P&C insurance basics v2

1. 1

2. Agenda
 Property Insurance
 Liability Insurance
 Personal Insurance
 Commercial Insurance
 Life and Health Insurance
 Risk Management Techniques
 Common P&C terminology
2

3. Property Insurance
 Property insurance is a broad term for a series of policies that provide either property protection
coverage or liability coverage
 Property insurance provides financial reimbursement to the owner or renter of a structure and
its contents in case there is damage or theft, and to a person other than the owner or renter if
that person is injured on the property
 First party insurance: First-party insurance that indemnifies the owner or user of property for its
loss, or the loss of its income-producing ability, when the loss or damage is caused by a covered
peril, such as fire or explosion
 Can be classified as:
1. Personal
2. Commercial

4. Liability Insurance
 Liability insurance provides the insured party with protection against claims resulting from
injuries and damage to people and/or property
 Liability insurance policies cover both legal costs and any payouts for which the insured party
would be responsible if found legally liable. Intentional damage and contractual liabilities are
generally not covered in these types of policies. (Third-party insurance.)
 There are three forms of liability insurance:
1. Public liability  Guest slipping at home
2. Professional indemnity  Doctor having insurance
3. Product liability  Toy manufacturer

5. Types of Insurance

6. Personal Insurance
 Personal insurance is the collective name for the different types of insurance products available
to cover the personal items you may own, such as your car (car insurance) or your home and
personal possessions (home insurance), or the activities you carry out, such as your holiday
(travel insurance)
 It can also cover the different variations within these categories, such as young driver insurance
and convicted driver insurance, or non-standard home insurance
 Some of these products are required by law and some are optional
Examples:
 Personal Auto Insurance
 Personal Liability Insurance
 Homeowners insurance
 Renters Insurance

7. Commercial Insurance
 Commercial insurance is insurance that protects businesses
 It covers businesses against losses, arising from things like damage to property or injury to
employees, and is a term commonly used to label core business insurance covers like public
liability and employers’ liability
Examples:
 Product liability insurance
 Business buildings insurance
 Business contents insurance
 Business interruption insurance
 IT equipment and laptop cover
 Stock insurance
 Tools and equipment insurance
 Plant and machinery insurance

8. Life and Health Insurance
 Health insurance is a type of insurance coverage that pays for medical and surgical expenses
incurred by the insured. Health insurance can reimburse the insured for expenses incurred from
illness or injury, or pay the care provider directly.
 It is often included in employer benefit packages as a means of enticing quality employees.
 Living(Health insurance) vs non living(Life insurance)
Difference:
Health & Medical Insurance are same and cover the eventuality incase one gets ill and needs a major
surgery/treatment/hospitalization. Life Insurance on the other hand covers the eventuality of death,
where the sum assured goes to the Nominee.

9. Types of Risk Management Techniques
Risk management involves the following:
1. Identifying and analyzing risk exposures
2. Examining possible risk management techniques
3. Choosing the appropriate techniques
4. Implementing the risk management technique
5. Monitoring or revising the plan implemented as required
Other ways to treat loss exposures:
1. Loss Control
2. Avoidance
3. Noninsurance transfer
4. Retention

10. P&C terminology
Actuary
A person concerned with the application of probability and statistical theories to the practical problems of insurance and related fields.
Actuarial responsibilities extend to the calculation of premiums, evaluation of various reserves, forecasting of financial results on both a
long-range and a short-range basis.
Binder
A temporary insurance contract pending the execution of the policy contract. It should contain a definite time limit, should be in writing,
and clearly designate the company in which the risk is bound, the amount and the perils insured against, as well as the type of insurance.
Claim
A demand for payment under an insurance contract or bond. The estimated or actual amount of a loss.
Coverage
A guarantee against specific losses provided under the terms of an insurance policy. It is used interchangeably with the words
“insurance” or “protection” and also may refer to the amount of protection afforded under an insurance policy or to the insurance
contract itself.
Deductible
The amount of a loss, which the insured has to pay.

11. P&C terminology
Peril
Cause of a possible loss, such as fire, theft, explosion, etc.
Earned premium
That part of an insurance premium which pays for the protection the insurance company has already given on a policy.
Endorsement
A provision added to a policy, to effect a change or alteration of terms or conditions; must be signed by an executive of the company
and attached to and made part of the policy to be valid.
Exposure
This term may refer to the state of being subject to the possibility of loss or the extent of risk as measured by payroll, receipts, area or
other standards.
Grace period
A period of time, usually thirty-one days following the premium due date, during which a premium may be paid. The policy remains in
force throughout this period.
Hazard
A specific situation that introduces or increases the probability of the occurrence of a loss arising from a peril, or that may influence the
extent of a loss.

12. P&C terminology
Liability limits
The sum or sums beyond which a liability insurance company does not protect the insured on a particular policy. The majority of
policies covering liability for bodily injury have two limits: a limit of liability to any one person; and another limit, usually higher, for
any single accident where more than one person is involved.
Subrogation
The right of the insurance company to recover from a third party the amount paid under the policy
Tort
A legal wrong committed on a person or property apart from a responsibility in a contract.
Underwriter
The individual whose duty it is to determine the acceptability of insurance risks; a person whose duty it is to select risks and
determine the amounts and terms by which the insurance company will accept the risks.
Actual cash value
The present-day value of property measured in cash, arrived at by taking the replacement cost and deducting for depreciation
brought about by physical wear and tear and obsolescence.
Replacement cost property insurance
Insurance providing the amount payable to the insured as the replacement cost of the property new, rather than the depreciated
value applied to the building structures or contents.

13. Types of P&C insurance
Fire and Allied
Lines
Auto Physical
Damage
Inland MarineOcean Marine
Crime
Business
Income/Business
Interruption

14. Fire and Allied Lines Insurance
 Allied lines are any type of property-casualty insurance closely related to fire insurance coverage
 Allied lines coverage is almost always taken out along with a standard fire insurance policy
 Allied lines includes coverage for wind and water damage and vandalism.
 In some instances, the coverage provided by allied lines insurance is very broad.
 For example, if the policy covers situations that are considered acts of nature, the terms are likely
to include specific events such as earthquakes, floods, lightning strikes, wind damage from
tornadoes or hurricanes and possibly even avalanches
 Allied lines insurance covers a variety of perils, including but not limited to:
Demolition charges, Increased cost of construction, Radioactive contamination, Sprinkler
leakage, Explosion, Riots, Strikes and Malicious Damage, Cyclone, Flood, Tidal Wave,
Earthquake & Volcanic Eruption, Tsunami

15. Business Income Insurance
 Business interruption insurance is a form of insurance coverage that replaces business
income lost as a result of an event that interrupts the operations of the business, such as fire or a
natural disaster.
 Business interruption insurance is not sold as a separate policy, but is either added to a
property/casualty policy or included in a comprehensive package policy.
 This type of policy pays out only if the cause of the business income loss is covered in the
underlying property/casualty policy.
 Business interruption insurance coverage extends until the end of the business interruption
period, as determined by the insurance policy.
 The amount payable is usually based on the past financial records of the business.
What Business Interruption Insurance Covers
 Profits, Fixed Costs, Temporary Location, Commission & Training Cost, Extra Expenses, Employee
wages, Taxes, Loan payments

16. Crime Insurance
 Business crime insurance is a type of insurance policy that a business can buy to protect
itself from losses from business-related crime.
 Protection through the policy can cover cash, assets, merchandise or other property loss when
someone perpetrates fraud, embezzlement, forgery, misrepresentation, robbery, theft or any
other type of business-related crime on the company.
 Business crime insurance protects the assets, operations and reputation of businesses of all sizes,
and is especially important for businesses that deal in cash or in online payment systems, whether
those use credit cards or other types of payment methods.
 A business crime insurance policy will usually have different limits of coverage for losses incurred
on the property of the business vs off-property

17. Ocean Marine Insurance
 Insurance covering the transportation of goods and/or merchandise by vessels crossing both
foreign and domestic waters including any inland or aviation transit associated with the
shipment.
 This type of marine insurance also encompasses coverage for damage to the vessels involved in
shipments and any legal liability arising in the course of shipment.
 Ocean marine encompasses a variety of insurance coverage designed to protect merchandise,
goods, workers, passengers and crews aboard shipping vessels and cargo storage during marine
transport domestically or abroad.
 Ocean marine insurance also covers other stages of an ocean marine shipment, including land or
air transportation connected to the marine shipment
 Provides 3 types of insurance under 1 policy:
i. Hull coverage
ii. Cargo coverage
iii. Liability coverage (Protection and Indemnity insurance)

18. Inland Marine Insurance
 Property insurance for property in transit over land, certain types of moveable property,
instrumentalities of transportation (such as bridges, roads, and piers, instrumentalities of
communication (such as television and radio towers), and legal liability exposures of bailees.
 Many inland marine coverage forms provide coverage without regard to the location of the
covered property; these are sometimes called "floater" policies.
 As a group, inland marine coverage forms are generally broader than property coverage forms.
 Common examples of property that requires Inland Marine Insurance include:
i. Transportation equipment (e.g., a food truck).
ii. Property in transit (e.g., cooking supplies stored and used in a food truck).
iii. Artwork or other valuables (e.g., a sculpture or painting in a restaurant).
iv. Accounts receivable.

19. Auto Physical Damage Insurance
 Automobile insurance coverage that insures against damage to the insured's own vehicle.
Coverage is provided for perils such as collision, vandalism, fire, and theft.
There are two main types of physical damage coverage available on an insurance policy:
 Collision insurance: Jenny has collision insurance on her new car. If Jenny backs her car into a
cement pole in a gas station parking lot, her collision coverage will pay for the damage to her
vehicle because her accident falls under the definition of “collision” in her insurance policy.
 Comprehensive car insurance (sometimes referred to as “Comp” or “OTC”, Other Than
Collision): Colin’s car is stolen from the driveway of his home. The insurance company will pay for
Colin’s car to be replaced as a result of having comprehensive coverage in his insurance policy. In
this example, the car was not damaged by way of a collision (running into an object, or rolling over
as a result of loss of control while driving), so collision coverage alone wouldn’t be sufficient to
replace Colin’s car.

20. Comprehensive or OTC coverage
inclusions
Comprehensive or “Other-than-collision coverage” also covers the following:
• Fire
• Theft
• Riot
• Hail, water, or flooding
• Explosion (including earthquake)
• Vandalism
• Windstorm
• Damage resulting from a bird or another type of animal
• Breakage of glass – Please note, if broken glass is a result of a collision, be sure to claim it that way to
avoid paying two deductibles
• Missiles or falling objects – not missiles in the military sense, those are specifically excluded under
“acts of war.”