Underwriting Principles & Information Importance

• The training is about the fundamental principles of underwriting and the importance of information

Foundation Principles of Underwriting and Importance of Information

• FINS BROKERS values include care, professionalism, and trust

Disclaimer

• This training aims to introduce international insurance practices, but Mongolian laws and regulations may differ or conflict

Agenda

• The main principles of insurance are utmost good faith.
• Material information significance.
• Duty of disclosure and Representation.
• Channels for finding material information and when to use it.
• Consequences of errors and violations.
• Insurable interest is the financial stake in the insured item.
• Proximate cause refers to the direct cause of the loss.
• The principal indemnity is the compensation principle.
• Subrogation includes claiming the property of the wrongdoer.
• Contribution focuses on sharing liability for losses.
• Minimization of loss ensures steps are taken to reduce losses.

Insurance Principles

• Guiding factors is the principle of indemnity
• Proximate cause is the reason for damage
• One action to assist in damages is loss minimization

Proximate Cause

• Proximate cause refers to the immediate reason for the loss.

Indemnity

• Indemnity means providing a payment.

Proximate Cause Explained

• Proximate cause is used to determine to pay a claim.
• It is important to verify the cause is covered prior to payout.

Diagram Example

• Storm causes power line to short circuit, leading to fire and floods.

Definition of Proximate Cause

• Proximate cause sets in motion a series of events that cause a loss.
• Chain reactions can cause damage.
• Proximate Cause must be a dominant reason.
• Proximate Cause must be directly related to the damage.

Event Example

• A chain of events can lead to damage:
• Lighting a match in the garage.
• Flame catches the cloth.
• Cylinders bursts.
• Garage wall caves in.
• Flammable Material enters office.
• An office catches fire.

Key Facts

• Payment is given if the damage has a direct cause.
• Payment is not given if the cause is due to exclusion.

Proximate Cause Evaluation Example

• A person falls off a horse and is injured.
• They seek treatment in hospital and get an infection.
• The person dies due to medical issues.
• Answer: The proximate cause of death is the infection.

Principle of Indemnity

• The principle of indemnity is the compensation principle.

Characteristics of Indemnity

• Indemnity restores the insured to their pre-loss condition.
• It is meant to make neither too little nor too much compensation.

Indemnity Options

• Various Compensation Methods Exist:
• Payment: Direct monetary compensation.
• Repair: Fixing of damaged properties.
• Replacement: Substituting item and can include home items.
• Restoration: Rebuilding structures, like buildings.

Overview of Castellain v.Preston(1883)

• "The point for the insured is to get full indemnity".
• "But it is clearly wrong to go over the full cover".

Indemnity Variations

• Exceptions Modify the Principle

Four Main Types of Indemnity Agreements

• Benefit agreement
• Agreed value contracts
• First loss treaties
• "New for old" agreements

Explanation of Indemnity Agreements

• Benefit Agreement: This states that the parties agree ahead of time the total value.
• "Agreed value" in arts, and vintage vehicles.
• "First loss" is where the insured doesn't want to the financial loss.
• With "new for old," the insurance will replace old products.

Key Terms

• Under Subrogation the insurer has rights to recoup losses.
• Key is Hold Harmless and subrogation waiver.

Contribution Concepts

• Contribution involves various entities and multiple agreements.
• The extra insurance will protect various goods.

Overview of Contribution

• It is important to note that an insured cannot profit.
• It will always be distributed evenly.

Contribution

• If multiple companies payout, they seek indemnity.
• It is common to have multiple insurance plans for multiple assets.
• There must also be an agreement of loss from those insurers.

Contribution Essentials

• Conditions for operation:
• Two+ valid agreements.
• Shared insured and asset.
• Shared risks.

Payout Facts

• "Contrition" Clause in Agreements determines the outcome.
• Contribution payout will lead to a greater chance of coverage.

Example of A Common Claim

• There should be an acknowledgement of title.
• These are North British and Mercantile v. Liverpool
• Insurance has an advantage due to the special condition.

Common Risk Factors.

• Contribution and risk factor.
• Fraudulence.

Using Contribution

• First to calculate amount.
• A amount is 30,000,00 MNT.
• B is 60,000,00MNT.

Calculating Contribution

• Calculate each contract seperately.
• Total up each, then calculate payout.

Loss Minimisation

• The insured reduces the harm to the goods with caution.

Factors to Note

• Do not be wreckless.
• Do what is necessary.
• The main thing is always be careful for your life.
• It is important to show you are responsible.

Facts About Loss and Harm

• Loss and Harm effects future incidents and premium.
• Also remember you have a part to play.