FOI - Chapter 1 Instructor Slides PDF

 The Forgetting Curve Hermann Ebbinghaus (1850-1909), a German psychologist founded the experimental psychology of memory and from this the forgetting curve (the loss of learned information) came to light. What do you think The Forgetting Curve is going to be about? So...

 The Forgetting Curve Hermann Ebbinghaus (1850-1909), a German psychologist founded the experimental psychology of memory and from this the forgetting curve (the loss of learned information) came to light. What do you think The Forgetting Curve is going to be about? Source material: https://www.csustan.edu/sites/default/files/groups/Writing%20Program/forgettin g_curve.pdf The Forgetting Curve The Forgetting Curve  What can I do? We will have activities throughout the course to give you the opportunity to review, please participate! You are responsible for your own learning: at home you must study the textbook, bring questions to class, and continue to review throughout the week! For those of you who are scheduling your exams, keep in mind the Forgetting Curve - the more time between when you finish the prep course and when you take the exam gives you more opportunity to forget! Unless you continue to study and review, of course!  Course Expectations Students have two minutes to write out their expectations for this course in the chat window.  The Past Mistakes and Successes Students take two minutes to write down what sort of studying they have done in the past and what has not worked in the chat window.  INSURANCE BROKER CAREER PATH Focus (Level I) ○ New Broker - Basic licensing: FOI, CAIB, orientation, Intro to RIsk Management, Customer Service for Insurance Professional (CSIP), Seminars Achieve (Level II) ○ Experienced broker - CAIB designation, relevant seminar Succeed (Level III) ○ Advanced Broker (Principals/Managers) - CCIB, CPIB, BEST PRACTICES, Seminars, BBA, MBA  CHAPTER 1: Introduction to General Insurance A BRIEF PERSPECTIVE Insurance centers around risk sharing - people pool resources to help others in times of need 5000 BC, Chinese boat operators used many boats instead of one to go down river rapids September 1666, there was a fire in a bake shop that almost destroyed the city ○ Fire Insurance started in London, England. This led to the development of insurance policies.  FIVE FUNCTIONS OF INSURANCE i) Spread the Risk ○ Through Insurance, losses of the few are shared amongst many people ○ Insureds pay into a pot which runs the business and pays losses (claims) ii) Basis of Credit System ○ CONSUMER ACCESS TO INSURANCE FREES UP CREDIT ○ Insurance protects investments II) Eliminates Worry - Encourages Entrepreneurship ○ Insurance lets people try ventures without having to save up first ○ Insurance - Small expenditures (insurance premium), to cover large (future) losses  Five Functions of Insurance cont... iv) Loss Prevention and Loss Reduction ○ Insurance industry educates to prevent losses and reduce severity of losses ○ Road safety, fire prevention, anti-theft methods, nationwide campaign to fight insurance fraud v) Source of Employment and Investment Capital ○ INSURERS ARE MAJOR EMPLOYERS/INVESTORS ○ Canadian insurers have over 100,000 people: independent brokers, adjusters, actuaries ○ These businesses have (more) jobs because of insurance: car repair, construction, medicine, law, accounting Define of Avoidance: all chance of financial loss = gone. Ex. People renting instead of buying own business premises avoids chance for financial loss from ownership of property  DEFINITION OF INSURANCE FROM THE INSURANCE ACT ○ Undertaking by one person to indemnify another against loss OR liability (loss) in respect to a certain risk or peril that the insurance object may be exposed OR pays money or other thing of value when the event happens  DEFINITION OF INSURANCE ANALYSIS OF DEFINITION OF INSURANCE ○ i) Insurance → gives ways of shifting financial responsibility for a loss to another Allows people to shift financial obligations (accidental loss to their cottage) to insurance companies FOR MONEY (Premium) ○ ii) Payment made only when there is a happening of a SPECIFIC risk or peril INSURANCE DEFINITION OF RISK Chance of financial loss that the insurance object may be exposed Buying insurance covers theses exposures DEFINITION OF PERIL Cause of loss (fire, wind, hail)  DEFINITION OF INSURANCE ANALYSIS OF DEFINITION OF INSURANCE ○ iii) Amount of payment restricted to amount required to indemnify the insured PURPOSE OF INSURANCE - to indemnify OR compensate victim for a loss PRINCIPLE OF INDEMNITY - people receive THE ACTUAL amount of loss; no more (profit), no less (incomplete indemnity) DETERMINE AMOUNTS OF INDEMNITY - insurer tries to decide the value of the insured property as it was immediately before the loss  Definition of Insurance cont... ○ iv) Insurance COVERS losses that object of insurance MAY be exposed PURPOSE OF INSURANCE - pay for accidental AND future losses AND NOT for deliberate or past losses Deliberate losses → waste of resources for the society If people could buy insurance after a loss, then there would be no reason to buy insurance BEFORE ○ v) Indemnity provided can be money or another thing of value Insurance company’s right → can settle claim instead of repairing or replacing damaged items OR paying insured money for damage To repair or replace items may cost more for both materials and labour  Important Terms So Far Students take two minutes to write down one important term that has been discussed so far in the course, in the chat window. Remember the Forgetting Curve! PROPERTY AND CASUALTY (P&C) INSURANCE IN CANADA P&C OR GENERAL INSURANCE - all types of insurance ○ Automobile Insurance Auto insurance is more than 50% of all P&C premiums in Canada and exceed all other classes combined ○ Property Insurance Habitational AND business properties ○ Liability Insurance Protection WHEN insureds are (financially) responsible for injury/damage they cause to others PROPERTY AND CASUALTY (P&C) INSURANCE IN CANADA ORGANIZATIONS OF INSURANCE ○ Two types of insurance organizations in Canada: private insurance companies AND government insurers ○ PRIVATE INSURERS - majority a) Stock Companies $ to operate stock companies might come from private funds or through public sale of stock Ownership → Company shareholders whose purpose is to derive profits from investments PROPERTY AND CASUALTY (P&C) INSURANCE IN CANADA b) Mutual Companies ○ A corporation owned by policyholders ○ Profit is not primary focus ○ MAIN GOAL: provide policyholders with insurance at as low a price as possible ○ If company makes money, those funds are refunded to policyholders via. Dividends OR subsequent rate adjustments PROPERTY AND CASUALTY (P&C) INSURANCE IN CANADA GOVERNMENT INSURERS ○ Federal and provincial government ○ Provide insurance plans, medical insurance, employment insurance, workers compensation ○ COMPULSORY AUTO INSURANCE COVERAGES BC, SK, MB, Quebec SK → government competes with private insurers for property AND other insurance  HOW INSURANCE IS DISTRIBUTED (SOLD) Direct Writing System ○ Producers are employees of insurer Limited to sell only products the insurer provides Pay is either salary or commission OR combination of salary and a bonus. Insurer Owns all business written Does all administrative functions EXAMPLES Belair, RBC Insurance, Desjardin Insurance Company  HOW INSURANCE IS DISTRIBUTED (SOLD) Independent Brokerage System ○ Over 6,500 independent agency/brokerage insurance offices in Canada (33,000 people) ○ Over 80% of insurance is sold this way ○ In BC, SK, and MB: the compulsory government auto insurance is sold BROKERAGE OWNERS Not employees of insurers Usually represent more than one insurance company and Facility Association Brokerage owns business produced, AND gives policyholders client services Brokerage is paid commission (by insurer) on all business written to pay salaries, rent, postage, operating expenses  HOW INSURANCE IS DISTRIBUTED (SOLD) Agency System ○ Agents represent ONE insurer and the Facility Association Small business owners Paid commission and bonus for business sold Have ownership in their book of business ○ EXAMPLES: Desjardin Insurance Company, Cooperators General Insurance Company Lloyd’s of London ○ Conventional Property and Liability insurers → can write a lot of different types of insurance but there is still some that they cannot handle SO Lloyd’s of London is an insurance Market option  HOW INSURANCE IS DISTRIBUTED (SOLD) ○ LLOYDS... ○ NOT AN INSURANCE COMPANY Lloyd’s of London , est. late 17th C to write marine insurance Doesn’t transact insurance business Is a group of companies and individuals (UNDERWRITERS) who assume risk for themselves MEMBERSHIP IS OPEN to anyone who meets the financial requirements of Committee of Lloyd’s ○ SYNDICATES Marine insurance became (more) complex, so more underwriters were needed to subscribe to risks Syndicates → made of underwriting members OR names Underwriting agent manages affairs of EACH syndicate, appoints an expert underwriter for each class of business  HOW INSURANCE IS DISTRIBUTED (SOLD) THE SLIP ○ Non-writing members acting as broker intermediaries for Lloyd’s syndicates ○ Placing a risk at Lloyd’s, producer has to give broker with the underwriting information (details) via. A folded sheet of paper (slip) ○ Underwriter commits to a % of total limit of liability, AND WHEN 100% of risk is subscribed, slip is given to the Policy Signing Office ○ Portfolios of Lloyd’s underwriters: hot air balloons, oil rigs, nuclear power plant facilities…  Recall and Write Students have three minutes to summarize this chapter in 3 sentences or write a question about it, in the chat window. Remember the Forgetting Curve!