaries </li></ul></ul><ul><li>Operating Requirements </li></ul><ul><ul><li>Must follow the requirements of the province Insurance Act and its regulations </li></ul></ul><ul><li>Renewal of License </li></ul><ul><ul><li>Must renew license each year and file a return giving basic detail about their operation </li></ul></ul>
  21. 21. AGENCY/BROKERAGE ORGANIZATION <ul><li>Finances </li></ul><ul><li>Production – New business and renewal </li></ul><ul><li>General management </li></ul><ul><li>Accounting </li></ul><ul><li>Claims Handling </li></ul>
  22. 22. Finances <ul><li>Starting an Agency/Brokerage Business </li></ul><ul><ul><li>Possible to start an insurance agency business </li></ul></ul><ul><ul><ul><li>Purchase an existing company </li></ul></ul></ul><ul><ul><ul><li>Start a new business </li></ul></ul></ul><ul><ul><li>Amount of capital required depended on </li></ul></ul><ul><ul><ul><li>Outlay </li></ul></ul></ul><ul><ul><ul><li>Ability </li></ul></ul></ul><ul><ul><ul><li>Economic </li></ul></ul></ul><ul><ul><ul><li>Market </li></ul></ul></ul><ul><ul><ul><li>Competition </li></ul></ul></ul><ul><ul><ul><li>Rates of commission </li></ul></ul></ul><ul><ul><ul><li>Expenses </li></ul></ul></ul><ul><li>Operation an Agency/Brokerage </li></ul><ul><ul><li>Trust Account </li></ul></ul><ul><ul><ul><li>Deposit all premiums collected from insureds </li></ul></ul></ul><ul><ul><ul><li>Pay net premium to imsurers </li></ul></ul></ul><ul><ul><ul><li>Commission amounts are transferred into the operation account </li></ul></ul></ul><ul><ul><ul><li>Belongs to insurers </li></ul></ul></ul><ul><ul><li>Operation Account </li></ul></ul><ul><ul><ul><li>Rent </li></ul></ul></ul><ul><ul><ul><li>Postage </li></ul></ul></ul><ul><ul><ul><li>Stationery </li></ul></ul></ul><ul><ul><ul><li>Salaries </li></ul></ul></ul><ul><ul><ul><li>Refund commission </li></ul></ul></ul>
  23. 23. Production – New business and renewal <ul><li>A sales quota[ 定量 ] – plan ur work, work ur plan </li></ul><ul><ul><li>An overall commission income goal </li></ul></ul><ul><ul><li>Income: new business, renewal and additional business </li></ul></ul><ul><ul><li>Relating income from new business and additional business to specific premium volume goals for the year, then break it down by month and by each week </li></ul></ul><ul><ul><li>Relating REN too </li></ul></ul><ul><li>Time control </li></ul><ul><ul><li>Time is Money </li></ul></ul><ul><li>Prospecting [ 寻找 ] ( and selling) </li></ul><ul><ul><li>Growth will only come with continued selling. The time available and selling is directly related to the amount of time spent on office. </li></ul></ul><ul><li>Product knowledge </li></ul>
  24. 24. General management <ul><li>Staff training, records keeping, computers using, filling, telephone calls returned, correspondence answered, follow-up routines </li></ul><ul><li>Essential elements of good client service </li></ul><ul><ul><li>Reputation as a dependable source of insurance advice </li></ul></ul><ul><ul><li>Adequate[ 足够 ] Capacity </li></ul></ul><ul><ul><ul><li>Adequate[ 足够 ] Capacity is the ability o provide a full range of insurance protection to clients </li></ul></ul></ul><ul><ul><ul><li>The capacity requirements of personal line isn’t as great as commercial line </li></ul></ul></ul><ul><ul><ul><li>A brokerage which expects to sell and service personal lines and commercial lines insurance would want insurers to provide: </li></ul></ul></ul><ul><ul><ul><ul><li>Multiple line products </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cooperation </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Imaginative underwriting </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cross-country operations </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Capacity and the ability to handle large commercial accounts </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Inspection and risk management services </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Good service to brokers and clients </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Good claims service </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Loss prevention </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Profit commission is an extra commission paid annually to a broker/agent, but only if the business placed by the broker/agent produced a certain level of profitability for the insurer. Terms are usually stated in the agency agreement </li></ul></ul></ul></ul>
  25. 25. Accounting <ul><li>Accountants Receivable – the control of money owned to the agency (collection of premiums) </li></ul><ul><li>Accountants Payable – the control and verification of billings received from insurers </li></ul><ul><li>Trust account and operation account control </li></ul><ul><li>Expense detail and budgetary[ 预算上的 ] control </li></ul>
  26. 26. Claims Handling <ul><li>Notify the insurer promptly of all reported losses and provide sufficient details with which to initiate immediate action </li></ul><ul><li>Appoint an adjuster promptly, if it is within the scope of their authority as stated in the agency agreement </li></ul><ul><li>Use a follow-up system to ensure that the adjuster and the insurer provide the best possible service to your client </li></ul><ul><li>Tell the client when there clearly is no coverage </li></ul><ul><li>Protect both client and insurer from unreasonable demands. </li></ul>
  27. 27. 3. THE INSURANCE COMPANY – THE INSURER <ul><li>STOCK COMPANIES </li></ul><ul><li>LLOYD’D INDURANCE MARKET </li></ul><ul><li>MUTUALS </li></ul><ul><ul><li>Factory mutuals </li></ul></ul><ul><ul><li>Stock mutuals </li></ul></ul><ul><li>GOVERNMENTS AS INSURERS </li></ul><ul><li>INSURANCE COMPANY ORGANIZATION </li></ul><ul><ul><li>Directors </li></ul></ul><ul><ul><li>CEO </li></ul></ul><ul><ul><li>Staff </li></ul></ul><ul><li>THE MAJOR FUNCTIONS OF EACH DEPARTMENT </li></ul><ul><ul><li>Marketing Department </li></ul></ul><ul><ul><li>Underwriting Department </li></ul></ul><ul><ul><li>Claims Department </li></ul></ul><ul><ul><li>Accounting Department </li></ul></ul><ul><ul><li>Statistical Department </li></ul></ul><ul><ul><li>Service Department </li></ul></ul><ul><ul><li>Department Interrelationships </li></ul></ul>
  28. 28. Groups of Insurer or Carrier <ul><li>Organizations operating for the profit of their owners (Shareholders) </li></ul><ul><ul><li>Stock companies </li></ul></ul><ul><ul><li>Lloyd’s Underwriters </li></ul></ul><ul><li>Co-operative organizations operating for the benefit of their members only </li></ul><ul><ul><li>Mutuals </li></ul></ul><ul><ul><li>Reciprocal[ 互惠 ] </li></ul></ul><ul><ul><li>Factory mutuals </li></ul></ul><ul><ul><li>Mutual benefit </li></ul></ul><ul><ul><li>fraternal[ 友爱 ] societies </li></ul></ul><ul><li>Government insurance organizations which can take the form of a government department or a crown corporation </li></ul><ul><ul><li>Workers’ Compensation Boards </li></ul></ul><ul><ul><li>Provincial medical plans </li></ul></ul><ul><ul><li>Automobile insurances as found in some provinces </li></ul></ul><ul><ul><li>Canada Pension Plan </li></ul></ul><ul><ul><li>Unemployment Insurance Plan </li></ul></ul>
  29. 29. STOCK COMPANIES <ul><li>A number of individuals (or other corporations) subscribe and pay in capital to form a legal entity know as a Corporation </li></ul><ul><li>Shareholders have an equitable interest in the assets of the corporation and hope to realize a reasonable profit on their investment </li></ul><ul><li>Unearned premium reserves </li></ul><ul><li>Consist of the portion of the premium which has not yet been earned on each policy. In actual fact this figure would change everyday. </li></ul><ul><li>Outstanding loss reserves </li></ul><ul><ul><li>Consist of funds set aside to pay for losses which have been incurred but not yet paid </li></ul></ul><ul><li>Incurred [ 遭受 ] but not reported (IBNR) reserves </li></ul><ul><ul><li>A loss is incurred when it happens </li></ul></ul><ul><ul><li>IBNR refers to losses which have occurred but have not yet been reported or recorded by the insurer. An insurer must estimate such losses and also set aside funds to cover them when they are reported </li></ul></ul><ul><li>Stock insurance companies </li></ul><ul><ul><li>Insureds pay a fixed premium as their contribution to communal fund. If the contributions of all policyholders are not sufficient to cover the losses of all policyholders, the shortfall is provided from the contributed capital of the investors </li></ul></ul><ul><ul><li>Achieve a profit from </li></ul></ul><ul><ul><ul><li>Underwriting gain, that is, excess of premiums collected over loss payments and expenses </li></ul></ul></ul><ul><ul><ul><li>Interest on investment </li></ul></ul></ul><ul><ul><li>Income must exceed claims and operating expenses </li></ul></ul>
  30. 30. LLOYD’S INDURANCE MARKET <ul><li>Merchants and other wealthy individuals would provide the insurance by signing their name to policies, they become as “ names ” </li></ul><ul><li>The individuals who had provided insurance by simple signing their name gave a way to professional underwriters employed to accept business at Lloyd’s on their behalf </li></ul><ul><li>Lloyd’s is an insurance market, not an insurance company </li></ul><ul><li>Made up of member s grouped into syndicates </li></ul><ul><li>Syndicates are managed by underwriting agents </li></ul><ul><li>Underwriting agents appoint underwriters for each class of business </li></ul><ul><li>Lloyd’s brokers bring business to Lloyd’s </li></ul><ul><li>up to 1994 Members have unlimited liability </li></ul><ul><li>Post 1994 some Members have limited liability </li></ul><ul><li>Group of members, know as syndicates[ 辛迪加 , 财团 ], employ professional underwriters to accept their risk on their behalf </li></ul><ul><li>Members of Lloyd’s are not responsible for each other’s losses </li></ul><ul><li>Each syndicate is run by a managing agent </li></ul><ul><li>A managing agent is responsible for employing the underwriting staff and managing the syndicate on the members’ behalf </li></ul><ul><li>Lloyd’s implemented a new franchise model operation system in 2003 </li></ul><ul><li>Lloyd’s businesses are independent and operate within the franchise </li></ul><ul><li>Lloyd’s market usually through a global network of insurance brokers </li></ul><ul><li>Lloyd’s brokers, with specialist knowledge, place risks in the Lloyd’s market on behalf of clients </li></ul>
  31. 31. MUTUALS[ 互助 ] <ul><li>Assessment or Premium Note Mutuals </li></ul><ul><ul><li>One of purest forms of co-operative enterprise is the mutual insurer operating on the premium assessment or premium note plan </li></ul></ul><ul><ul><li>The outstanding difference between a purely mutual company and a stock company is that in the case of the mutual company, the consideration (premium) for the contract (policy) is not fixed or certain at the time the contract is made but must be determined either during the term of contract or at its termination since the final amount will depend on the operating experience </li></ul></ul><ul><li>Factory Mutuals </li></ul><ul><ul><li>Factory mutuals have specialized in the field of fire prevention and at the outset were successful in writing fire insurance on the cotton mills of New England </li></ul></ul><ul><ul><li>At the inception of a policy a premium deposit is required, at termination of the insurance credit against renewal deposit or return to the policyholders </li></ul></ul><ul><li>Stock Mutuals </li></ul><ul><ul><li>A number of companies which started as pure assessment mutuals have been changed the nature of their organization by an Act of Legislature of the province in which they are incorporated, to permit them to write participating policies with the public generally. </li></ul></ul><ul><ul><li>Policyholder is not actually a member of the mutual company in same way as under the pure assessment mutual system. Shareholders of these stock mutuals are in fact carrying on the business of writing participating policies with insurance company </li></ul></ul><ul><li>Co-operative Stock Mutuals </li></ul><ul><ul><li>Capital for these companies is subscribed by the members shareholders who are also the insureds. This is risk capital based on the co-operative principle of one vote for one shareholder. </li></ul></ul><ul><ul><li>Usually no dividends are payable on this share capital but surplus profits are distributed on the patronage basis </li></ul></ul><ul><ul><li>They are non-assessable so differ in that respect from the premium note mutuals </li></ul></ul>
  32. 32. GOVERMENTS AS INSURERS <ul><li>A contract of insurance between the insured and the government or the insured and a government department or the insured and a crown corporation </li></ul><ul><li>Government insurance may be monopolistic [ 垄断 ] and/or compulsory [ 强制 ] or merely an alternative market in which to buy insurance </li></ul><ul><ul><li>monopolistic [ 垄断 ] and/or compulsory [ 强制 ] – unemployment insurance, workers’ compensation insurance in many provinces; certain coverage under automobile insurance in some provinces </li></ul></ul><ul><ul><li>Alternative[ 互斥 ] market – certain coverages under automobile insurance in those provinces having compulsory government plans </li></ul></ul><ul><li>Federal government departments operate insurance plans for unemployment insurance and pensions </li></ul><ul><li>Province government are involved in workers’ compensation and medical and hospitalization plans </li></ul><ul><li>Province government in Saskatchewan , Manitoba , British Columbia and Quebec are engaged in writing compulsory automobile insurance. Saskatchewan and Manitoba governments also offer various general insurance coverages in competition with private industry </li></ul>
  33. 33. INSURANCE COMPANY ORGANIZATION <ul><li>Organization may be defined as an arrangement for getting things done. </li></ul><ul><li>Operating for profit </li></ul><ul><li>To achieve this overall corporate objective of profit an insurance company must be organized in such a way as to: </li></ul><ul><ul><li>Comply[ 服从 ] with all laws that pertain to corporations </li></ul></ul><ul><ul><li>Comply with the special laws that apply to insurance companies </li></ul></ul><ul><ul><li>Perform the functions necessary to an insurance organization </li></ul></ul>
  34. 34. ORGANIZATION <ul><li>The Directors </li></ul><ul><ul><li>The directors of an insurance company are chosen either by the shareholders in an incorporated company or by the policyholders in a mutual company </li></ul></ul><ul><ul><li>The Board of Directors choose the Chiarman </li></ul></ul><ul><ul><li>See the company is run according to its law </li></ul></ul><ul><ul><li>Minimum 3 Directors are required by law </li></ul></ul><ul><ul><li>The Board of Directors meets periodically, receives reports from the officers </li></ul></ul><ul><ul><li>Matters of policy include: </li></ul></ul><ul><ul><ul><li>The type of insurance and extent of coverages that the company will sell </li></ul></ul></ul><ul><ul><ul><li>The territory and area in which the company will operate </li></ul></ul></ul><ul><ul><ul><li>The underwriting policy which the company will follow </li></ul></ul></ul><ul><ul><ul><li>The agency policy </li></ul></ul></ul><ul><ul><ul><li>Investment policy </li></ul></ul></ul><ul><ul><li>Foreign Companies </li></ul></ul><ul><ul><ul><li>A Canadian Chief Agent will be required if headquarters </li></ul></ul></ul><ul><ul><ul><li>Some also setup a Canadian Advisory Board </li></ul></ul></ul>
  35. 35. ORGANIZATION <ul><li>The Chief Executive Officer </li></ul><ul><ul><li>Overall organization and operation of the company </li></ul></ul><ul><ul><li>Carry out the policies set by the Directors </li></ul></ul><ul><li>Staff </li></ul><ul><ul><li>Marketing Department (Production Department, Agency Department) </li></ul></ul><ul><ul><ul><li>Corresponds to the Sales Department in an industrial concern </li></ul></ul></ul><ul><ul><ul><li>Responsible for securing applications for insurance in sufficient numbers to enable the insurer to operate effectively and to attain its overall corporate objectives - profit </li></ul></ul></ul><ul><ul><li>Underwriting Department </li></ul></ul><ul><ul><ul><li>Carry out the activities necessary to select risks offered to the insurer so that the overall cooperate objective fulfilled </li></ul></ul></ul><ul><ul><li>Claim Department </li></ul></ul><ul><ul><ul><li>Responsible for the investigation and settlement of claims in accordance with the contracts between the insurer and the insureds </li></ul></ul></ul><ul><ul><li>Accounting Department </li></ul></ul><ul><ul><ul><li>Responsible for the recording, summarizing and analyzing of the company’s financial transactions and any other duties incidental to this responsibility </li></ul></ul></ul><ul><ul><li>Service Department </li></ul></ul><ul><ul><ul><li>Data processing </li></ul></ul></ul><ul><ul><ul><li>Purchasing of supplies </li></ul></ul></ul><ul><ul><ul><li>Policy issuing </li></ul></ul></ul><ul><ul><ul><li>Office service </li></ul></ul></ul><ul><ul><ul><li>Human resources </li></ul></ul></ul><ul><ul><ul><li>Printing </li></ul></ul></ul><ul><ul><ul><li>Research </li></ul></ul></ul><ul><ul><ul><li>Engineering </li></ul></ul></ul><ul><ul><ul><li>Legal </li></ul></ul></ul>
  36. 36. THE MAJOR FUNCTIONS OF EACH DEPARTMENT <ul><li>The Marketing Department </li></ul><ul><ul><li>Responsible for the flow of business </li></ul></ul><ul><ul><li>Companies who write Through Brokers </li></ul></ul><ul><ul><ul><li>Appointing agents/brokers </li></ul></ul></ul><ul><ul><ul><li>Training agents/brokers </li></ul></ul></ul><ul><ul><ul><li>Sales promotion </li></ul></ul></ul><ul><ul><ul><li>Link between agent/broker and insurer </li></ul></ul></ul><ul><ul><li>Direct Writing Companies </li></ul></ul><ul><ul><li>Specialized Operations </li></ul></ul><ul><li>Underwriting Department </li></ul><ul><li>The Claim Department </li></ul>
  37. 37. THE MAJOR FUNCTIONS OF EACH DEPARTMENT <ul><li>The Accounting Department </li></ul><ul><ul><li>Premiums </li></ul></ul><ul><ul><li>Claims Payments </li></ul></ul><ul><ul><li>Payroll </li></ul></ul><ul><ul><li>Operation Expenses </li></ul></ul><ul><ul><li>Taxes and Assessments </li></ul></ul><ul><ul><li>Budgets </li></ul></ul><ul><ul><li>Receipt and Disbursement of Funds </li></ul></ul><ul><ul><li>Administration of the Investment Program </li></ul></ul><ul><li>The Statistical Department </li></ul><ul><ul><li>Receive data </li></ul></ul><ul><ul><li>Produce reports </li></ul></ul><ul><li>Service Department </li></ul><ul><li>Department Interrelationships </li></ul>
  38. 38. Marketing Department <ul><li>Companies who write Through Brokers </li></ul><ul><ul><li>Appointing agents/brokers </li></ul></ul><ul><ul><ul><li>Broad coverage of territories/classes of business </li></ul></ul></ul><ul><ul><li>Training agents/brokers </li></ul></ul><ul><ul><ul><li>New products, company philosophy, underwriting </li></ul></ul></ul><ul><ul><li>Sales promotion </li></ul></ul><ul><ul><ul><li>Increased production, field underwriting, assist with clients </li></ul></ul></ul><ul><ul><li>Link between agent/broker and insurer </li></ul></ul><ul><ul><ul><li>Accounts collection, contract negotiation, production quotas </li></ul></ul></ul><ul><ul><ul><li>Liaison [ 联络员 ] between insurer and brokers </li></ul></ul></ul><ul><li>Direct Writing Companies </li></ul><ul><ul><li>Direct writers are also known as exclusive agency companies </li></ul></ul><ul><ul><li>Through individuals either an employee salesperson or an exclusive agent of that company </li></ul></ul><ul><ul><li>Agency Department are responsible for the selection, hiring and supervision of the salespeople or agents </li></ul></ul><ul><li>Specialized Operations </li></ul><ul><ul><li>E.g. factory mutuals, unique business classes </li></ul></ul><ul><ul><li>Insurer is selling a technical loss prevention service as well as insurance protection </li></ul></ul><ul><ul><li>Agency Department personnel in this type of operation are required to have specialized training, often in engineering </li></ul></ul><ul><ul><li>May through their employees or independent agents </li></ul></ul>
  39. 39. Underwriting Department <ul><li>Responsible for risk selection </li></ul><ul><li>Work hand-in-hand with Marketing for development of a profitable portfolio </li></ul><ul><li>Most underwriting done at the Branch level </li></ul><ul><ul><li>Unusual/large risks referred to HO </li></ul></ul><ul><li>Underwriting Functions </li></ul><ul><ul><li>Decision to accept/reject/modify risk being presented (p.25) </li></ul></ul><ul><ul><li>Based on: </li></ul></ul><ul><ul><ul><li>Personal info/physical/moral hazard/special factors </li></ul></ul></ul><ul><ul><ul><li>May/may not be presented on an application </li></ul></ul></ul><ul><ul><li>Technical Service </li></ul></ul><ul><ul><li>Risk inspection </li></ul></ul><ul><li>Risk Rejection: </li></ul><ul><ul><li>Unacceptable class of business </li></ul></ul><ul><ul><li>Unacceptable level of risk </li></ul></ul><ul><ul><ul><li>Compared to average for class </li></ul></ul></ul><ul><ul><li>Substandard quality of risk </li></ul></ul><ul><ul><ul><li>May be improved </li></ul></ul></ul>
  40. 40. Underwriting Department <ul><li>Underwriting Terms </li></ul><ul><ul><li>Line: </li></ul></ul><ul><ul><ul><li>Class of business </li></ul></ul></ul><ul><ul><ul><li>All amounts of insurance for policyholder </li></ul></ul></ul><ul><ul><li>Risk: </li></ul></ul><ul><ul><ul><li>Subject of insurance contract </li></ul></ul></ul><ul><ul><ul><li>Chance of loss </li></ul></ul></ul><ul><ul><li>Application </li></ul></ul><ul><ul><ul><li>An application is a request for insurance; it could be oral or written </li></ul></ul></ul><ul><ul><li>Exposure: </li></ul></ul><ul><ul><ul><li>Danger of loss, particularly fire, arising from what happens to another risk close by </li></ul></ul></ul><ul><ul><ul><li>Amount of loss potential </li></ul></ul></ul><ul><ul><ul><li>Property adjacent to insured risk </li></ul></ul></ul><ul><ul><li>Reinsurance: </li></ul></ul><ul><ul><ul><li>Method of sharing risk with another insurer </li></ul></ul></ul><ul><ul><ul><li>Premium and losses are shared </li></ul></ul></ul><ul><ul><ul><li>Invisible to policyholder </li></ul></ul></ul><ul><ul><li>Retention: </li></ul></ul><ul><ul><ul><li>The amount the insurer retains for its own account (like a deductible) net of reinsurance. </li></ul></ul></ul><ul><ul><li>Fleet </li></ul></ul><ul><ul><ul><li>A fleet policy in one insuring a number of automobiles for one owner </li></ul></ul></ul><ul><ul><ul><li>Individually Rated or Fleet (min. 5 power units) </li></ul></ul></ul><ul><ul><ul><li>A specified minimum of vehicles is required before it is considered a fleet </li></ul></ul></ul><ul><ul><li>Exception-base underwriting, rating by exception </li></ul></ul><ul><ul><li>Computer rates smaller risks and other risks will be reviewed </li></ul></ul>
  41. 41. Underwriting Department <ul><li>Property Department: </li></ul><ul><ul><li>Fire insurance, extended coverages, business interruption, transportation perils </li></ul></ul><ul><ul><li>Coverage on fixed and moveable property </li></ul></ul><ul><ul><li>Often divided by Personal/Commercial/Special Lines </li></ul></ul><ul><li>Casualty Department </li></ul><ul><ul><li>Primarily liability insurance, but can include other non-property lines: </li></ul></ul><ul><ul><ul><li>Accident, Fidelity, Crime, Surety </li></ul></ul></ul><ul><ul><li>May be combined with Property department in multi-line insurance companies </li></ul></ul><ul><ul><li>May have separate Casualty department for unique classes, e.g. Errors & Omissions </li></ul></ul><ul><li>Automobile Department </li></ul><ul><ul><li>Auto insurance only </li></ul></ul><ul><ul><li>Personal </li></ul></ul><ul><ul><li>Commercial </li></ul></ul><ul><ul><li>Special risks such as fleets </li></ul></ul><ul><li>Marine Department </li></ul><ul><ul><li>Ocean cargo or large ships </li></ul></ul>
  42. 42. The Claims Department <ul><li>The reason for insurance! </li></ul><ul><li>Ensure fairness to both the insured and the insurer </li></ul><ul><ul><li>In accordance with the contract conditions </li></ul></ul><ul><li>Adjuster: </li></ul><ul><ul><li>Investigates losses and determines the amount payable </li></ul></ul><ul><ul><li>An expert at utilizing other experts! </li></ul></ul><ul><li>Functions of the Claims Department: </li></ul><ul><ul><li>Assess validity of claims </li></ul></ul><ul><ul><li>Investigate the scene of the loss </li></ul></ul><ul><ul><li>Estimate loss amount and set reserves </li></ul></ul><ul><ul><li>Interpret and apply contract provisions </li></ul></ul><ul><ul><li>Determine amount payable </li></ul></ul><ul><ul><li>Approve payments </li></ul></ul>
  43. 43. The Accounting Department <ul><li>Key Accounting Terms </li></ul><ul><ul><li>Assets </li></ul></ul><ul><ul><ul><li>All of the wealth of the company </li></ul></ul></ul><ul><ul><ul><li>Non-admitted: do not comply with Insurance Act and cannot be recorded in financial statements </li></ul></ul></ul><ul><ul><li>Liabilities </li></ul></ul><ul><ul><ul><li>Money owed by the company </li></ul></ul></ul><ul><ul><ul><li>Outstanding loss </li></ul></ul></ul><ul><ul><ul><li>Includes claim amounts payable (IBNR) and unearned premiums </li></ul></ul></ul><ul><ul><li>Net Worth </li></ul></ul><ul><ul><ul><li>Value of the company to its owners (shareholders) </li></ul></ul></ul><ul><ul><ul><li>Assets – Liabilities = Net Worth </li></ul></ul></ul><ul><ul><li>Net Premiums </li></ul></ul><ul><ul><ul><li>Premiums left after commission deducted </li></ul></ul></ul><ul><ul><li>Financial Statements </li></ul></ul><ul><ul><ul><li>prepared by the Accounting Department and document the financial health of the company </li></ul></ul></ul><ul><li>Recording, Summarizing and Reporting the Company’s Financial Transactions </li></ul><ul><ul><li>Premiums </li></ul></ul><ul><ul><ul><li>Accurate recording and collection </li></ul></ul></ul><ul><ul><li>Claims Payments </li></ul></ul><ul><ul><li>Payroll </li></ul></ul><ul><ul><ul><li>Accurate and confidential administration </li></ul></ul></ul><ul><ul><li>Operating Expenses </li></ul></ul><ul><ul><li>Taxes & Assessments </li></ul></ul><ul><ul><ul><li>Premium taxes/profit taxes </li></ul></ul></ul><ul><li>Begets </li></ul><ul><ul><li>Estimated income and expenses for the coming year </li></ul></ul><ul><ul><li>Monitor actual to budgeted amounts </li></ul></ul><ul><ul><ul><li>Take corrective action </li></ul></ul></ul><ul><li>Receipt and Disbursement of Funds </li></ul><ul><ul><li>E.g Claims Payments </li></ul></ul><ul><li>Administration of the Investment Program </li></ul>
  44. 44. THE MAJOR FUNCTIONS OF EACH DEPARTMENT <ul><li>The Statistical Department </li></ul><ul><ul><li>Often managed by the Actuarial Department </li></ul></ul><ul><ul><li>Receives input from Underwriting, Claims, Marketing and Accounting </li></ul></ul><ul><ul><li>Data are coded before entered in the computer </li></ul></ul><ul><ul><ul><li>Coding is the use of symbols such as numbers or letters or represent information appearing in policies or lost records </li></ul></ul></ul><ul><ul><li>Produces statistical reports (MIS) that are used in the management of the company </li></ul></ul><ul><ul><ul><li>Loss ratio, production, accumulations, etc. </li></ul></ul></ul><ul><ul><ul><li>Monthly agency accounts </li></ul></ul></ul><ul><ul><ul><li>Monthly broker production reports/renewal lists </li></ul></ul></ul><ul><ul><ul><li>Net Premium are premiums after the producer’s commission has been deducted </li></ul></ul></ul><ul><li>Service Departments </li></ul><ul><ul><li>Departments that support the “Business” side of the organization </li></ul></ul><ul><ul><ul><li>Marketing/Underwriting/Claims </li></ul></ul></ul><ul><ul><li>Purchasing, Corporate Services, Policy Handling, Information Technology </li></ul></ul><ul><li>Department Relationships </li></ul><ul><ul><li>Each department must keep the “Big Picture” in mind </li></ul></ul><ul><ul><li>Understand how coordination between department achieves the goals of the organization </li></ul></ul><ul><ul><li>Departments must function as a team, not as rivals </li></ul></ul>
  45. 45. 4. BASIC DOCUMENTS, COMMON CLAUSES, INSURANCE PRACTICS <ul><li>BASIC DOCUMENTS </li></ul><ul><ul><li>Application </li></ul></ul><ul><ul><li>Temporary Insurance </li></ul></ul><ul><ul><li>The Policy </li></ul></ul><ul><ul><li>Certificates of Insurance </li></ul></ul><ul><ul><li>Endorsements </li></ul></ul><ul><li>COMMON CLAUSES </li></ul><ul><ul><li>Loss payable clause </li></ul></ul><ul><ul><li>Mortgage clause </li></ul></ul><ul><ul><li>Deductibles </li></ul></ul><ul><ul><li>Coinsurance </li></ul></ul><ul><li>INSURANCE PRACTICS </li></ul><ul><ul><li>Assignment of insurance contracts </li></ul></ul><ul><ul><li>Termination of insurance contracts </li></ul></ul><ul><ul><li>Renewals </li></ul></ul><ul><li>HOW TO READ A POLICY </li></ul>
  46. 46. BASIC DOCUMENTS <ul><li>Application </li></ul><ul><ul><li>An application is a request for insurance </li></ul></ul><ul><ul><ul><li>Coverage is the term used for insurance protection </li></ul></ul></ul><ul><ul><ul><li>Utmost good faith implies a standard of honesty greater than that usually required in most ordinary contracts </li></ul></ul></ul><ul><ul><li>Oral vs. Written Applications </li></ul></ul><ul><ul><ul><li>A written application is preferable: </li></ul></ul></ul><ul><ul><ul><li>To avoid misunderstandings </li></ul></ul></ul><ul><ul><ul><li>If the application is to become part of the policy </li></ul></ul></ul><ul><ul><ul><li>Misrepresentation is misleading the insurer as to material fact affecting a policy or the settlement of a loss either by directly lying or by not disclosing certain information </li></ul></ul></ul><ul><ul><ul><li>A Material fact is something affecting a contract of insurance important enough to change the agreement between the company and the policyholder. Material facts must be disclosed. An insurer must also be notified of changes material to a risk after policy has been issued. Insurance Acts require that insurer must provide: </li></ul></ul></ul><ul><ul><ul><ul><li>There is in fact a misrepresentation </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The application actually made the misrepresent at the time he applied for the insurance </li></ul></ul></ul></ul><ul><ul><li>Variation in Forms </li></ul></ul><ul><ul><ul><li>Name, Address, Occupation, Insurance History, Claims History </li></ul></ul></ul><ul><ul><ul><li>Other questions according to the class of insurance: </li></ul></ul></ul><ul><ul><ul><ul><li>Questions deal with moral Hazard </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Questions deal with physical Hazard </li></ul></ul></ul></ul>
  47. 47. BASIC DOCUMENTS <ul><li>Temporary Insurance </li></ul><ul><ul><li>The temporary insurance which can be legally binding whether expressed orally or in writing </li></ul></ul><ul><ul><li>A binder is a memorandum of an agreement to insure, issued to record the transaction pending the writing of a policy. Usually issued by insurer </li></ul></ul><ul><ul><li>A cover note is a document issued by agents or brokers which tells the insured that the insurance described has be effected. Usually issued by broker. </li></ul></ul><ul><ul><li>Both are for a specific limited period of time </li></ul></ul><ul><ul><li>Both are cancelled the same way as a policy </li></ul></ul><ul><ul><li>A Deductible is the amount of a loss which the insured must pay </li></ul></ul><ul><ul><li>Statutory conditions (common law provinces) are conditions required by law as promulgated by provincial legislatures </li></ul></ul><ul><ul><li>General condition (Quebec) are statutory in nature in that provincial legislation sets out the subject matter that must covered by these conditions although it does not specify the exact words that must be used </li></ul></ul>
  48. 48. BASIC DOCUMENTS <ul><li>Temporary Insurance </li></ul><ul><ul><li>Problems with Temporary Coverages Especially Oral Binders </li></ul></ul><ul><ul><ul><li>Was a contract actually made? Oral </li></ul></ul></ul><ul><ul><ul><li>Does Intermediary have authority? Contract </li></ul></ul></ul><ul><ul><ul><li>What are the provisions of the contract? (P. 9) that should be listed in binder/cover note </li></ul></ul></ul><ul><ul><ul><li>If no conditions stated, Statutory or General conditions are the only ones that apply </li></ul></ul></ul><ul><ul><li>Cancelling Temp Insurance </li></ul></ul><ul><ul><ul><li>Fixed period of time, usually short, 30 days Issuance of policy ends temporary coverage </li></ul></ul></ul><ul><ul><ul><li>If u/w decides not to issue the policy, must follow Termination (Statutory Conditions) </li></ul></ul></ul><ul><ul><ul><li>If not properly cancelled, claim occurs, there may be coerage (would lose in court) </li></ul></ul></ul>
  49. 49. BASIC DOCUMENTS <ul><li>The Policy </li></ul><ul><ul><li>A policy is the instrument evidencing a contract. It states the exact terms and provisions of the contract, in other words, the agreement made between the insured and insurer </li></ul></ul><ul><ul><li>Policy Components </li></ul></ul><ul><ul><ul><li>Coverage Summary </li></ul></ul></ul><ul><ul><ul><ul><li>Identifies the parties to the contract – the insurer and the insured </li></ul></ul></ul></ul><ul><ul><ul><ul><li>States the commencement date, term and expiry date </li></ul></ul></ul></ul><ul><ul><ul><ul><li>State premium and rate </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Shows the amount insured </li></ul></ul></ul></ul><ul><ul><ul><li>Insuring Agreements </li></ul></ul></ul><ul><ul><ul><ul><li>The subject matter of the insurance – description of the property covered (risk description) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The perils insured against </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The exclusions </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The circumstance under which the insured may receive the proceeds of the insurance </li></ul></ul></ul></ul><ul><ul><ul><li>Statutory Conditions/Quebec General Conditions are applicable to Automobile, Accident and Sickness, and Fire Insurance </li></ul></ul></ul><ul><ul><ul><ul><li>They must be printed on every one of these policies </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Policy in Quebec contain General Conditions. Specified points must address but not does not regulated the exact form </li></ul></ul></ul></ul><ul><ul><ul><li>Policy Conditions is part of the insuring agreement </li></ul></ul></ul><ul><ul><ul><li>Signature Clause is found immediately following the insuring agreements or conditions. </li></ul></ul></ul><ul><ul><ul><ul><li>under hand or under seal: no different </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The policy is signed by the insurer; insured’s signature not required. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Normally signed by CEO </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Require countersigned. By law </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Subscription policies must be signed by a member of each company participating in the risk </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The subscription policy is used usually to insure large risks. </li></ul></ul></ul></ul>
  50. 50. BASIC DOCUMENTS <ul><li>The Policy </li></ul><ul><ul><li>Policy Components </li></ul></ul><ul><ul><ul><li>Coverage Summary </li></ul></ul></ul><ul><ul><ul><ul><li>Identifies the parties to the contract – the insurer and the insured </li></ul></ul></ul></ul><ul><ul><ul><ul><li>States the commencement date, term and expiry date </li></ul></ul></ul></ul><ul><ul><ul><ul><li>State premium and rate </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Shows the amount insured </li></ul></ul></ul></ul><ul><ul><ul><li>Insuring Agreements </li></ul></ul></ul><ul><ul><ul><ul><li>The subject matter of the insurance – description of the property covered (risk description) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The perils insured against </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The exclusions </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The circumstance under which the insured may receive the proceeds of the insurance </li></ul></ul></ul></ul><ul><ul><ul><li>Statutory Conditions/Quebec General Conditions </li></ul></ul></ul><ul><ul><ul><ul><li>Apply to auto, accident & sickness, fire (property) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Must be provided at new business & change of contract terms (ie. Endorsement) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Policy may contain both Statutory & Policy Conditions </li></ul></ul></ul></ul><ul><ul><ul><ul><li>They must be printed on every one of these policies </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Policy in Quebec contain General Conditions. Specified points must address but not does not regulated the exact form </li></ul></ul></ul></ul><ul><ul><ul><li>Policy Conditions is part of the insuring agreement </li></ul></ul></ul><ul><ul><ul><ul><li>Apply, but are not statutory in nature, can argue in court </li></ul></ul></ul></ul>
  51. 51. BASIC DOCUMENTS <ul><li>The Policy </li></ul><ul><ul><li>Policy Components </li></ul></ul><ul><ul><ul><li>Signature Clause is found immediately following the insuring agreements or conditions. </li></ul></ul></ul><ul><ul><ul><ul><li>under hand or under seal: no different </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The policy is signed by the insurer; insured’s signature not required. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Normally signed by CEO </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Require countersigned. By law </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Subscription policies </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>must be signed by a member of each company participating in the risk </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>used to insure large risks - spread the risk </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>lead company prepares the policy with one or more insurance companies participating in covering the risk </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>arranged by the broker who handles the client’s account </li></ul></ul></ul></ul></ul>
  52. 52. BASIC DOCUMENTS <ul><li>The Policy </li></ul><ul><ul><li>Manuscript Policies </li></ul></ul><ul><ul><ul><li>a policy specifically designed for a particular risk </li></ul></ul></ul><ul><ul><ul><li>does not use standard, pre-printed wordings </li></ul></ul></ul><ul><ul><ul><li>NOTE: still must contain all the elements of a normal policy </li></ul></ul></ul><ul><ul><li>Differences Between Policy and Application </li></ul></ul><ul><ul><ul><li>The insurer to notify the insured of the difference in the policy as compared with the application </li></ul></ul></ul><ul><ul><ul><li>This notification must be in writing </li></ul></ul></ul><ul><ul><ul><li>If the insured doesn’t object to this change within a stated period of time, the policy is deemed to cover as it is written </li></ul></ul></ul><ul><ul><ul><li>If the insurer does not notify the insured of the difference, the insured can insist on coverage in accordance with the app if there is a loss </li></ul></ul></ul><ul><ul><li>Standardization of Policies </li></ul></ul><ul><ul><ul><li>Legislation </li></ul></ul></ul><ul><ul><ul><li>General usage </li></ul></ul></ul><ul><ul><ul><li>Court decisions </li></ul></ul></ul>
  53. 53. BASIC DOCUMENTS <ul><li>Certificates of Insurance </li></ul><ul><ul><li>A certificate may be a modified form of a policy, issued as convenience to a party who may have an interest in the insurance </li></ul></ul><ul><ul><ul><li>lienholder </li></ul></ul></ul><ul><ul><li>It certifies the existence of the insurance </li></ul></ul><ul><ul><li>commonly used on renewal </li></ul></ul><ul><ul><li>don’t have to repeat all the info that is on file on the original policy </li></ul></ul><ul><li>Endorsements </li></ul><ul><ul><li>Changes are effected by means of endorsement: </li></ul></ul><ul><ul><ul><li>Removal, relocation, mortgagee, loss, rate, hazard </li></ul></ul></ul><ul><ul><li>In insurance law an endorsement means any writing on the back of a policy which varies the terms of the contract </li></ul></ul><ul><ul><li>When an endorsement changes the contract in any way that deletes, reduces or restricts coverage two copies must be sent to insureds, one to be attached to their policy and the other for them to sign and return to the insurer </li></ul></ul>
  54. 54. COMMON CLAUSES <ul><li>Loss Payable Clause </li></ul><ul><ul><li>indicates the insurable interest of other persons or corporations interested in the insurance coverage • e.g. GMAC, Toyota Credit, etc </li></ul></ul><ul><ul><li>When a loss occurs payment is usually made jointly to the Insured and the loss payees </li></ul></ul><ul><li>Mortgage Clause </li></ul><ul><ul><li>Purpose </li></ul></ul><ul><ul><ul><li>recognizes the existence of a mortgagee on the insured property </li></ul></ul></ul><ul><ul><ul><li>To express an agreement between the mortgagee and the insurer which is independent of the agreement between the insurer and the insured </li></ul></ul></ul><ul><ul><li>Rights of Mortgagee </li></ul></ul><ul><ul><ul><li>Loss under the policy are made payable to the mortgage as their interests may appear </li></ul></ul></ul><ul><ul><ul><ul><li>The mortgagee has right to share in loss payment if insured owns and not paid off in term </li></ul></ul></ul></ul><ul><ul><ul><li>The clause entitles the mortgage to receive a loss payment regardless of: </li></ul></ul></ul><ul><ul><ul><ul><li>Any act or neglect of the mortgage or owner of the property </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Occupation of the premises for purpose more hazardous than are permitted by the policy </li></ul></ul></ul></ul><ul><ul><li>Obligations of Mortgagee </li></ul></ul><ul><ul><ul><li>Mortgagees must notify the insurer if: </li></ul></ul></ul><ul><ul><ul><ul><li>No-occupation or vacancy for over 30 days </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Change of ownership </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Increase Hazard (and pay additionl premium if necessary) </li></ul></ul></ul></ul><ul><ul><ul><li>Mortgagee only obligated if they know of changes </li></ul></ul></ul><ul><ul><ul><li>The Mortgagee is required to pay to the insurer on reasonable demand, any extra premium required because of increase in hazard </li></ul></ul></ul><ul><ul><li>Rights of the Insurer </li></ul></ul><ul><ul><ul><li>When the insured has violated a condition of the policy the insurer is still liable to the mortgagee </li></ul></ul></ul><ul><ul><ul><ul><li>Pay the loss to the mortgagee if loss is less than the mortgage amount </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Buy out the mortgagee </li></ul></ul></ul></ul>
  55. 55. COMMON CLAUSES <ul><li>Deductibles </li></ul><ul><ul><li>Small claims are expensive to service in relation to the amount involved </li></ul></ul><ul><ul><li>Deductible is a form of self-insurance </li></ul></ul><ul><ul><li>Deductibles operate in several ways: </li></ul></ul><ul><ul><ul><li>The insured pays a stated amount of every claim </li></ul></ul></ul><ul><ul><ul><li>A franchise require the insured to pay the full amount of the loss up to the amount of the deductible after which the insurer will pay the total amount </li></ul></ul></ul><ul><ul><ul><li>Disappearing deductibles use a formula whereby the deductible applies in small losses and is reduced as the size of the loss increases until the deductible disappears completely and the insurer pays the total loss </li></ul></ul></ul>
  56. 56. COMMON CLAUSES <ul><li>Coinsurance </li></ul><ul><ul><li>A policy CLAUSE designed to encourage insures to carry adequate [ 足够的 ] amounts of insurance on their property by requiring them to bear a portion of every loss if underinsurance exists </li></ul></ul><ul><ul><li>Coinsurance clause contains a provision stating when adequate insurance is considered to exist under that particular policy </li></ul></ul><ul><ul><li>Usually expressed as a % </li></ul></ul><ul><ul><ul><li>e.g. 50, 80, 90, 100 </li></ul></ul></ul><ul><ul><li>Could be a specifically stated sum </li></ul></ul><ul><ul><ul><li>STATED AMOUNT COINSURANCE CLAUSE </li></ul></ul></ul><ul><ul><li>Types of Risks Where Coinsurance is Used </li></ul></ul><ul><ul><ul><li>Coinsurance is applied mostly to contracts covering commercial property and usually not for residential dwelling or person property </li></ul></ul></ul><ul><ul><ul><li>It is suitable where the risk of a total loss is relatively remote when compared with risk of partial loss </li></ul></ul></ul><ul><ul><li>Application of Coinsurance in the Event of a Loss </li></ul></ul><ul><ul><ul><li>(Actually Amount of Insurance / Required Amount of Insurance) * Amount of Loss = Amount the Insurer Will Pay </li></ul></ul></ul><ul><ul><ul><li>Amount of Insurance $200,000; Value: $300,000; Coinsurance req: 80%;Loss:$100,000 </li></ul></ul></ul><ul><ul><ul><ul><li>$200,000/$240,000 * $100,000 = $83.33.33 (paid by insurer) $16,667 (paid by insured) </li></ul></ul></ul></ul>
  57. 57. INSURANCE PRACTICES <ul><li>Assignment of Insurance Contracts </li></ul><ul><ul><li>An insurance contract cannot be assigned by an insured to another individual except insurer consents </li></ul></ul><ul><ul><li>A contract of insurance is said to be a personal contract </li></ul></ul><ul><ul><li>Effect of Insurance Being a Personal Contract </li></ul></ul><ul><ul><ul><li>A person who sells a business or automobile cannot sell or assign to the purchaser the insurance on them without the consent of the insurer </li></ul></ul></ul><ul><ul><li>Assignment of Insurance Contracts Without Consent Applies in Some Circumstance </li></ul></ul><ul><ul><ul><li>Assignment under Bankruptcy Act will be recognized by insurers </li></ul></ul></ul><ul><ul><ul><li>Transfer of the assets of those who have died to their executors or administrators </li></ul></ul></ul><ul><ul><li>Assignment of Insurance Contracts With Consent </li></ul></ul><ul><ul><ul><li>The former owner signs off his or her interest in the insurance policy and any mortgage under the policy does so also </li></ul></ul></ul><ul><ul><ul><li>New owner finish personal details also new mortgagees </li></ul></ul></ul><ul><ul><ul><li>The insurer formally consents to change by issuing an endorsement to this effect. The document used to effect the change is called a Transfer and Consent. Any premium adjustment is normally made between the old insurer when property sold </li></ul></ul></ul><ul><ul><li>Assignment of Proceeds May Occur Without Consent </li></ul></ul><ul><ul><ul><li>Insureds may always assign the proceeds of policies without the consent of their insurers </li></ul></ul></ul><ul><ul><ul><li>Any money that may become due to the insured as a claim payment may assign over to another party without the insuer’s permission </li></ul></ul></ul><ul><ul><ul><li>Return premium too </li></ul></ul></ul>
  58. 58. INSURANCE PRACTICES <ul><li>Termination of Insurance Contracts </li></ul><ul><ul><li>Statutory Conditions sets out the terms of cancellation for </li></ul></ul><ul><ul><ul><li>fire (and related policies) </li></ul></ul></ul><ul><ul><ul><li>automobile policies </li></ul></ul></ul><ul><ul><ul><li>accident and sickness policies </li></ul></ul></ul><ul><ul><li>Insurer can only cancel within a set number of days </li></ul></ul><ul><ul><ul><li>Notice in writing delivered by registered mail OR hand delivered </li></ul></ul></ul><ul><ul><ul><li>insurer must return pro rata premium (full unearned premium) </li></ul></ul></ul><ul><ul><ul><li>Prop rata cancellation is cancellation of a policy when the return premium paid is the full proportionate [ 相称的 ] part due for the unexpired term </li></ul></ul></ul><ul><ul><li>Insured can cancel any time </li></ul></ul><ul><ul><ul><li>refund calculated on a “ short rate ” basis unearned premium less and administration fee </li></ul></ul></ul><ul><ul><ul><li>Short Rate or Short Date cancellation is applicable when the policyholder cancels before a policy reaches its natural expiration. The insurer pays a return premium less than the proportionate or pro rata that is still unearned. The difference between the actual unearned portion of the premium and the amount refunded is used to defer administration expenses insured in the early cancellation </li></ul></ul></ul><ul><ul><li>Cancel Policy or Void Policy </li></ul></ul><ul><ul><ul><li>The insurer could have declared its position that the misrepresentation or nondisclosure made the policy void from the beginning </li></ul></ul></ul><ul><ul><ul><li>To avoid a policy means to treat it as it never existed </li></ul></ul></ul><ul><ul><ul><li>Nondisclosure or concealment means the failure to disclose a material fact misrepresentation </li></ul></ul></ul>
  59. 59. INSURANCE PRACTICES <ul><li>Renewal </li></ul><ul><ul><li>insurer will “review” the renewal and notify the broker of renewal </li></ul></ul><ul><ul><li>renewals may be </li></ul></ul><ul><ul><ul><li>“ automatic” OR </li></ul></ul></ul><ul><ul><ul><li>based on instructions from the broker </li></ul></ul></ul><ul><ul><li>Insuers may send their agents a renewal list </li></ul></ul><ul><ul><li>Wait a renewal insurrections </li></ul></ul><ul><ul><li>If no instructions are received by expiry date the policies are allowed to lapse </li></ul></ul>
  60. 60. HOW TO READ POLICY <ul><li>Who is covered? </li></ul><ul><li>What property is covered? </li></ul><ul><ul><li>Often there is a definition in the policy </li></ul></ul><ul><ul><li>There may be a specific description of the property covered </li></ul></ul><ul><li>What perils are covered? </li></ul><ul><li>Where doe the coverage apply? </li></ul><ul><li>What are the exclusions? </li></ul><ul><li>What are the extensions of coverage? </li></ul><ul><li>What are the conditions of coverage? </li></ul><ul><ul><li>What must the insured do to have coverage continue? </li></ul></ul><ul><ul><li>What must be done if there is a loss? </li></ul></ul><ul><ul><li>What must be done to recover a loss? </li></ul></ul><ul><li>Is there anything else to consider? </li></ul>
  61. 61. 5. AUTOMOBILE INSURANCE <ul><li>Development of Automobile Insurance </li></ul><ul><li>Legislation and forms </li></ul><ul><li>Automobile applications </li></ul><ul><li>Rating </li></ul><ul><li>Facility Association </li></ul>
  62. 62. DEVELOPMENT OF AUTOMOBILE INSURANCE <ul><li>PLAINTIFF: One who brings a lawsuit </li></ul><ul><li>DEFENDANT: One who is named in a lawsuit </li></ul><ul><li>Standard Automobile Policy (S.P.F / Q.P.F.1) is basic policy form in most provinces </li></ul><ul><li>Ontario form: O.P.F.1 </li></ul><ul><li>As most people became automobile owners and costs/incidence of accidents rose, most provincial governments implemented compulsory auto insurance/minimum coverage limits </li></ul><ul><ul><li>Public Policy Impact </li></ul></ul><ul><li>Some provinces implemented coverage changes </li></ul><ul><ul><li>“ No Fault” coverage- reduce legal costs (ONT.) </li></ul></ul><ul><ul><li>Compulsory government coverage for injuries (QUE.) </li></ul></ul>
  64. 64. DEVELOPMENT OF AUTOMOBILE INSURANCE <ul><li>1 = Albert, New Brunswick, Newfoundland, Northwest Territories, Nova Scotia, Nunavut, Ontario, PEI, Yukon </li></ul><ul><ul><li>Insurances write both direct and through independent agents/brokers </li></ul></ul><ul><li>2 = British Columbia, Manitoba and Saskatchewan </li></ul><ul><ul><li>Compulsory government insurance plans provide the basic coverages </li></ul></ul><ul><ul><li>Private industry is permitted to offer certain additional coverages and specialty policies </li></ul></ul><ul><li>3 = Quebec </li></ul><ul><ul><li>Certain compulsory coverages are provided only by the government plan </li></ul></ul><ul><ul><li>Certain compulsory coverages are provided only by private industry </li></ul></ul><ul><li>Ontario, Quebec, New Brunswick, Manitoba, Saskatchewan have no-fault plans </li></ul>
  65. 65. LEGISLATION AND FORMS <ul><li>The wording of policy form is governed by provincial regulation in each province (except Saskatchewan) </li></ul><ul><li>No insurer shall use a form of application, policy, endorsement or renewal or continuation certificate in respect of automobile insurance other than a form approved by the Superintendent </li></ul><ul><li>Government insurance plans </li></ul><ul><ul><li>No policy issued for the basic compulsory coverages. The vehicle registration and/or operator’s license as evidence of a contract of insurance </li></ul></ul><ul><ul><li>All extension policy forms and endorsements issued by private insurers be of a standard and approved form </li></ul></ul><ul><ul><li>Extension Policies provide coverage over and above that provided by the basic compulsory government plans. They are often used to increase limits and/or to reduce deductibles . They may be issued by a government insurer or by private insurers </li></ul></ul>
  66. 66. AUTOMOBILE APPLICATIONS <ul><li>Application form is approved by government </li></ul><ul><li>Writing and signed application not required for insurer to obtain before policy issued </li></ul><ul><li>“ True” copy of the application must be signed by the applicant (required by Insurance Acts) </li></ul><ul><li>Serves 3 purposes: </li></ul><ul><ul><li>Identifies particulars of the contract </li></ul></ul><ul><ul><ul><li>Applicant/Insurer /Agent information </li></ul></ul></ul><ul><ul><ul><li>Agreements of applicant </li></ul></ul></ul><ul><ul><li>Confirms details of coverage </li></ul></ul><ul><ul><ul><li>Policy Period, Coverages, Premiums, Endorsements </li></ul></ul></ul><ul><ul><li>Documents information required to underwrite/rate the automobile exposure </li></ul></ul><ul><ul><ul><li>Utmost [ 最大的 ] Good Faith! </li></ul></ul></ul>
  67. 67. Particulars of the Contract <ul><li>Identification of Applicant </li></ul><ul><ul><li>Also required for underwriting, e.g. Driver Abstract (MVR) </li></ul></ul><ul><ul><li>A Driver Abstract is a record of an individual’s driving convictions which insurers may obtain from provincial Motor Vehicle departments </li></ul></ul><ul><li>Policy Period </li></ul><ul><ul><li>Coverage begins at the time of day stated and ended at 12:01 am local time </li></ul></ul><ul><ul><li>In Quebec, it begins and ends at 12:01 Standard Time </li></ul></ul><ul><li>Particulars of the described automobile </li></ul><ul><ul><li>Insurable Interests </li></ul></ul><ul><ul><ul><li>Mortgage, lien or encumbrance [ 抵押担保 ] </li></ul></ul></ul><ul><li>Coverages </li></ul><ul><ul><li>Third Party Liability will pay all sums for which the insured is legally liable for bodily injury and property damage to thirty parties resulting from a motor vehicle accident </li></ul></ul><ul><ul><li>Accident Benefits include medical payments, death and total disability benefits without any regard to fault. It also includes uninsured motorist cover in some provinces; in others this is a separate section </li></ul></ul><ul><ul><li>Own Damage cover pays for loss of or damage to the insured automobile. Four specific choices are usually available </li></ul></ul><ul><ul><li>Uninsured Motorists Coverage </li></ul></ul><ul><li>Use of the Vehicle </li></ul><ul><ul><li>Pleasure or business </li></ul></ul><ul><ul><li>Mileage annually </li></ul></ul><ul><li>Drivers </li></ul><ul><li>Names of all drivers </li></ul><ul><li>Years licensed, driver training course, percentage of use of each vehicle </li></ul>
  68. 68. Particulars of the Contract <ul><li>Impairments [ 障碍 ] (not in Ontario) </li></ul><ul><li>Past license and insurance experience </li></ul><ul><ul><li>Driving convictions in 3 years </li></ul></ul><ul><ul><li>Suspensions or cancellations in past 6 years (some provinces is 3 years) </li></ul></ul><ul><li>Particulars of all accidents and claims of the applicant arising out of the ownership or operation of any automobile within the past 6 years are requested. </li></ul><ul><li>Registered owner and actual owner </li></ul><ul><ul><li>The person shall not be deemed to be the owner of an automobile for the reason only that ha has a lien on the automobile or has legal title to the automobile as security </li></ul></ul><ul><li>Signature of an application </li></ul><ul><li>Correct and honest information </li></ul><ul><ul><li>Utmost good faith implies a standard of honesty greater than that usually required in most ordinary [ 普通的 ] commercial contract </li></ul></ul><ul><ul><li>Penalty clause </li></ul></ul><ul><li>Statement in all provinces except Quebec </li></ul><ul><ul><li>Reports containing personal, credit, factual, investigative or driver record information may be sought in connection with this application for insurance or renewal, extension or variation thereof. </li></ul></ul>
  69. 69. Summary of Application <ul><li>Identifies the parties to the contract and the coverages </li></ul><ul><li>Identifies the vehicles involved and their use </li></ul><ul><li>Identifies the drivers and their experience </li></ul><ul><li>Obtains background information on past insurance, license and driver records, and claims history </li></ul><ul><li>States the warning about misrepresentations or fraudulent dealings pertaining to the application or to claims </li></ul><ul><li>Advice applicant that personal information may be sought relating to the application </li></ul>
  70. 70. Automobile Rating <ul><li>What is a fair and equitable Rating System? </li></ul><ul><ul><li>The premiums of the many pay for the losses of the few </li></ul></ul><ul><ul><li>The premium should be commensurate [ 相当的 ] with the risk </li></ul></ul><ul><ul><li>Mandatory Auto Insurance should be affordable for all </li></ul></ul><ul><ul><li>Rating criteria should be non-discriminatory [ 区别对待的 ] </li></ul></ul>
  71. 71. Rating Criteria- Drivers <ul><li>Age, gender and marital status of applicant </li></ul><ul><ul><li>Statistical correlation [ 相互的关系 ] between loss experience and these factors (e.g. young male drivers) </li></ul></ul><ul><ul><li>Some provinces no longer allow these factors to be considered in rating while others still do </li></ul></ul><ul><li>Driving experience </li></ul><ul><ul><li>Years Licensed </li></ul></ul><ul><ul><li>Training course (3 years credit) </li></ul></ul><ul><ul><li>Newcomer to Canada? </li></ul></ul><ul><li>Driving record </li></ul><ul><ul><li>Accidents & Convictions in pat 6 years </li></ul></ul><ul><ul><li>Previously insured </li></ul></ul><ul><ul><li>Claims in past 6 years </li></ul></ul><ul><li>Other regular drivers </li></ul><ul><ul><li>Other drivers </li></ul></ul><ul><ul><li>Percentage of use by each person per vehicle </li></ul></ul><ul><li>Territory and distance driven annually </li></ul><ul><ul><li>Working distance </li></ul></ul><ul><ul><li>Rating territory </li></ul></ul><ul><ul><ul><li>Rear-end collisions in urban </li></ul></ul></ul><ul><ul><ul><li>High speed, multiple vehicle pile-ups, death, heavy damage, loss in high way </li></ul></ul></ul><ul><ul><ul><li>Single vehicle accident in country road </li></ul></ul></ul><ul><ul><ul><li>Windshield and light in gravel road </li></ul></ul></ul><ul><ul><ul><li>Fire in remote </li></ul></ul></ul><ul><ul><ul><li>Stealing in city </li></ul></ul></ul><ul><li>Vehicle usage </li></ul><ul><ul><li>Business, taxis, commercial </li></ul></ul><ul><li>Vehicle description </li></ul><ul><li>Year, make, serial number </li></ul><ul><li>Coverage </li></ul>
  72. 72. Typical Automobile Rating <ul><li>Territory: 14 (Kitchener/Waterloo) </li></ul><ul><ul><li>All Coverages </li></ul></ul><ul><li>Type of Use: 01 (Pleasure, under 10,000 km annually, no driving to/from work) </li></ul><ul><ul><li>TPL, AB, Vehicle Damage </li></ul></ul><ul><li>Driving Record: 6 (Six years accident free) </li></ul><ul><ul><li>TPL, AB, Collision/All Perils </li></ul></ul><ul><li>Vehicle Rate Group: 30 (Based on age, ,make, model of vehicle </li></ul><ul><ul><li>AB, Collision/All Perils, Comprehensive </li></ul></ul>
  73. 73. FACILITY ASSOCIATION <ul><li>Unincorporated, non-profit association of insurers </li></ul><ul><ul><li>Unincorporated, non-profit association of insurers </li></ul></ul><ul><li>“ Market of Last Resort” for those who cannot obtain coverage from standard auto insurers </li></ul><ul><ul><li>Must be declined by other companies (“Residual Market”) </li></ul></ul><ul><li>“ Servicing Carriers” administer policies & claims </li></ul><ul><ul><li>Funded by FA members </li></ul></ul>
  74. 74. 6. THE AUTOMOBILE POLICY – THIRD PARTY LIABILITY <ul><li>The Automobile policy </li></ul><ul><li>Third party liability </li></ul><ul><ul><li>Need for adequate third party liability insurance </li></ul></ul><ul><li>Motor vehicle Liability cards </li></ul><ul><li>Third party coverage </li></ul><ul><ul><li>Who is covered </li></ul></ul><ul><ul><li>What is covered </li></ul></ul><ul><ul><li>Additional agreements of insurer </li></ul></ul><ul><ul><li>What is not covered </li></ul></ul><ul><ul><li>Agreements of insured </li></ul></ul><ul><ul><li>Quebec and Ontario </li></ul></ul><ul><li>Application of third party liability insurance </li></ul>
  75. 75. THE AUTOMOBILE POLICY <ul><li>Standard Automobile Policy (Owner’s Form) is used in Albert, New Brunswick, Newfoundland, Northwest Territories, Nova Scotia, PEI and Yukon </li></ul><ul><li>Ontario uses OAP1 </li></ul><ul><li>Quebec uses QPF1 </li></ul><ul><li>Govt. plans deliver much the same coverage as private insurers </li></ul><ul><li>The Owner Form may also be used for vehicles not licensed under Highway Traffic Acts in provinces having government automobile insurance plans </li></ul><ul><li>There may be differences between the policies as to how the insured is indemnified and the maximum amounts of coverage in each section </li></ul>
  76. 76. THE AUTOMOBILE POLICY Albert Ontario Atlantic provinces Quebec Included under Section B Section 5 Section D Government insurance Uninsured Motorist Coverage New Brunswick Ontario Section A-1 Section 6 Direct Compensation – Property Damage All provinces expect Ontario and Quebec Ontario Quebec Section C Section 7 Section B Loss of or Damage to Insured Automobile All provinces expect Ontario and Quebec Ontario Quebec Section B Section 4 Government insurance Accident Benefits All provinces except Ontario Ontario Section A Section 3 Third Party Liability Province Policy Section Coverage
  77. 77. The Legal Environment <ul><li>“ Insured Person” insured in policy, any one drives car with consent, any one opeartes a part of car (door window …) </li></ul><ul><li>Third Party is people who claim against a policy but who are not the insured or insurer </li></ul><ul><li>Minimum limits are the smallest amount of Third Party Liability insurance that be purchased in any Canadian jurisdiction [ 管辖区 ] </li></ul><ul><li>Priorities of payment how much of the minimum policy limit will apply to bodily injury claims and how much will apply to property damage claims in situations where there is not enough insurance to cover all the combined claims </li></ul><ul><li>Property Damage (P.D) refers to damage to the property of others, not the insured’s own property </li></ul><ul><li>Bodily Injury (B.I) refers to any claims resulting from injury to or death of persons other than the insured as defined in the policy </li></ul><ul><li>Ordinary Negligence [ 一般过失 ] is either the failure to do what a reasonable and prudent person would do in a given situation or doing what such a person would not do in a given situation </li></ul><ul><ul><li>the doing of something a “reasonable” person would not do, or </li></ul></ul><ul><ul><li>the not doing of something that a “reasonable” person would do in a similar circumstance </li></ul></ul><ul><li>Gross Negligence [ 重大疏忽 ] is reckless[ 鲁莽的 ], wanton[ 不负责任的 ] and wilful [ 特意的 ] misconduct where the standard of due care of a reasonable and prudent person has been ignored by such a shockingly wide margin that it reflects an indifference to the natural and probable consequences as to almost amount to an intentional act. </li></ul><ul><ul><li>Reckless, wanton & willful misconduct </li></ul></ul><ul><ul><li>Reasonable standard of care ignored </li></ul></ul><ul><li>Onus [ 责任 ] of proof means burden[ 义务 ] of proof. The provincial Highway Traffic Acts state who must prove negligence in specific automobile accident situations </li></ul><ul><ul><li>Burden of proving negligence is USUALLY on the Plaintiff </li></ul></ul>
  78. 78. The Legal Environment <ul><li>LIABILITY The chance of loss arising from an individual’s legal obligation to pay damages because of bodily injury or death of another person (BI) or because of damage to another’s property (PD) </li></ul><ul><li>INDEMNIFY An insurer must “make good” the amount of the insured’s financial loss... </li></ul><ul><ul><li>no more and no less </li></ul></ul><ul><ul><li>Must put a dollar value on “intangible” losses- Bodily Injury </li></ul></ul><ul><li>Common Law (all provinces other than Quebec): </li></ul><ul><ul><li>Courts determine negligence (“reasonable person’s actions”) and indemnity (damages) </li></ul></ul><ul><ul><li>Base decisions on court precedents[ 先例 ] </li></ul></ul><ul><li>Civil Code (Quebec) </li></ul><ul><ul><li>Base decisions on codified[ 法典 ] (written) law </li></ul></ul><ul><li>Parties to a Legal Action: </li></ul><ul><ul><li>PLAINTIFF: </li></ul></ul><ul><ul><ul><li>One who brings a lawsuit (claims negligence) </li></ul></ul></ul><ul><ul><li>DEFENDANT: </li></ul></ul><ul><ul><ul><li>One who is named in a lawsuit </li></ul></ul></ul><ul><ul><li>ONUS OF PROOF: </li></ul></ul><ul><ul><ul><li>Burden of proving negligence is USUALLY on the Plaintiff </li></ul></ul></ul>
  79. 79. Onus of Proof- Automobile <ul><li>If the accident is between two vehicles the onus is on? Who alleges </li></ul><ul><li>If the accident is between a vehicle and a pedestrian the onus is on? driver </li></ul><ul><li>How does Newfoundland differ? Claimant (pedestrian) </li></ul>
  80. 80. The Automobile Policy – Third Party Liability <ul><li>Need for adequate[ 足够的 ] insurance </li></ul><ul><ul><li>Claimants have a direct right of action against the insurer to have insurance money under the policy paid directly to them. </li></ul></ul><ul><ul><li>Claimants are ensured of being able to share in the money payable under a motor vehicle liability policy. </li></ul></ul><ul><li>Absolute Liability Law </li></ul><ul><ul><li>Innocent third parties must be protected </li></ul></ul><ul><ul><li>The policy will pay up to the minimum limits of the province – even if the insured has violated a condition of the policy </li></ul></ul><ul><ul><li>The insurer can recover from the responsible insured. </li></ul></ul>
  81. 81. The Automobile Policy – Third Party Liability <ul><li>Absolute Liability Law </li></ul><ul><ul><li>Innocent third parties must be protected </li></ul></ul><ul><ul><li>The policy will pay up to the minimum limits of the province – even if the insured has violated a condition of the policy </li></ul></ul><ul><ul><li>The insurer can recover from the responsible insured </li></ul></ul>
  82. 82. MOTO VEHICLE LIABILITY INSURANCE CARDS <ul><li>A proof of automobile third liability insurance </li></ul><ul><li>What information is on the motor vehicle liability card? </li></ul><ul><ul><li>Name and address of insured </li></ul></ul><ul><ul><li>Name and address of insurer </li></ul></ul><ul><ul><li>Name and address of agent/broker </li></ul></ul><ul><ul><li>Description of insured vehicle </li></ul></ul><ul><ul><li>Policy number </li></ul></ul><ul><ul><li>Effective date and term of the policy </li></ul></ul><ul><li>Types of Liability Card: </li></ul><ul><ul><li>Temporary 30 days </li></ul></ul><ul><ul><li>Permanent </li></ul></ul><ul><ul><li>Endorsement </li></ul></ul>
  83. 83. THIRD PARTY LIABILITY COVERAGE <ul><li>Who is Covered </li></ul><ul><ul><li>The named insured </li></ul></ul><ul><ul><li>Anyone else who, with consent [ 同意 ] of the named insured, personally drives the automobile insured </li></ul></ul><ul><ul><li>Anyone who, with consent, operates a part of the automobile, as for example a door, window or hood </li></ul></ul><ul><li>What is Covered </li></ul><ul><ul><li>Provides protection for liability imposed by law upon the insured for bodily injury or death of any persons or damage to their property arising out of the ownership, use or operation of an automobile. </li></ul></ul><ul><ul><ul><li>Ordinary Negligence & Gross Negligence </li></ul></ul></ul><ul><ul><li>Generally speaking liability arises out the application of the provincial highway traffic act. </li></ul></ul><ul><ul><li>Subject to limitations </li></ul></ul><ul><ul><ul><li>E.g. Intentional Acts, Illegal Operators </li></ul></ul></ul><ul><li>What is Not Covered </li></ul><ul><ul><li>Damage to property carried in or on the automobile </li></ul></ul><ul><ul><li>Damage to property owned or rented by the insured or in the care custody or control of the insured. </li></ul></ul>
  84. 84. THIRD PARTY LIABILITY COVERAGE <ul><li>Additional Agreements of Insurer </li></ul><ul><ul><li>Investigate, negotiate and settle claims </li></ul></ul><ul><ul><li>Defend any civil action even if groundless </li></ul></ul><ul><ul><li>Pay court costs taxed against the insured and pay interest on “insured portion” of judgment </li></ul></ul><ul><ul><li>Reimburse the insured for out of pocket expenses for medical aid </li></ul></ul><ul><ul><li>Pay up to the minimum limits of the jurisdiction, within Canada, where the accident occurs </li></ul></ul><ul><ul><li>Not use a defence that is not available in the jurisdiction where the accident occurs </li></ul></ul>
  85. 85. THIRD PARTY LIABILITY COVERAGE <ul><li>Agreements of Insured </li></ul><ul><ul><li>The insurer is irrevocably [ 不能撤回地 ] appointed the insured’s attorney ( the insured must co-operate with the insurer and not prejudice [ 损害 ] the claim) </li></ul></ul><ul><ul><li>To reimburse the insurer for any amounts the insurer had to pay due to the absolute liability law </li></ul></ul>
  86. 86. Provincial Coverage Variations Third Party Liability <ul><li>Quebec, Ontario & New Brunswick </li></ul><ul><ul><li>These provinces plus Manitoba have passed legislation that prohibits or severely limits the right to sue due to bodily injuries </li></ul></ul><ul><ul><li>Instead they have devised schedules of no fault benefits which are paid by the injured parties own insurers </li></ul></ul><ul><ul><li>The rationale is that legal costs are reduced and injured parties get immediate medical attention including rehabilitation as well as provisions for lost income and other additional expenses </li></ul></ul>
  87. 87. Provincial Coverage Variations Third Party Liability <ul><li>Quebec </li></ul><ul><ul><li>No suits permitted for bodily injury </li></ul></ul><ul><ul><li>Recover from Govt. plan </li></ul></ul><ul><ul><li>Can purchase higher limits from private insurers </li></ul></ul><ul><ul><li>For property damage paid by own insurer for damage to the degree that the other person is at fault </li></ul></ul><ul><li>Ontario </li></ul><ul><ul><li>No suits permitted for bodily injury unless over The Threshold [ 门槛 ] – applies to non-pecuniary damages only </li></ul></ul><ul><ul><ul><li>The injured person has died </li></ul></ul></ul><ul><ul><ul><li>Has sustained[ 持久的 ] permanent serious disfigurement or permanent serious impairment of an important physical, mental or psychological function </li></ul></ul></ul><ul><ul><li>Recover from own accident benefits </li></ul></ul><ul><ul><li>Can sue for economic loss </li></ul></ul><ul><ul><li>Vehicle damage is covered under direct compensation property damage (DCPD) </li></ul></ul><ul><ul><ul><li>Also coverage for property in the vehicle </li></ul></ul></ul><ul><ul><li>The insured only recovers from their own policy. </li></ul></ul><ul><ul><li>To the extent that they are not at fault they claim under DCPD </li></ul></ul><ul><ul><ul><li>Fault Determination Rules- Insurance Act </li></ul></ul></ul><ul><li>New Brunswick </li></ul><ul><ul><li>Liability suits allowed for non-pecuniary losses </li></ul></ul><ul><ul><li>Minor injuries subject to a cap. </li></ul></ul><ul><ul><li>Suits permitted for economic loss </li></ul></ul><ul><ul><li>DCPD same as Ontario </li></ul></ul>
  88. 88. APPLICATION OF THIRD PARTY INSURANCE <ul><li>Situation 1 </li></ul><ul><li>Situation 2 </li></ul><ul><li>Situation 3 </li></ul><ul><li>Situation 4 </li></ul><ul><li>Situation 5 </li></ul><ul><li>Situation 6 </li></ul>
  89. 89. 7. AUTOMOBILE ACCIDENT BENEFITS; LOSE OF OR DAMAGE TO THE INSURE AUTOMOBILE <ul><li>Accident benefits </li></ul><ul><ul><li>Coverage </li></ul></ul><ul><ul><ul><li>Medical, rehabilitation and funeral expenses </li></ul></ul></ul><ul><ul><ul><li>Death benefits and loss of income payment </li></ul></ul></ul><ul><ul><ul><li>Application of coverage </li></ul></ul></ul><ul><ul><ul><li>Family protection endorsement (underinsured motorist protection) </li></ul></ul></ul><ul><li>Uninsured motorist protection </li></ul><ul><li>Loss of or damage to the insured automobile </li></ul><ul><ul><li>Coverage </li></ul></ul><ul><ul><li>Exclusions </li></ul></ul><ul><ul><li>Additional agreements </li></ul></ul><ul><li>General provisions, definitions and exclusions </li></ul><ul><li>Statutory Conditions/Quebec General Conditions </li></ul><ul><li>Recreational vehicle </li></ul>
  90. 90. ACCIDENT BENEFITS <ul><li>Third Party Liability coverage responds to legal liability claims </li></ul><ul><ul><li>Courts decide fault, damages </li></ul></ul><ul><ul><li>Adversarial System; decisions & payments can take years </li></ul></ul><ul><ul><li>Persons injured in accidents when they were at fault or where there was no other motorist were left to cope with huge medical bills and no means of support. </li></ul></ul><ul><li>TORT : </li></ul><ul><ul><li>Breach of a duty imposed by law; a civil wrong[ 一种 ( 法定 的 ) 职责 的 疏漏 ] </li></ul></ul><ul><li>TORTFEASOR [ 犯侵权行为者 ]: </li></ul><ul><ul><li>Wrongdoer; party responsible for the occurrence; the negligent party </li></ul></ul><ul><li>NO FAULT: </li></ul><ul><ul><li>Claims paid without reference to who was at fault </li></ul></ul><ul><li>Accident benefits provide speedy relief to enable people to carry on </li></ul><ul><ul><li>Payable by own insurer regardless of negligence, legal liability or fault for accident </li></ul></ul><ul><li>Originally designed to provide a nominal benefit for those injured or killed in an automobile accident </li></ul><ul><li>Developed first as an optional medical expense coverage </li></ul><ul><li>Insured person does not lose their right to sue responsible party (exc. Que. & Manitoba) </li></ul><ul><ul><li>Can recover over and above benefits paid </li></ul></ul><ul><ul><li>Subject to “Threshold” in Ontario </li></ul></ul><ul><ul><li>( no-fault benefit schedule ) </li></ul></ul><ul><li>A no-fault benefit schedule is a schedule stating the benefits and amounts that will be paid under the policy. These are regulated by statute[ 法规 ] </li></ul><ul><li>Collateral benefits are any sources of entitlement outside of the automobile policy </li></ul>
  91. 91. Accident Benefits- Limits <ul><li>NO FAULT BENEFITS SCHEDULE: </li></ul><ul><ul><li>Regulated by Statute in some provinces </li></ul></ul><ul><ul><ul><li>Ontario- Statutory[ 法定 ] Accident Benefits Schedule (SABS) </li></ul></ul></ul><ul><ul><ul><li>States benefits payable & amounts </li></ul></ul></ul><ul><ul><li>In some provinces, Accident Benefits limits stated within the policy </li></ul></ul><ul><li>COLLATERAL BENEFITS: </li></ul><ul><ul><li>Sources of entitlement outside automobile policy/no fault benefits schedule </li></ul></ul><ul><ul><ul><li>E.g. Private health insurance, WSIB, etc. </li></ul></ul></ul><ul><ul><li>Provinces vary on how these benefits affect payment under Accident Benefits coverage </li></ul></ul>
  92. 92. Accident Benefits- Who is Insured? <ul><li>Insured person includes: </li></ul><ul><ul><li>Named insured </li></ul></ul><ul><ul><li>Spouse </li></ul></ul><ul><ul><li>Dependants of either </li></ul></ul><ul><ul><li>Any driver named in the policy </li></ul></ul><ul><ul><li>Any person involved in the accident </li></ul></ul>
  93. 93. Accident Benefits- Coverage <ul><li>Medical, rehabilitation and Funeral Expenses </li></ul><ul><ul><li>The insurer agrees to reimburse each insured person for out-of-pocket medical and rehabilitation expenses, up to a specified limit </li></ul></ul><ul><ul><li>Out of pocket expenses that are reasonable, necessary and incurred within a specified time period </li></ul></ul><ul><ul><li>Medical, surgical, dental, ambulance, hospital, nursing, rehabilitation and funeral benefits </li></ul></ul><ul><ul><li>Expenses recoverable under other private or government medical, hospital, surgical or dental insurance plans or which are excess of the policy limits are excluded . </li></ul></ul><ul><li>Death & Dismemberment </li></ul><ul><ul><li>Persons in accidents or their dependents will receive some benefits without need for litigation </li></ul></ul><ul><ul><ul><li>Benefits paid in lump sum amounts to insured or qualified dependents (P. 7) </li></ul></ul></ul><ul><ul><li>An injured party retains the right of action against a responsible third party to collect damage in excess of the limit allowed under this coverage (except where this right is removed) </li></ul></ul><ul><li>Loss of Income Payments </li></ul><ul><ul><li>Weekly income benefits for loss of income due to injury/disability related to auto accident </li></ul></ul><ul><ul><ul><li>Maximum amounts payable per week </li></ul></ul></ul><ul><ul><ul><li>Waiting period is common </li></ul></ul></ul><ul><ul><ul><li>Maximum time limits on payment </li></ul></ul></ul><ul><ul><li>Contract of Indemnity </li></ul></ul><ul><ul><ul><li>Benefit payable based on previous occupation/income </li></ul></ul></ul><ul><ul><li>The amount of the benefit paid will be based on </li></ul></ul><ul><ul><ul><li>The amount insured </li></ul></ul></ul><ul><ul><ul><ul><li>Percentage of gross weekly earnings subject to a maximum limit per week </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Some province stipulate [ 规定 ] a minimum amount </li></ul></ul></ul></ul><ul><ul><ul><li>The money value of the lost time of the insured person </li></ul></ul></ul><ul><ul><ul><ul><li>More than one insurer (group accident in