Insurance Course PDF

Risk ==== Risk - possible future event, accidental, occurs independently of the insured\'s will and causes material damage, personal injury or death. [Risk selection]: - Pure risk is defined as a situation in which there are only the possibilities of loss or no loss. (Unexpected death, job...

Risk ==== Risk - possible future event, accidental, occurs independently of the insured\'s will and causes material damage, personal injury or death. [Risk selection]: - Pure risk is defined as a situation in which there are only the possibilities of loss or no loss. (Unexpected death, job related accidents, damage to property from natural events and so on). - Speculative risks - is defined as a situation in which either profit or loss is possible (Gambling, Stock Exchange, Trading Currency) Definition of insurance ======================= Insurance is a social instrument through a group of people/individual (insured) transfers the risk to another party (insurance company/insurer) in exchange for the payment of an amount of money (insurance premium), respectively the promise that at the time of loss occurrence, the effects will be covered by insurance company. According to the Romanian Civil Code - the insurance contract, the insurance contractor or the insured, have to pay an insurance premium to the insurance company, and the latter undertakes to pay an indemnity, as the case may be, to the insured, the beneficiary or the third party. Technical elements of insurance =============================== Regardless of the type of insurance, there are certain general elements that are identical: the subjects of insurance, the object, the interest in insurance, the insured risks and those excluded, the insured amount, the insurance premium, the damage/loss, the indemnity, the insurance period. Subjects of insurance: factors directly or indirectly involved in subscribing/selling of insurance policies: the insurer, the insured, the contractor, the beneficiary. The objects of the insurance can be: property, individuals/life/injuries, civil liability, pension, etc. Interest in insurance - In order to be included in the insurance contracts, individuals/companies must have a financial interest on property, persons, liability. In the case of property insurance, interest appears as a measure to protect own property and / or companies' assets. In the case of personal insurance, the interest refers to deaths, work accidents, permanent and temporary disabilities, survival over a certain age. The interest appears as a measure to insure an income, to the persons specified in the contract in case the death of the insured person; or as a measure to obtain certain compensatory income for periods of hospitalization as a result of work-related accidents; or to obtain certain life annuities in case of permanent disabilities from accidents. In the case of liability insurance, the interest refers to the avoidance of diminishing/decreasing the financial resources of the insured by causing certain damages to third parties. Therefore, insurance companies through various marketing techniques will have to make potential policyholders aware of their interest in the protections offered by insurance. If we are dealing with insurance by the effect of the (mandatory) law, the interest is imposed by the state. Insured amount (Insured Sum): expresses the maximum level of liability of the insurer for the risks assumed. The insured amount is clearly stated in each policy, and is determined by the insured\'s representative based on internal procedures. It is very important that this value to be as close as possible to the real value of the insured property (property insurances). Insurance benefits ================== Insurance offers two fundamental benefits: - preventing the occurrence of financial difficulties and even bankruptcies for companies, respectively the loss of savings made by individuals in case of risk occurrence. This is possible by dispersing the risks to the members of the group. Of course, in some situations preventing damage is more appropriate than taking out an insurance policy. For this reason, the insurance industry constantly elaborates and publishes various statistical studies. - supporting research activity in different fields. In some cases it is more convenient to pay funds for research than to pay compensation later (a lot of money is invested in researching phenomena that generate natural disasters earthquakes, tornadoes, floods - in the hope that the time of their occurrence may be known for some time before, in order to take measures to limit damages). The mechanism of the insurance ============================== To better understand how insurance differs from other financial transactions in terms of risk, we must analyze how it works. The insurance is created by an insurer/insurance company, as a professional bearer of the risk, who assumes the financial aspect of the risk transferred to him by the insured/policy holder. The insurance company accepts the risk in exchange for the promise to pay the damage/compensation at the time of occurrence and the amount mentioned in the insurance contract. In exchange for accepting the variability of the expected results, the insurer collects insurance premiums. It should be noted that the insured pays the premium for the transfer of risk at the level of the maximum loss/damage. Most insurance contracts are expressed in financial/monetary terms, but sometimes there is the possibility of paying for services. In the case of property insurance, civil liability, life insurer pays the amount or part of the amount specified in the insurance policy. In the case of injuries, in addition to the remuneration/compensation received by the insured, he can also receive various services free of charge (access to a physical recovery center, various other facilities that are not normally available). **Objects of Insurance** The objects of the insurance can be: property, injuries, third party liability and life. **Interest in insurance** In order to be insured the goods/property, individuals, liability there be an interest of the policyholder towards them. It is very important that this interest can be assessed in monetary terms and to be of an economic nature (for legal entities). In the case of property insurance, interest appears as a measure to protect one\'s own assets. In the case of individual/injury/health insurance, the interest refers to deaths, working accidents, permanent and temporary disabilities, survival over a certain age. The interest appears as a measure to insure an income, to the persons specified in the contract (beneficiary) in case the death of the insured person occurs; or as a measure to obtain certain compensatory income for periods of hospitalization caused by work-related incidents; or to obtain life annuities in case of permanent disabilities from accidents. In the case of liability insurance, the interest refers to the avoidance of decreasing the financial resources of the insured if the insured person (his minor children, own employees in case of legal entities) causes certain damages to third parties, natural and legal persons. Therefore, insurance companies through various marketing techniques should make potential policyholders aware of their interest in the protections offered by insurance. If we are dealing with mandatory insurance, the interest is imposed by the state. Mandatory insurance is characterized by the fact that it is regulated by law. The mandatory character derives either due to the high frequency of occurrence of the insured risks, but also due to the severity of some damages with low frequency. In Romania at present the most well-known form of compulsory insurance is the motor third party liability insurance -- MTPL = RCA. The mandatory law on home insurance becomes valid from July 1, 2008, all individuals and legal entities who own real estate (house purpose) must take out such insurance. On the other hand, in the developed countries of the world (USA, Japan, EU states) there are several compulsory insurances - car, for buildings, etc. Facultative/optional insurance is subscribed only by request of the insured and is based on the agreement of the insurance company and the insured/policyholder specified in the insurance contract. Insurers operate insurance sales through various distribution channels - with a particular focus on insurance clients' managers, insurance agencies and insurance brokers. The first category of persons are permanent employed by the insurer, remunerated with a fixed salary plus bonuses for carrying out complex insurance targets. The insurance inspectors coordinate the activity of the insurance agents and that of the insurance brokers. **The insurance agent** is defined by law and represents only the interests of an insurer. Thus, a person can carry out an activity as an insurance agent, if he holds a valid written authorization from an insurer (agent contract), to act only on insurance company behalf and has the official certification from Institute of Insurance Management. If an insured person has bought an insurance through an insurance agent, the insurance company in whose name the agent acts is liable to the insured for all acts or omissions of the insurance agent. However, the insurance agent is liable to the insurance company for his actions and deeds arising from the sale of insurance; thus any mistake of the insurance agent towards an insured will be fully covered by the insurer, he will subsequently impute the amount related to the guilty insurance agent. Insurance agents - must meet the some terms, most important are: a. to pass specialized professional training, knowledge and skills in order to exercise this activity, in accordance with the requirements provided in the norms issued by the Financial Supervisory Authority; b. to have a valid malpraxis insurance; c. not to have a criminal record; d. to have a good reputation / ethic. The current legislation offers the possibility for insurance agents to organize themselves in the form of a limited liability company. Thus, the legal entity insurance agent must meet several conditions: a. to have the sole object of activity the activity of insurance agent, b. to have a malpraxis insurance contract, in accordance with the requirements of the Financial Supervisory Authority; c. not to have been previously declared bankrupt and not to be the object of a judicial reorganization procedure at the moment of requesting the authorization; d. to have a good reputation, and its name must include the mention "insurance agent"; e. the executive leader to have the necessary training and experience to hold this position. Insurance legislation provides that **insurance brokers** may also act as intermediaries in the insurance industry. A company can operate as an insurance broker, if it has an operating license from the Financial Supervisory Authority. In order to obtain the operating license from the Financial Supervisory Authority and to be able to operate continuously on the insurance market, the insurance broker must meet the different terms, most significant conditions are: a. to be a legal entity and to have a share capital paid in cash - a value that is permanently updated by norms by the Financial Supervisory Authority; b. to have in force a professional liability insurance contract of the insurance broker (malpraxis insurance) c. to have as object of activity only the activity of insurance broker; d. to comply with the requests of the Financial Supervisory Authority regarding the reports, as well as the activities they carry out Unlike the insurance agent, insurance brokers can intermediate insurance products from several insurers. The insurance broker represents the interests of its clients, negotiates for them (individuals or legal entities, insured or potential insured), contract insurance contracts on their behalf, can provide assistance before and during insurance contracts, intermediate/facilitate the process of settling claims / loss compensation. In developed countries with experience in insurance industries, statistics proves that most insurance contracts/policies are intermediate by insurance brokers. This trend is also similar in Romania, where from one year to another, the volume of Gross Written Premium intermediated by insurance brokers is increasing. **CLASS 3 -- ELEMENTS OF INSURANCE - continuation** **Insured Sum** It expresses the maximum level of liability of the insurer for the risks assumed by the insurance contract. The insured sum is clearly stated in each policy, and is determined by the insurance companies' representative in the operation called valuation of the property / insurance assessment. It is very important that this value to be close as possible to the real value of the insured property / asset. If the insured sum is lower than the real value (underinsurance), in case of damages, the insured person will not receive the real value, but a part. Thus, the insurance will not provide the full protection policyholder needs. When the insured amount is higher than the real value (over insurance or excess of insurance), the insured has no any interest to keep the good/asset/property in optimal conditions, because one insured event will occur, he would receive a higher value. So the subscribing for the insurance at a value higher than the real value is not possible from the point of view of the insurer. In case such an insurance is concluded and the insured event occurs, then the insured asset/property is completely destroyed, the insured will receive the insured amount mentioned in the policy. The insurance company observing that an excess of insurance has been subscribed (the person who performed the over valuation is responsible for this mistake/fraud) will recover the difference from the real value to the level of compensation from the culprit. For example, the value of a 3-year-old car is 10,000 Eur, but due to the error in valuation from the insurer\'s representative, the insured sum is 10,500 Eur. We assume that after 3 months the car is 100% damaged. Once the damaged occurred, the claims representatives of insurance company realize that the vehicle had been excess insured. Based on insurance contract, the policyholder will receive 10,500 Eur, and the insurance company will recover from its employee that mistakenly valuated the vehicle, the excess difference - 500 Eur. In the case of individual/disability insurance, the insured sum is divided in two major parts: insured sum doe death caused by accidents and insured sum for permanent disability caused by accidents. In case of permanent/temporary disability from the accident, the insured receives a percentage of the amount insured for disability, a percentage corresponding to the injured part of the human body. **CLASS 3 -- ELEMENTS OF INSURANCE - continuation** We assume that amount insured sum for disability insurance include 10,000 lei for injuries, and the policyholder suffered an arm' fracture that will cause a permanent disability (situation is the same for temporary invalidity). The doctor sets a disability percentage of 20%, so the insured will receive 2,000 lei in compensation. In the case of third party liability insurance, the insured sum is determined by the value required by the potential insured in the questionnaire form and accepted by the insurance company. In order this insured sum to be adequate, an analysis of the previous damages caused to third parties, from the activity carried out is necessary. The insured sum can be divided/expressed into several events, in this case insurance companies use the term of insured sum per event. Also, it can be seen as a maximum value, not restricted by the number of events -- this way we have aggregate insured sum (total insured sum). If several events are insured with a specific insured sum per event, and in case of a damage this value is exceeded, the difference not covered by the insurance company will be paid by the policyholder from its own resources. **CLASS 4 -- ELEMENTS OF INSURANCE - continuation** **Damage / Loss / Injury** The damage reflects the prejudice caused to the insured by the occurrence of the insured event. It has a certain value, which quantifies the damage. In case of Property insurance there are: - total damage - when the property/asset is completely destroyed or stolen, or - partial damage - if the insured property is destroyed, but after repairing / restoration, the asset/property can be used again as in its initial form For certain types of insurance (ex. Vehicle insurance) if the percentage of damage exceeds 7580% from the real value, the insurance company considers that a total damage has been recorded, paying the insured sum to the beneficiary of the insurance. This is due to the fact that through the other previous examples (statistics), expenses with repairing of the vehicle (labor expenses, road assistance / transport expenses, etc.) the value to be paid as insured sum can be exceeded. Based on insurance contract, the insured sum represents the maximum liability of the insurance company. Both types of damage can be: - partial / total damages with recoveries - partial / total damages without recoveries A very delicate problem appears in the moment when a total loss appears, caused by a traffic collision. In these cases the insurance company declares total loss if the loss exceeds 75% of the Insured Sum. The compensation paid to the insured person will be 75% of the insured sum plus the wreck. The wreck remains on policyholder ownership, and it can be sold or repaired (if technical safety measures are respected). There is also the option that insurance company to sell the wreck by auction (auction's winner will pay the wreck's value directly to the policyholder). In this case, the difference from the auction's value to the level of insured sum will be paid by the insurance company. **CLASS 4 -- ELEMENTS OF INSURANCE - continuation** The problematic of total damage is more complicated in case of leasing contracts. This way, the leasing company as owner of the vehicle is the insured person. If total loss occurs, based on the leasing contract the following procedure will be assumed: - Because the leasing company is the owner of the car, it will receive the 75% of the Insured Sum and the vehicle's wreck - The leasing company will deduct from the 75% of the Insured Sum, the leasing payments due until the end of the contract (related to the credit), and the remaining amount plus the wreck will be given to the user. **Injury** In case of individuals the injury reflect the correct term used to define/quantify the prejudice. The injury can generate: - temporary invalidity - permanent invalidity Both temporary and permanent invalidity can be partial or total -- depending the injured parts of the human body. In case of third party liability, the guilty person (individual or legal entity) may cause to a third party: - damages to property/assets - physical injuries - moral damages **CLASS -- ELEMENTS OF INSURANCE -- Principles of Compensation** **Importance of Insuring the Properties at the Real Value** **A delicate issue related to property insurance refers to the real value of the insured object. The method of determining this value depends on the type of good (asset) insured:** **Vehicles** **Buildings owned by individuals (apartments, houses, cottages, etc.) and owned by legal entities (registered offices, halls, warehouses, special purpose buildings)** **Goods from apartments, stocks, and contents of legal entities** **Every insurance company starts from the premise that the potential insured will insure their assets at the real value. In the event of differences, the ways in which this value is determined must be taken into account.** **In the specialized literature, but also in the process of settling the damages within the insurance companies, two indemnity principles are mainly used:** **Principle of limited insured sum** **Proportional principle of compensation** **The difference between these two principles is the way in which the correlation is made between the insured amount of the good and its real value determined according to the insurers\' methodologies.** **In the case of the limited insured sum principle, the liability of the insurance company is limited to the level of the insured sum. In the case of minor loss or damage, the insured person will receive the entire compensation -- there is no financial disadvantage. If we assume the real value of an apartment is 100,000 Euro, and the insured sum is 60,000 Euro -- we have underinsurance. Based on this principle, the insurance company will pay any loss up to 60,000 Euro. If the loss is 3,000 Euro, the level of compensation is 3,000 Euro.** **In the case of an explosion and the loss or damage is 87,000 Euro, the compensation is 60,000 Euro, and the difference up to 87,000 Euro (in this case, 27,000 Euro) will be paid by the insured person from their own money.** **The principle of proportional compensation states that the compensation will be paid proportionally, insured sum divided by real value:** **compensation=Loss times insured sum over the real value.** **Using the same assumption as above, in the case of a 3,000 Euro damage, the compensation will be:** **compensation=Loss times insured sum over the real value =3,000×60,000100,000=1,800 ** **This is a principle similar to a mathematical report; the insurance company assumes the property has been insured 60% out of the real value.** **Analyzing insurance markets, the limited insured sum principle is more theoretical and is used especially in developing insurance markets. For example, in Romania, it is used for mandatory house insurance P.A.D., where the legal normatives established the insured sum for A and B type of buildings to 20,000 Euro and 10,000 Euro, no matter the real value. And in the case of risk occurrence, damages will be paid up to these insured sums.** **Deductible:** **The deductible represents the part of each damage that is paid by the policyholder. It is used for facultative insurances. The deductible can be:** **A fixed amount -- 100 Euro of each damage** **A percent from the insured sum -- 10% of the insured sum in the case of theft of a vehicle** **Number of days -- in the case of hospitalization** **The deductibles are used by insurance companies for different reasons:** **To keep alive the interest of the policyholder over the insured property or asset** **To avoid minor losses** **To offer a cheaper price to policyholders (a zero deductible policy will be more expensive than an insurance with deductible)** **This way, the formula of compensation is:** **compensation= loss times insured sum over real value − deductible** **There are also cases in the insurance market when the deductible will be waived if the damage exceeds a specific level. For example, there is a contract with a 100 Euro deductible for any losses up to 1,500 Euro. In the case that the loss from a specific event will exceed the level of 1,500 Euro, the deductible will be waived.** **Remaining/Residual Insured Sum:** **After each compensation paid to the policyholder, the insured sum is decreasing with the level of compensation, resulting in the Remaining Insured Sum.** **the remaining insured sum = insured sum− compensation** **Following this aspect, the asset is insured at this lower amount, and in the case of a second damage to the same insured asset within the same insurance contract, the compensation will be paid based on the proportional principle of compensation:** **C′=L′×I.S.R.I.S.** **Where:** **C′ is the compensation of a second loss** **L′ is the second loss** **R.I.S.R.I.S. is the remaining insured sum** **I.S.I.S. is the insured sum** **In order to avoid this issue, the insurance company offers the insured person the choice of paying a supplementary premium. The supplementary premium takes into account the value of the damage, premium quotations, and the number of months until the end of the contract:** **P′=C×q×n12** **Where:** **P′ is the supplementary premium** **C is the compensation** **q is the premium quotation** **n is the remaining months until the end of the contract** **Example:** **If we assume the premium quotation q=5% and the damage or loss of 3,000 Euro occurred after 8 months from the starting of the insurance contract, we have:** **P′=3,000×5%×412=50 Euro** **By paying the supplementary premium of 50 Euro, the insured sum will be equal to the real value:** **I.S.=R.V.=20,000 EuroI.S** **This way, the next damage (if any will occur) will be paid entirely by the insurance company.** **CLASS 6 -- ELEMENTS OF INSURANCE - continuation** **Insurance Premium:** Insurance premium represents the amount of money that is paid by insrued person in order insurance company to cover the risks that are exposed to. Premium insurance can be established by law in case of mandatory insurances or by insurance companies in case of facultative products. We have the example of insurance premium in case of mandatory house insurance PAD, where the law mentions the 130 Ron/year insurance premium for houses built from strong resitant materials and 50 Ron/year for the other types of low resistant materials. In case of facultative insurance we have the formula: *p*=1.5×*q* p -- insurance premium I.S. -- insured sum q -- premium quotation Premium quotation is established by actuarial department of insurance companies for 100 monetary units. Quotation takes into account risks' exposures, total losses for a specific industry, factors that will increase or decrease the risk from an average level. Beside this, premium quotation includes administrative expenses and the profit of the insurance Company. Here are included commission paid for selling insurance contracts. Insurance premiums can be paid in the moment of signing the contract for entire period of valability, or by installments. In the second case, insurance premium will be higher as insurance company will add an installment fee. In case insurance premium is paid in installments: - Clients can pay directly to the insurance company's offices, or - Like any other invoice/bill, directly from bank account/online through insurance companies' platforms. In case the insurance premium is paid by installments, the due date is established in the moment of signing the contract, and they are clearly mentioned. The responsibility of payment remians on behalf of insured person/contractor. **CLASS 6 -- ELEMENTS OF INSURANCE - continuation** Even if this mention is clearly stated in the contract, under terms and conditions section, insurance companies and theirs representatives (insurance agents and brokers) take all the measures to contact the insured person and inform him in time about thedue date: - Email notifications, - Text on personal mobile phones - Regular mail -- by mailing the bill/invoice Beside these, insurance agents have all the interest to follow installments' payments in due time, because thay are paid by commission only in the moment the client pays the bill. All these aspects are perceived sometimes by the client as an aggressive strategy, but in the end is about their protection, because if the insurance premium installments are not paid in time, the coverage from insurance company will be interrupted. In case of renewal of a facultative insurance contract, in case there hasn't been recorded any losses paid by insurance company, it will be offered a discount in insurance premium -- *bonus clause*. Otherwise, if the insured person has received compensation from the insurance company for a loss, the insurance company may apply a higher premium (as a protective measure in the new contract) -- known as the malus clause. Conversely, when claims are recorded on an insurance policy, depending on their value, a more expensive premium may be offered. In case of facultative insurances, if the clients add new values to their insured assets during the validity of contract (vehicle, house), insurance company will charge a supplementary insurance premium, but only for the remaining part of the contract (see example from class PPS presentation). If the client will sell the asset, in case no lossed has been recorded, insured client is entitled to receveid a part of the premiums paid for not consumed period. It is needed the proof of alienation of that asset. In case insurance company paid for loss(es) related to insured risks, insured person must pay the remaining installmets, no matter if the asset will remain on his property or will be sold. (see example from class PPS presentation) Insurance contract ================== Insurance contract has the same terms of validity as mentioned in Civil Code Art.948 -- it is valid if the following 4 conditions are met in the same time: - the involved parties to have the ability to sign contract - the consent of the parties to be valid - the object of the contract to be clear stated - The contractual clause to be lawful Based on Law 172/2004 insurance contract must be written and to include the following: a. Names, domiciles/addresses of the involved parts; b. The object of insurance: assets, injuries, liability, life; c. The insured risks; d. Beginning and ending date; e. Insurance premium; f. Insured Sum. The name and address of the insured person, the name of the company and its headquarters are important for the insurance company, because it must bear official correspondence (announcing due rates, expiration of the contract, the launching of new insurance products, initiating possible lawsuits). The object of the insurance must be very clearly identified, so that there are no unpleasant situations at the time of damage, as follows: - when insuring the goods/property/assets, the type of the good is mentioned (for cars the vehicle identification number, for valuable equipment the manufacturing series) - when insuring persons, the personal numerical code of the insured is mentioned - in the case of civil liability insurance, the exact type of liability assumed is mentioned, depending on the specifics of the activity carried out The category of insured risks is very important because it clearly specifies the type of risks that will be compensated. They must be properly described so there are no interpretation in certain situations. Also, in order to highlight the insured risks, the insurers mention in the insurance contract also the uninsured risks in terms of exclusions. The insured risks must be carefully studied by the potential insured to see if they cover their own needs. Depending on the insurers\' risk policy, some risks that are insured with one insurer on the basic policy, can be insured to other insurance company on the basis of special clauses. The risks insured on the special clauses are included in the insurance by annexing them to the basic insurance policy and by collecting an additional premium. The moment when the insurer\'s liability starts is the moment from which the occurrence of an insured risk will trigger the insurer\'s liability. Depending on the types of insurance this moment can be; - when the insurance premium is paid (in the case of Motors Own Damages Insurance - CASCO-type insurances for new insured cars from official dealers) - the day following the payment of insurance premiums (most insurances) - time to leave the country (travel insurance, Green Card insurance) - in case of payment of insurance premiums by bank transfer, the moment when the respective money enters the insurer\'s account The insurance policy (insurance contract) can be issued only if the methodological norms of the insurer are respected, which specify the conditions under which an asset / a person/ liability can be insured. In most cases, insurers require policyholders to complete a questionnaire application identifying their exposure to risk. After completing **the request form** / questionnaire request, respecting the insurers\' methodology, the insurance agents / brokers will make the offer to the client. If the client accepts the level of the insurance premium, and depending on the type of insurance, the insurers\' representatives will carry out a verification of the risks described in the questionnaire application: - in the case of property insurance, **the risk inspection** of the goods to be insured is performed (depending on the insurers\' requirements, pictures of the insured property must be taken) - for personal insurance (life insurance, private health insurance) a set of medical tests may be required If the situation is according to the data described in the request form, the insurance policy will be issued - both the request form and the risk inspection will be an integral part of the insurance policy. Special Clauses =============== Insurers may add special clauses to each contract to extend certain risks. By signing them by the insured, the clauses are an integral part of the insurance contract. By attaching additional clauses, the insured may be asked to pay an additional premium - for example to car insurance for damage and theft: if the insured also wants to insure people in the car against the risk of death and disability as a result of an accident, will pay an additional premium under this clause. **Insurance supplements** are treated in a manner similar to contractual clauses. The insurance supplement is an official act issued by the insurer at the request of the insured, by which changes are made to the initial insurance policy (change of insured domicile, increase of the insured amounts for property insurance, addition of additional equipment to a car). Once it is issued and signed by the insured and the insurer, the insurance supplement becomes part of the insurance contract. **The protection offered by an insurance contract may end on the following situations**: - Before the starting of the contract, if the risk occurrence became impossible (this may happen also during the contract validity). - During the validity of the contract -- insurance company notices that risks exposure have been increased and insured person did not take any decreasing measures - In case of a total loss/damage -- insurance premiums (installments) that have not been paid, will be retained by the insurance company from the total compensation - Once the asset/property has been sold - In case insured person did not pay due installments - In case of false statement on the request form - Once insurance contract expires (end of the contract) In case of insurance products there must be offered to the clients different information related to the products (for non life insurances and for life insurances): - IPID "*Insurance Product Information Document* " The content of the IPID is already determined by Article 20(8) of the IDD text. Indeed, Article 20(8), IDD provides that the IPID "shall contain the following information ([[https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=CELEX:32016L0097])](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32016L0097): - information about the type of insurance; - a summary of the insurance cover, including the main risks insured, - the insured sum and, where applicable, the geographical scope and - a summary of the excluded risks; - the means of payment of premiums and the duration of payments; - main exclusions where claims cannot be made; - obligations at the start of the contract; - obligations during the term of the contract; - obligations in the event that a claim is made; - the term of the contract including the start and end dates of the - contract; - the means of terminating the contract - KID key information documents (KID) for packaged retail and insurance-based investment products (PRIIPs) requires that the producer of an investment product intended to be sold to retail investors has to provide a KID concerning the product **CLASS -- MOTORS OWN DAMAGES** **Facultative Insurance -- Motors Own Damages Insurance (CASCO ; hull insurance):** This type of insurance is an optional insurance, each individual and legal entity will choose to buy this insurance depending on their own exposures to damages, the history of damages (their frequency and severity) and the existing financial situation. If the vehicle is purchased by leasing or credit, the insurance of vehicles for damage and theft will be concluded by the banking or leasing Company. The insurance companies in Romania offer approximately similar insurance products, from the point of view of the general conditions, the differences appear in the way of insuring special risks, the way of establishing the depreciation coefficients, the insured amount, the premium quotations. Also an important factor to be mentioned is the procedure to settle the damages. The general risks that can be insured through such an insurance policy may be: - damage caused by collisions, scratches, falls, falling of some objects on the vehicle; - damage caused as a result of the theft of the vehicle or of some of its components or parts, - damage to the vehicle by fire, explosion, - damages caused to the vehicle by natural phenomena - floods, storms, hurricanes, earthquakes, landslides, torrential rain, hail, lightning, the weight of the snow or ice, snow avalanches, the action of water; - damage to the vehicle as a result of measures taken to save it when it is damaged as a result of an insured risk - the expenses incurred by the insured in order to replace the set of locking keys of the insured vehicle as a result of the theft or loss of at least one row of its keys. In order to be included in the insurance, motors must have a valid periodic technical inspection. In the situation of insuring the vehicle for the risk of theft, the insurers request the existence of at least two original keys. The existence of a single set of keys will lead to the insurer\'s refusal to cover the risk of theft. Compared to the insured risks, in the case of insuring cars for damage and theft, there are situations in which the insurers\' liability does not operate. These situations are called exclusions. Therefore they are not included in the insurance and, therefore, no indemnities are granted for: - damage caused to the vehicle by improper maintenance, operation, wear and tear, as a result of manufacturing defects, the influence of temperature on the engine of the vehicle, damage to the engine, gearbox, etc. due to insufficient lubrication, overheating - damage to tires caused by cutting, puncturing, explosion except in cases where these damages occur as a result of insured risks of the vehicle; - damages caused to the additional equipment fitted to the vehicle, if they were not declared by the insured in the questionnaire application (their value was not included in the insured amount of the vehicle); - damages caused to the vehicle as a result of entering it in flooded places; - the part of the damage that increased if the insured did not take the measures to limit it following an insured event; - damages caused to the vehicle components that were damaged in the moment of buying of the insurance, mentioned and photographed in its inspection report - damage caused to any component parts of the vehicle by non-compliance with the rules on loading and mooring of goods during transport; - damage caused both to the exterior and to the interior of the vehicle, by the action of corrosive substances; - damage caused to the vehicle during or as a result of transportation, towing, - damage to the vehicle of war, invasion, civil war, revolution, rebellion, insurrection, military dictatorship, conspiracy, strikes, civil unrest, terrorism and ther similar - damage to the vehicle, in cases where the accident was intentionally caused - damages registered if the accident occurred while driving under the influence of alcohol, during the commission of acts incriminated by legal provisions, the accident occurred while the perpetrator was trying to evade prosecution. (These omissions do not apply if the insured vehicle has been stolen). - theft, attempted theft, if the police did not register a complaint in this regard - if the theft of the vehicle is registered and the insured does not submit to the insurance company the registration certificate and the identity card of the original vehicle, the 2 original keys of the vehicle Value of a vehicle ================== Insurance companies insure vehicles at their **real value at the time** of buying the insurance. There are certain insurance companies that accept the insurance of the vehicle at an insured amount lower than the real value (the situation that occurs for used cars when the market price is lower than the real value determined by insurers). In the latter case, at the time of the occurrence of a damage, the principle of proportional compensation will be applied. The real value of the vehicle represents the new value minus depreciation. Due to the limited nature of the life of vehicles, insurers refuse to insure older than 10-12 years. In exceptional cases (when the vehicle is insured continuously for several years with the same insurer) this period can be extended up to 15 years. The reasoning for not insuring old cars is justified by the low level of the insured amount, the high insurance premium and at the moment of a partial damage, the damage easily becomes total damage. M.O.D. insurance can be concluded with or without deductible. The deductible is an integral part of the insurance policy and can be applied differently to different risk categories: - deductible for car theft - deductible for damages - deductible at all risks Risk Inspection =============== To avoid attempted fraud, insurers require that the vehicle be photographed as follows: - a photo of each corner of the vehicle so that two adjacent parts can be seen - a photo of the interior of the vehicle showing the number of kilometers on board - a photo with the vehicle identification number - a photo of each additional endowment mentioned in the questionnaire application - a photo of each existing damage (in the version in which the vehicle has minor damage) - keys photo Insurance premium ================= Some insurance companies, in establishing the final M.O.D. premium for individuals, diversify the methodology according to several criteria: - age of the insured - year of obtaining the driving license - geographical area - number of kilometers traveled annually - the existence of other insurances with the same insurer - the car is out of warranty (in this situation at the time of a damage, its settlement will be made in authorized services except for dealerships) Loss Handling Process ===================== Damage agents, finds the damaged parts of the vehicle and proposes their repair or replacement. With a copy of the claim file, the insured will go to the car service to order the specified pieces and carry out the repair. If, during the repair works, other hidden damages are found, produced as a result of the insured risk, damages that could not be observed initially, together with the damaged and insured agent, an additional report will be completed. If this procedure is not respected, insurance companies will not pay for those extra damages. After the vehicle has been repaired, the service will send the final invoice to the insurer for acceptance. The damage inspector verifies whether the estimate initially accepted for service corresponds to the invoiced parts / services, and if so, he will give his payment acceptance. The insured person can then take their vehicle out of service. If there are differences between the initial estimate accepted by the insurer and the final invoice, the insurer will give its acceptance only for the amount related to the initial estimate, the differences will be paid by the insured. Compulsory home insurance (PAD) =============================== According to law no. 260/2008 and the implementing norms issued by the Insurance Supervisory Commission currently in Romania it is mandatory to provide housing insurance for individuals. All residential buildings are included in this form of insurance: holiday home, protocol housing, service housing, social housing, intervention housing, emergency housing. The classification of dwellings is made according to Law 260/2008 in 2 categories as follows: „Houses type A - construction with resistance structure made of reinforced concrete, metal or wood or with exterior walls made of stone, burnt brick or any other material resulting from a heat and / or chemical treatment, for which the insured sum is 20,000 EUR; After November 2023, it became 100,000 RON Houses type B - construction with exterior walls made of unburned brick or any other material not subject to heat and / or chemical treatment, for which the insured sum is 10,000 EUR." After November 2023, it became 50,000 RON The mandatory home insurance policy (PAD) has two major features that differentiate it from optional home insurance: - covers only the risks related to natural disasters: earthquake, floods and landslides - the insurance premium: 50 Ron for type B dwellings or 130 Ron for type A dwellings. The insurance premium is paid in lei at the NBR exchange rate on the day of payment **Facultative house insurance:** The insurance of a building can be concluded by any natural or legal entity, who holds the quality of owner, administrator, tenant, etc. The insurance of a building is usually done for a period of one year. For the insured buildings and contents, the insurers issue insurance policies, based on which they undertake to indemnify the holder of the insurance policy when the insured risks occur, provided that the insurance company has collected the insurance premiums. The insurers insure the buildings, the goods located at the address mentioned in the insurance policies as well as certain auxiliary expenses depending on the option of the insured, mentioned in the insurance policy. Also, it can be insured the liability towards third party. Buildings and other constructions intended for commercial or residential activities are provided in their constructive integrity (foundation, plinth, walls, floors, roof, floors, windows, doors, stairs). Along with the buildings, the water supply pipes for the sanitary and heating installations inside the building, the internal sewer pipes, the sanitary objects, the conductors of the lighting installation and the buried plugs under the plaster, the false ceilings and the lighting fixtures are also included. Fixed installations that ensure the general functionality of buildings / constructions (central heating, air conditioning, elevators, lightning protection) are considered insured only if their value is included in the insured sum and if they have been mentioned in the insurance policy. In the category of different constructions with their mention in the policy can be provided: fences, garages. In terms of content, the following can be provided: functional machinery, equipment, units, technological installations, motors, transformers, tools, furniture, control equipment, ovens, air conditioners, office equipment, telecommunications installations, radio-TV, means and installations. fire detection and extinguishing or anti-theft, technological pipes and electrical cables serving machines, equipment, motors and the like; other fixed assets and inventory items; The category of content insurance may also include goods that by their nature are, temporarily or permanently, outside the building under the open sky, insofar as they are designed specifically for this purpose (machines and equipment for work and arrangement located in the construction yards and for which protective measures have been taken, including against theft, appropriate to their nature. In addition, the following costs can be provided by expressing the option of the owners of the constructions: - design costs; - expenses for cleaning the place as a result of the insured risks; - expenses related to the intervention of firefighters for extinguishing fires Insured risks ============= In general, the insurance policy offers protection of buildings and their contents against the following risks: fire, lightning, explosion, earthquake, flood, theft, vandalism, landslides caused by natural causes, etc. Based on special clauses, with the payment of additional insurance premiums the insured risks can be supplemented. Due to the high degree of exposure to different categories of risks, insurers do not accept to insure certain goods (buildings, contents, etc.): buildings, degraded constructions that cannot be used for economic purposes, earthen huts, wells, dams, ditches, as well as other similar constructions, abandoned buildings without owner. Exclusions ========== They are not included in the insurance and therefore the damages caused by / or coming from: war, revolution, rebellion, confiscation, expropriation, nationalization, sequestration, atomic explosion, etc. are not compensated. It also does not provide money, securities, jewelry, securities, art objects. Insured Sum buildings ===================== In order to buy the insurance, the insured must provide certain data about the building: the year in which it was built, the surface, the type of materials used, the degree of finishing, etc. In the case of building insurance, the insured sum is determined according to the **market value**. If this is not possible, the building is usually provided at: - invoice/contract value in case of new value - the replacement value, representing the cost of construction. The replacement value per square meter is obtained from the evaluation tables per square meter, tables which are established by insurers according to the destination of the building and which are based on different criteria: construction structure, building roof, height, degree of finish. We have the following relationship **New Value (Replacement)=\> Surface** 𝒙 **New value per square meter** The contents of the building ============================ In the case of insuring fixed assets, inventory items, the insured amount can be determined depending on the remaining value of the goods or the market value. All goods may be insured on different groups: - General/normal goods - Electronics - Jewelries -- money and jewelries are not insured - Paintings/arts -- special terms Third Party Liability Insurance =============================== \- Physical damages to third parties (neighbors) **CLASS - PERSONAL ACCIDENT INSURANCE** PERSONAL ACCIDENT INSURANCE =========================== PERSONAL INSURANCE insurance can be organized both in the form of public insurance and in the form of private insurance. The first category of insurance is regulated by law and is mandatory for all legal entities or those of a similar nature. The second category are organized in the form of optional insurance and are present in the portfolio of insurance companies. The major differences between the two types of insurance refer to the insured amount, the premium quotation, the way of solving the compensations / indemnities The accident is a sudden event, occurred from outside and without a person\'s will - PERSONAL INSURANCE insurance refers to permanent and / or partial disability and death from an accident. According to the insurance legislation in force, these insurances constitute a distinct group within the general insurance and [are different from the life] [insurances]. - In addition to PERSONAL INSURANCE insurance, insurance companies also offer health insurance for both individuals and employees of legal entities. PERSONAL INSURANCE insurance can also be found in the form of additional clauses attached to the various insurance products: - to the motors' own damages insurance - the clause of accident, death from accident of the persons in the motor vehicle is attached - to the insurance of passenger carriers / carriers' liability - the clause for accident insurance of passengers is attached - to the insurance of the real estate's belonging to the individuals (house owners' insurance) - the accident clause of the persons permanently residing at the insured domicile is attached Insurers, through the PERSONAL INSURANCE policies intended for both legal and natural persons, to insure the risk of death and the risk of permanent disability, as a result of an accident. In the moment of asking for an offer, the insured or his representative will choose the sum insured for death from accident and the sum insured for permanent disability from accidents. In most cases the sum insured for disability is higher than the amount insured for death. The insured sum is established according to the exposure to risks of the person / persons who will be included in the insurance. The insured sum is a total one that includes the two insured sums specified above. Due to the specifics of this product, it is ideal for the insured to set a high amount of disability insured as high as possible, because when an accident occurs, the compensation will be correlated with the sum insured for disability. Insurance Premium ================= - The most important criterion is the category of risk -- the industry. There are thus several classes of risk: low-risk activities, medium-risk activities, high-risk productive activities, very risky activities. Additional clauses that may be attached to a PERSONAL INSURANCE policy include: - Hospitalization due to an accident - Temporary incapacity for work due to an accident - Death and permanent disability clause, due to occupational disease - Death clause at work due to a sudden event - The clause providing coverages for fractures and surgeries Indemnity ========= At the moment of an accident, the injured person or the representatives of the deceased person will notify the insurance company, and together with insurance representative the forms (claims) will be filled out Based on this claim file, the insurer pays an indemnity to the insured or the beneficiary, as compensation / indemnity. The amount of the indemnity is established depending on the degree of disability of the insured as follows: - The insured amount, in case of death or total permanent disability of the insured. - Part of the sum insured if the invalidity is partial. The payment amount is established on the basis of some coefficients applied to the insured amount, coefficients established depending on the degree of permanent disability established by the doctor - The degree of permanent disability will be established by the doctor, using the criteria for evaluating the degrees of permanent disability. If, on the basis of the first medical examination, the definitive degree of permanent invalidity cannot be established, it will be established after a second examination. In cases of obvious permanent disability, the determination of the degree of disability and the payment of the indemnity are made without waiting for the end of the treatment. The total amounts paid for cases of permanent disability may not exceed the amount insured for this risk. In order to resolve the claim, in case of an insured risk, the following documents are required: - the report of the accident suffered, issued by the authorized investigation or investigation party - the employee certificate, in case of insurances bought by the economic agents for their own employees; - identity card; - medical documents regarding the treatments received; - prescriptions, receipts, payment notes (original) regarding expenses with medicines and treatment; - for accidents resulting in the death of the Insured: the death certificate; the identity card of the beneficiary. The indemnity due, as a result of the occurrence of an insured risk, is paid to the following persons: - to the insured in case of permanent disability - to the designated beneficiaries or, in the absence of such designation, to the legal heirs, as beneficiaries in case of death of the insured