All of them are multiple choice questions Part A of the Exam are direct questions Part B of the Exam are Case Studies All the chapters are equally important 70% is the pass percentage 70-79% - Grade Pass 80-89% - Grade Good >=90 - Grade Excellent Immediate Result
Property and Liability Insurance Principles 5/28/2008 4:54 PM New Brand FMT-P2_28May08 2 Segment A 1) Insurance: What is it? 2) Who provides Insurance and How is it Regulated 3) How is the Financial Performance of Insurers Measured? Segment B 4) Marketing 5) Underwriting 6) Claims Segment C 7) Insurance Contracts 8) Property Loss Exposures and Policy Provisions 9) Liability Loss Exposures and Policy Provisions 10) Managing Loss Exposures: Risk Management
Property and Liability Insurance Principles 5/28/2008 4:54 PM New Brand FMT-P2_28May08 3
A contract or device for transferring risk from a person, business or organization to an insurance company that agrees, in exchange for a premium, to pay for losses through an accumulation of premium.
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 4 Insurance has three components
A Transfer Mechanism , in which one party - the insured (a person, a business, or an organization whose property, life, or legal liability is covered by an insurance policy) - transfers the chance of financial loss to another party - the insurance company, or the insurer.
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 5 A Business System , which includes various operations that must be conducted in a way that generates sufficient income to pay claims and provide a reasonable profit for its owners. Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 6 A Contract , between the insured and insurer that states what potential costs of loss is transferred to the insurer and expresses the insurers promise to pay for those losses in consideration for a stated premium.
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 7 Insurance as a Transfer System Insurance is a system of both transferring and sharing the costs of losses.
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 8 Insurance as a Transfer System The law of large numbers is a mathematical principle stating that as the number of similar but independent exposure units increases, the relative accuracy of predictions about future outcomes (losses) based on these exposure units also increases.
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 9 An Exposure Unit is a measure of loss potential and is used in pricing insurance
Types of Loss Exposures Property loss exposures Liability loss exposures Human and Personnel loss exposures
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 10 Ideally Insurable Loss Exposures
Large number of similar exposure units Losses that are accidental Losses that are definite and measurable Losses that are not catastrophic Losses that are economically feasible to insure
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 11 Insurance as a Business
Types of insurers Private Insurers Stock Insurance Companies Mutual Insurance companies Reciprocal insurance exchanges Federal Government Insurance Programs (Social Security Program, National Flood Insurance Program, Federal Crop Insurance Program, Federal Deposit Insurance Corporation, National Credit Union Administration) Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 12 Insurance as a Business
Types of insurers
State Government Insurance Programs Workers Compensation Insurance Unemployment Insurance Plans Fair Access to Insurance Requirements (FAIR) plans Automobile Insurance Plans
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 13 Insurance as a Business
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 14 Insurance as a Business
State Insurance Regulation (Rates, Insurer solvency, and Consumer protection) Closely monitor the financial condition of insurance companies and take actions necessary to prevent insurer insolvency They will approve the policy language State insurance departments regulate insurance rates to protect consumers from excessive rating and thereby avoid discriminations
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 15 Benefits of Insurance
Payment for the costs of covered losses Reduction of the insureds financial uncertainty Loss control activities of insurance companies Efficient use of resources Support for credit Satisfaction of legal requirements Satisfaction of business requirements Source of investment funds Reduction of social burdens
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 16 Costs of Insurance
Premiums paid by insureds Operating costs of insurers Opportunity costs Increased losses Increased lawsuits
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 17 Insurance as Contract
Insurance is a contract entered into between two parties wherein one party viz., the insurer promises to pay the other viz., insured for a loss which is indemnifiable as per the policy terms conditions and exceptions for a return of a consideration viz., premium. The four basic types of insurance (property, liability, life and health) are generally divided into two broad categories: Property / Liability Insurance Life / health Insurance
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 18 Insurance as Contract
Property Insurance Fire and allied lines Business income Crime Ocean and inland marine Auto physical damage
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 19 Insurance as Contract
Liability Insurance Auto Liability Commercial general Liability (Premises, Business Operations, Products) Personal Liability Professional Liability
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 20 Insurance as Contract
LIFE INSURANCE Whole life insurance Term Insurance Universal life insurance HEALTH INSURANCE Medical Insurance Disability Income Insurance
Insurance : What is it ? 5/28/2008 4:54 PM New Brand FMT-P2_28May08 21