The Insurance Machine

Table of Contents

 

Table of Contents

 

Welcome

 

 

 

Chapter One:  Insurers

Page 1

Government Sponsorship

1

Private Sponsorship

1

Private Insurers

2

    Stock Companies

2

    Financial Soundness

3

          Capital Stock, surplus, surplus to policyholders

3

Lloyds of London

5

    Transacting Lloyds’ of London Business

7

          Excess business, surplus insurance

8

Self-Insurance

8

          Excess loss, share basis

9

Captive Insurance Companies

10

    Risk-Retention Groups (RRG)

11

Alternatives

12

          Compensating Balance Plans, Paid-loss retro

12

 

 

Chapter Two: Controlling Loss

13

Risk/Chance of Loss

13

          Loss frequency, loss-severity

13

Loss Control

14

Engineering Approaches

15

Human Approaches

16

Prevention

16

Risk Awareness

19

Application of Loss Prevention

21

    Pre-Contact

21

    Contact

22

    Post-Contact

22

 

 

Chapter Three:  Underwriting & Reinsurance

23

Pricing

23

          Adverse Selection, actuarial equity

24

Selective Underwriting

26

    The First Step in the Selection Process

26

    Level of Risk

26

          Standard risk, Preferred risk, Sub-standard risk

27

    Post-Selection

27

Adverse Selection

28

Moral Hazard

28

Morale Hazard

29

    Example

29

Competing in the Marketplace

29

Redlining

30

    Example

30

The Underwriting Cycle

30

    Example

31

What are we Insuring Against?

31

The Economic Burden of Risk

33

Types of Risk

34

Determining degrees of Risk

34

Probability of Loss

35

The Law of Large Numbers

35

Risk Information

36

    The Insurer’s View & The Consumer’s View

36

          Line limits

37

Deductible Clauses

38

Reinsurance

39

    Why is Reinsurance Used?

39

Pro Rata & Excess of Loss

41

    Pro Rata

41

    Excess of Loss

41

Shopping for Reinsurance

42

Brokers

43

What Else is Available?

44

 

 

Chapter Four: Ratemaking

45

What is Ratemaking?

45

A Matter of Class

46

Territory Risk Groupings

47

    Special Aspects of Ratemaking

47

Catastrophes

48

Minimum Premiums

48

Merit Rating

48

Prospective Experience Rating

49

Retrospective Experience Rating

50

Fire Insurance

51

Construction

51

Occupancy

52

Exposure

52

Protection

52

Where is the Structure Located?

53

Time of Loss

53

Following Proper Procedures Essential

53

          Schedule-rated risks

55

 

 

Chapter Five: Insurance Regulation

56

Do We Need So Many Hoops?

56

How Do These Traditions Come About?

60

    Paul versus Virginia

60

How Does State Regulation Work?

61

    The Commissioner’s Primary Powers Include …

64

Insurance: A Regulated Business

65

What Do the States Do?

65

Insurance Classes

66

Taxation

66

Regulating Agents & Brokers

69

Premium Rates

70

          Prior Approval, Modified Prior Approval

71

          File-an-Use, Open Competition

72

Insurer Assets

73

 

 

Chapter Six: Terrorism Risk Insurance Act

75

Defining “Act of Terrorism”

75

TRIA

75

President Bush Signs the Act

77

The Role of Terrorism Insurance

77

Policy Restrictions

79

Business Interruption Insurance

79

    Example

80

Workers Compensation & Other Coverage

80

Coverage Under TRIA

81

 

 

Chapter Seven:  Ethics

86

“Agent, Protect Thyself”

86

Why Would an Agent be Sued?

88

What Are the Agent’s Professional Responsibilities?

90

    Example

91

E & O Insurance

91

    Claims-Made Versus Occurrence Policies

92

    Example

92

On the Personal Side of Ethics

93

    Example

94

Valuing Human Relationships

95

Truly Ethical or Simply Ethical for Show?

95

    Example

96

Justice for All

98

Objectivist Ethics: Preserve Life

99

What is Really Ethical?

102

Just the Facts

102

          Cultural Relativism, Moral Reformers

103

          Moral Skepticism

105

Viewing from a Different Angle

107

Mores

110

    Example

110

Relativism

111

“Ought Implies Can”

112

    Example

114

Personal Conditioning

115

    Example

115

    Example

116

    Example

116

    Example

117

    Example

118

The Legal System

119

    Example

120

    Example

121

Determining Right From Wrong

122

          Twisting & Churning

124

Ethics & Premiums

125

Ethics & Redlining

127

 

 

United Insurance Educators, Inc.

8213 – 352nd Street East

Eatonville, WA 98328

 

(800) 735-1155

 

www.uiece.com