Basic Principles Module 2 - Insurance Education PDF

 LOSS Sentimental Liability Losses losses/ Consequential other Losses parties Own Uninsured damage...

 LOSS Sentimental Liability Losses losses/ Consequential other Losses parties Own Uninsured damage Losses losses Loss Types Loss is the term used to describe the loss of or damage to property.  Own Damage Losses Sentimental Liability Losses losses/ Consequential other Losses. parties Own damage losses refer to the losses Mr Jones may suffer due to damage to Own his own property. damage Uninsured These can have a number of causes. losses Losses. Which are referred to as perils e.g. fire, flood, hail, accident , theft, etc) Loss If Mr. Jones decides to buy insurance Types from us he will have a limited choice of causes We will not insure certain causes (perils), example: gradually operation causes, such as rust and disasters, and war.  Vehicle Write Off/ Total Loss Sentimental Liability Losses losses/ Consequential other Losses. parties A damaged vehicle which is not repairable or one that would cost more Own to repair than the vehicle was worth damage Uninsured before the damage occurred is known losses Losses. as a write off. Which means the vehicle is not Loss repaired and the client will get a cash Types settlement. This is also known as a “total loss” (theft is also considered to be a total loss but isn’t a write off).  Liability losses/other parties Sentimental Liability Losses. losses / other Consequential. A third party is a person who is not a party to parties a contract of insurance. This is the legal responsibility one person has to another, that is enforceable by law Own We all have a right that our things are not Damage Uninsured damaged. The existence of this right places a Losses losses duty on all of us to damage other people’s property. We call this legal duty, because it has Loss consequences If Mr. Jones damages a third party’s property, Types he breaches a legal duty, and his conduct is wrongful. The consequence is that Mr. Jones has to make good the damage that resulted directly from his actions (or sometimes inaction, such as when you should really do something to prevent damage, but you fail to do what you are supposed to do).  Liability losses/ other parties Sentimental Liability Losses. losses / other Consequential. Also known as public liability party insurance. parties It provides indemnity to the insured in respect of his legal liability arising out of an accidental damage to the property of others Own or injury caused to others. Damage Uninsured In Pet Policies this provides Compensation Losses losses and cost arising from accidental injury or damage CAUSED by the insured pet/ loss of Loss or damage to property/ Death or bodily injury to any person. Types Liability insurance provides a Limit of Liability, which is the maximum amount that an insurer will pay for one loss in terms of a Liability policy.  Sentimental Losses Sentimental Liability Losses losses/ Consequential other parties In insurance we can only deal with losses that can be expressed in financial terms. (There must be a monetary value to be Own able to insure) damage Uninsured Losses. It is impossible to attach an objective losses financial value to an inconvenience suffered or to the sentimental value Loss attached to an article. Types Therefore, we cannot insure Mr. Jones against these or similar losses. It is also not recognised as an insurable interest.  Consequential Loss Sentimental Liability Losses losses/ Consequential other In Insurance terms this is a pure financial Losses parties. loss suffered by the client as a result of the happening of an insured event. The two losses are separate events. Own Consequential loss is a loss directly damage Uninsured arising from another loss. losses. Losses. Example: After an accident, the client wants to claim for loss of income Loss because he could not work without his Types vehicle. The loss of income is consequential. Example: A client that misses a very important business deal due to an accident, will not be able to claim for loss of income as this is a consequential loss  Uninsured Losses Sentimental Liability Losses losses/ Consequential other Losses parties A loss that is not covered by the insurance policy. War , Nuclear Acts or Terrorism, Own riots and strikes – any damages damage Uninsured losses Losses caused by these events will be covered more specifically under Loss SASRIA (South African Special Types Risks Insurance Association)  The RAF is responsible for providing appropriate cover to all road users within the borders of South Africa. Road Accident The premiums collected for this insurance is done through fuel levies. The RAF compensates third parties that are injured or killed in incidents Fund (RAF) involving vehicles on South Africa roads. Regardless if they are injured in a vehicle or a pedestrian, they will have cover.  Indemnity The term indemnity means that the insurer places the insured in the same financial position or as close thereto as possible after a loss as he/she was in immediately prior to the occurrence. If the client has appropriate cover the insurer will indemnify (pay) for the insured loss according to the stated sum insured (monetary limit of the insurer's liability under a policy). We can indemnify a client by 4 methods: Pay for an item; Replace the item; Repair the item and Re-instatement (A combination of any of the previous 3) On Pet Policies the main form of indemnity is via Reimbursement Reimbursement:.the action of repaying a person who has spent or lost money. We ‘Reimburse’ a client after they have provided proof of costs. Ultimately This refers to the amount we pay towards your insurance claim  Agreed Values vs Indemnity NON- LIFE LIFE Most Life insurance provides payment of a For most non-life insurance, the amount set amount of money when the insured paid at claim reflects the sctaul amount of event occurs. It doesn’t matter how much loss suffered – even if the policy sum loss the policyholder actually suffered, nor insured is higher than that loss. does it matter how procedes are spent by the beneficiary. For example: if a car is destroyed in an Exception: Some life insurers do sell accident, the insurer will usually pay a disability and health insurance coverage claim that reflects the value of the car at that is indemnity – based the time it was destroyed, not the value at the time of purchase or the cost to replace it with a newer model  Buildings Insurance Is a policy that covers the structure of a house or other buildings against a number of different perils. Forcible Entry or Exit In insurance, cover is sometimes restricted to there being signs of force into or out of the premises or vehicle. Important consideration are visible means of entry which is easily verified. i.e. broken window or door lock The insurance company may not pay claims if there are no visible signs of forcible entry or exit because clients may leave doors or windows open.  Replacement Cost Replacement cost is the value of property as indicated by the current purchase price of a similar article. If an item has been damaged and it can be economically repaired we will either arrange or authorise repair and will replace the item with a new one of similar quality through our preferred suppliers, or at our option, we will pay the cost of repair. Otherwise, we will replace the item with a new one of similar quality through our preferred suppliers, or at our option, we will pay for the replacement cost of a new item of similar quality.  Average In general insurance, this is a policy provision that has the effect of reducing a claim payment where under-insurance is discovered. Under-insurance is when property is insured for less than it would cost to replace with a new item. It is important that the client insures their property for the correct value. If, when the loss or damage happens, the sum insured on the schedule is less than the cost of replacing all the contents as new, we may only pay for part of the loss or damage. Average is only applied to home contents and building insurance.  Average The following calculation is used when under-insurance is discovered: CLAIM PAYMENT: CLAIM AMOUNT X INSURED AMOUNT ÷ BY NEW REPLACEMENT VALUE Example: The insured submits a claim for R50,000 He was insured for R200,000 Upon investigation it was found that the insured’s entire household contents comes to a replacement value of R350,000 The claim payment will be calculated as follows: Claim amount (R50,000) x Insured amount (R200,000) ÷ by new replacement value (R350,000) = claim payment (R28,571.43) Portable Possessions Insurance (All Risk) A Portable Possessions (All Risks) policy covers loss of or damage to personal belongings in your possession (usually carried on or by a person), property likely taken outside of the home. If an item is specified and the loss happens outside the home, it will be covered under the All-Risks policy. These items have no territorial limits (can be taken outside of the South African border). Examples of items would be cameras, clothing, jewelry, laptops, cellphones, etc.  Loss Ratio The loss ratio is the difference between the ratios of premiums paid to an insurance company and the claims settled by the Losses Due to Claims + Adjustment company. Expenses This is used as a means of Total Premium Earned Loss Ratio measuring the company’s financial performance by dividing the claims paid out by the premiums received.  Claim A claim is a formal application made by the insured for payment (indemnity) after the occurrence of loss or damage covered by the policy. When a client submits a claim, we can either accept or reject (repudiate) his claim if the client was in breach of the contract at the time of the loss. Please note, there is a difference between a claim and a loss: A loss refers to either loss of or damage to one’s property. Legality and Rights Arbitration Arbitration is a private form of resolving disputes – as opposed to 1 taking it to court. Also called alternative dispute resolution. It is done privately and by agreement between people, companies or business Subrogation The term subrogation is the right of one party to stand in a place of 2 another and take up the latter's legal rights against a third party. When the insurer has paid the insured, the insurer will take legal action against the third party to recover costs of the loss. The insured can no longer take any legal action against the third party.  Assessor and Loss Adjuster An Assessor is a person appointed by an insurer to investigate and report on the circumstances of a loss, and to recommend the manner in which a claim should be finalised or negotiated in terms of the relevant policy. A loss adjuster is a qualified person who assesses the size or value of loss on behalf of an insurer, they may be employed by the insurer to look after his interest in a loss settlement.  Claims Adjuster A claims adjuster reviews claims and determines whether the claims should be paid and what amount is owed to the insured. Pet insurance adjuster are very similar to motor or homeowners' insurance. When your dog or cat gets sick or insured you submit a claim to the insurance company, and they assesses the loss and reimburse valid claims. The adjusted is appointed by and acts as a representative of the insurance provider who seeks to determine the extent of the insurer’s liability for loss when a claim is submitted.  Determining Item Values 1 Quantify: To put value to something. Example: quantify the own damage loss of this vehicle. This can be done by evaluating the cost of parts to be replaced, repair costs and labour costs etc. 2 Proof of Quantum: This refers to the value of any item being claimed. The policyholder must prove the ‘quantum’ (value) by submitting invoices or valuations certificates. 3 Valuations: Valuation is a list if property with values allocated to each item and forms the basis of insurance. Example: A diamond ring or an antique piece of furniture. These sorts of items may need valuation certificates to prove their wealth.  Proximate Cause This refers to the direct, dominant or specific cause that brought about the loss / damage which is covered by a short-term insurance policy. Proximate cause can be easily defined as the direct cause of a loss, uninterrupted by another event. In terms of any loss suffered, the insurer needs to establish the uninterrupted chain of events that caused the loss, and that the loss was caused by an insured peril under the policy  Excess Excess is the first amount payable by the insured in the event of a valid claim. It is the part of a loss for which the insured is liable. It can be a percentage of the claim or a fixed amount Reasons for charging an excess: An excess shifts some risk from the insurer back to the policy holder. It is the uninsured portion of the policy holder’s loss. On a vehicle policy, the policy holder can reduce the premium when an excess is increased. It is important to only select a level of excess the policy holder can afford when there is a claim. It’s easy to be carried away by the potential savings to bank on the hope that there will never be a claim. Beneficiary This is a person or entity that receives the benefit from an insurance policy This can be the insured, the insured estate or any other person nominated by the policy holder  Executor An Executor is the person named in a will who has agreed to carry out the terms or instructions of the will. A will or testament is a legal document by which a person, expresses their wishes as to how their property is to be distributed at death, and names one or more persons, the executor, to manage the estate (sum of assets and debts) until its final distribution.  Contribution The contribution principle governs relationships between insurance companies. The contribution principle in insurance is a rule that specifies what happens when a person buys insurance from multiple companies to cover the same event, and that event occurs.  Abandonment and Salvage Abandonment The giving by the insured to the insurer of damaged 1 property when a total loss is claimed, and the client is indemnified and paid out Salvage This is whatever is recovered of an insured item or part of it, 2 on which a claim has been paid to the insured. Parts of the salvage property will be sold to make up for the loss of the claim paid out. Any salvage recovered would be the property of the insurer, as the insured would already have been indemnified for the loss of such insured item.  Franchise The amount of a loss at or below which no claim is payable by the insurer. The claim amount therefore falls within excess (it is too small to pay out). Above that amount, the loss will be met in full. An example of franchise would be: If the claim value is below R5 000, the client has no cover. If the claim value is R5 000 or more, we will pay the claim in full (less any applicable excesses).  Ombudsman A highly qualified and experienced person who mediates where an insured does not agree with the insurer's decision. The insured would lodge a formal complaint with the Insurance company and then approach the Ombudsman office for the Ombudsman to mediate. The cost would be for the insurer’s account  Cancellations A cancellation is when either the client (at any time) or the insurer (with 30 days written notice) terminates the cover permanently signalling the ned of the insured period. Cancellation clause is a clause in a policy which allows one party to cancel the contract following due notice to the other