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INS21 - Download as Word Doc .doc), PDF File .pdf), Text File .txt) or read online. INS21 Costs of Insurance The benefits of insurance are not cost-free. Property and Liability Insurance Principles INS 21 Course Guide [AICPCU] on Get your Kindle here, or download a FREE Kindle Reading App. Start by marking “AINS 21 Property and Liability Insurance Principles” as Want to Read: Be the first to ask a question about AINS 21 Property and Liability Insurance Principles. This review has been hidden because it contains spoilers.

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Aug 1, The Paperback of the Property and Liability Insurance Principles: INS 21 Course Guide by Aicpcu/iia at Barnes & Noble. FREE Shipping on. Posts about ins 21 insurance certification written by Varun. Passed Certification - INS Posted: February 24, in Please download from the below link. Topics. AINS 21 Segment A Topics: Understanding insurance. Insurers and how they are regulated. Insurer financial performance. AINS 21 Segment B Topics.

Effectively apply RMI principles to your everyday work. Set yourself apart with a solid understanding of insurance operations and financial measurements. Skip to main content. You are here. Martin J Frappolli wrote a new wall post. Virtual Reality VR is defined as computer-generated environments or realities designed to

Thanks for telling us about the problem. Return to Book Page. Get A Copy. More Details Friend Reviews. To see what your friends thought of this book, please sign up.

Lists with This Book. This book is not yet featured on Listopia. Community Reviews. Showing Rating details. Sort order. Feb 25, Bradley Arlt rated it liked it. The only reason I read this is for work.

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And it turned out to be useful for everyday outside work life too. A good overview of the insurance biz. Why three stars? More complex examples would have been good, case studies and the like. And I found the book a little dry. You can't blame the subject.

I have read many other so-called dry subject material books that were a delight to read. That said, it wasn't painful to read either.. Taxes and Fees All the insurance companies in the fifty states levy premium taxes usually between 2 to 4 percent on all premiums generated by the insurers in a particular state.

Paid Losses All claim payments that an insurer has made in a given period.

INS 21: property and liability insurance principles : course guide.

Incurred Losses For a particular period equal to sum of paid up losses and changes in losses reserves loss reserves at the end of the period minus loss reserves at the beginning of the period. Advertising expenses can be significant component of acquisition expenses for most of the insurers. General Expenses The General Expenses include expenses associated with staffing and maintaining insurance departments such as accounting.

Other Underwriting Expenses In addition to the losses and loss expenses the cost of providing insurance includes other significant underwriting expenses.

Investment expenses include the salaries and all other expenses related to the activities of the investment department. Net Income before tax is its total earned premium and investment income minus its total losses and other expenses in the corresponding period. Admitted Assets are types of property such cash and stocks. These include money. Income Taxes Like other businesses insurance company pay income taxes on the taxable income. On their financial statement.

When an insurer adds its net investment gain or loss results to its net underwriting gain or loss.

So an insurance company must remain financially sound to pay losses. Assets These are property both tangible and intangible in nature.

Net operating income or loss After an insurance company has paid losses and reserved money to pay additional expenses. Gain or Loss from Operations An insurers net underwriting gain or loss is its earned premium minus its losses and underwriting expenses for the specific period. Its assets. Non Admitted Assets are types of property such as office furniture and equipment.

Major types of liabilities found on the financial statements of the insurers Liabilities are financial obligations or debts owned by a company to other entity. Insurers must record and report financial information in a consistent manner using various financial statements which include: Monitoring the financial performance of insurers The objective of most insurers include being profitable and remaining in business in the long term.

It is liability because it represents the insurance premiums prepaid by insured for services that the insurers have not yet rendered. Policyholder Surplus of an insurance company is equal to its total admitted assets minus its total liabilities.

Investment Income Ratio is calculated by dividing net investment income by earned premiums for a particular period. Comparing two items produces a ratio that highlights a particular aspect of financial performance.

Several such ratios are widely used in the insurance business. Profitability Ratio Several ratios measure the profitability of an insurance company.

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These profitability ratios are as follows: Financial Statement Analysis Analyzing the relationship of different items that appear on the insurer financial statements helps determine how well insurance companies are performing. These ratios are broadly known as Profitability Ratio. Combined Ratio is the sum of loss ratio and expense ratio. Overall Operating Ratio is calculated by subtracting the invest income ratio from the combined ratio. Capacity Ratio or Premium to Surplus Ratio is calculated by dividing its written premiums by its policyholder surplus.

Responsibilities of an Agent and the Principal. In the agency relationship. A Producer is any person who sells insurance products for an insurance company. Insurance Agents are legal representatives of the insurance company for which they have contractual agreement to sell insurance. In insurance. An Agency Contract or Agency Agreement is a written agreement between the insurance company and the agent that specifies.

Creation of Agency Relationship An agency relationship is usually created by written contract between principal and the agent. In agency relationship. It is a process of identifying customers and their needs and then creating.

Thus from insured point of view. The laws of agency impose five specific duties on all agents: The agency relationship. Errors and Omissions are negligent acts committed by a person in the conduct of insurance business that give rise to legal liability for damages.

Responsibilities of an Agent and the Principal to Third Parties An agency relationship also creates responsibilities to the Third Parties. Authority of Agents. The Law presumes that knowledge acquired by the agent is the knowledge acquired by the insurance company. An important factor involved in this duty is exposure of insurance agents to errors and omissions claims. Responsibilities of the Agent to the Principal In an agency relationship. According to the agency law.

Insurance agents generally have three types of authorities to transact business on behalf of the insurers: Binding Authority is a power to make insurance coverage effective on behalf of the insurer.

Insurance Marketing Systems Most Insurers use one or more of the following traditional marketing systems: Binding authority is generally granted to the agent in the agency contract and thus is a form of express authority.

Implied Authority is the authority that arises from actions of the agent that are in accord with the accepted custom and that are considered to be within the scope of authority granted by the principal.

A Binder. Independent Agency System An independent agency is an independent firm that sells insurance usually as a representative of several unrelated insurance companies. The MGA functions almost as a branch office for one or more insurance companies.

The Brokers are not legal representatives of the Insurer. Independent Agent is a producer who works for an independent agency. Managing General Agencies MGAs A Managing General Agency is an independent business organization that appoints and supervises independent agents for insurance companies that use the independent agency system.

One of the main distinguished features between independent agency system and other marketing systems ownership of the agency expiration list which is the record of present policy holders. They receive managerial commission often referred as override. Brokers shop among insurance companies to find the best coverage or value for their clients.

Brokers An insurance broker is an independent business owner or firm that represents customers rather than insurers. But in certain cases. As an exception to the foregoing. Exclusive Agency System An Exclusive agent is an agent that has a contract to sell insurance exclusively for one insurance company or a group of related companies. A direct writer is an insurer that uses the direct writing system to market insurance. Differences Among Traditional Insurance Marketing System Type of What marketing company or companies do the producer represent Does the insurer employ the producers?

How are producers usually Compensated? Does the Agency or Agent own the Expiration List? What methods of sales are usually used? Direct Writing System The direct writing system of an insurance marketing uses sales representatives who are employees of the insurance company. Direct Response System A direct response system includes any insurance marketing system that does not depend primarily on individual producers to locate customers and sell insurance but relays primarily on mail.

In this system. Such sales representatives are paid commission as well as office expenses. Mixed Marketing System This is a system which refers to the use by the insurer of more than one marketing system. Two types of commissions that producers typically earn are sales commissions and contingent commissions.

Phone or internet Compensation of Producers While some producers receive a salary. The more than producers one insurer are employed by the agency Usually one Usually No.

Sales Usually Yes. Phone or internet Mail. Phone or internet. Personal Contact. The commission compensates the agency not only for making the sale but also for providing service before and after the sale.

Sales Commission or simply a commission is a percentage of the premium that insurer pays to the agency or producer for the new policies sold or existing policies renewed.

Personal contact. Service provided before the sale includes. To make a sale. It is a commission that an insurer pays usually annually to an independent agency that is based on the premium volume and profitability level of the agency business with that insurer.

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Contingent Commissions In addition to the commissions based on a percentage of premiums. They are employees of the insurer whose role is to visit agents representing the insurer.

While the policy is getting to be renewed. After the sale. Different ways of motivation is payment of contingent commissions. Some states have several different licenses including license for agents. Some states such as California. Unfair Trade Practices Laws. As the producers are involved in the sales are often first to identify a need that could be addressed by either a new policy or modifications of an existing policy as they are actually aware of the competition in the market they recommend to the marketing department regarding the product management and development.

Product Management and Development Insurance Production is most successful when producers have a desirable product to sell at a competitive price. Motivation comes from the programs developed in the home office by way of financial incentives that producers receive for selling of insurance products.

These laws vary by state and change periodically. Licensed producers are required to adhere to all laws regulating insurance sales in the state or states in which they conduct insurance business.

Producer Motivation Insurance companies need to motivate their producers to sell the types of insurance the companies wants to sell. Sales contest. In other states. Makes false or misleading statements about dividends previously paid on any insurance policy. These are State Laws that specify certain prohibited business practices.

Tie — In — Sales It is unfair trade practice for a producer to require that the purchase of insurance be tied to some other sale or financial arrangement. Misrepresents the dividends to be received on any insurance policy.. Rebating Rebating is offering anything other than the insurance itself to an applicant as an inducement to buy or maintain insurance. It is also an unfair trade practice.

Other deceptive practices Other than above. Uses a name or title of insurance policies that misrepresents the true nature of policies. Underwriting Activities Underwriting includes the following activities: An Underwriter is an insurance company employee who evaluates applicants for insurance.

The underwriting selection process is not limited to the underwriters but also include producers and underwriting managers.

Capacity Considerations. Adverse Selection normally occurs if the premium is low related to the loss exposure. If insurers do not properly select policyholders and price coverages. Insurance company receives applications.

An insurance company cannot accept all applicants for two basic reasons: Underwriting is the process of insureds. Adverse Selection Considerations Adverse Selection is a situation that occurs because people with greatest possibility of losses are the ones most likely to purchase insurance. By spreading their risk among various type of insurance and different geographical areas.

Arranging Reinsurance Reinsurance is a contractual agreement whereby one insurer. An insurer must have adequate policyholder surplus to be able to increase in the volume of insurance it writes. Insurers attempt to protect their available capacity in three primary ways: Insurance companies allocate capacity by setting limitations on the amount of insurance they write for any one insured.

Optimizing use of available resources means that an insurance company shall use all its resources to make a profit from the line of business which it specializes. Optimizing use of available resources Various resources of an insurance company shall include financial resources. Insureds with similar loss exposure are grouped into similar rating classes.

A premium is commensurate with the exposure when the appropriate relationship exist between the size of the premium and exposure assumed by the insurer. Merit Rating serves two purposes: Premium Determination Rate is a price of insurance charged per exposure unit.

Type of Rates In determining the appropriate premium to charge for coverage. It encourages loss control activity by rewarding safety conscious insureds with lower premium or rate than those who do not participate in loss control. Many insureds within a rating class have loss characteristics that might not be fully reflected in Class Rate.

Pricing Coverage The Underwriting pricing objective is to charge a premium that is commensurate with the exposure. Class Rates They are also called manual rates or rates that apply to all insureds in the same rating category or rating class. If the reinsurance is readily available. The premium is determined by multiplying the rate by number of exposure units. Commensurate means showing an appropriate relationship. Class Rates have traditionally been published in rating manuals — books used by underwriters.

Merit Rating Plans modify class rates to reflect these characteristics. Some insurers develop their own standard forms that they use in policies for their insureds. Each Individual Rates reflects characteristics such as building construction.

Monitoring also applies to underwriting decisions on entire book of business. The insurer must decide what type of coverage it will provide to each applicant and then charge a premium appropriate to that coverage. Since underwriting decisions involve an assessment of loss potential. Insurance Advisory Organizations develop policy forms using standard insurance wording. Individual Rates Individual Rates are also called Specific rates are used for commercial property insurance on unique structures.

A book of business can also refer to all policies of an insurance company or agency or as a whole. Judgment Rates It is a type of individual rate is used to develop a premium for a unique exposure for which there is no established rate. A book of business also called as portfolio can refer to all policies in a particular territory or to all policies providing a particular type of insurance business.

These policy forms are referred as standard forms that contains standardized policy wordings. The rate is developed only after detailed inspection of the structure and its contents. Monitoring Underwriting Decisions Underwriters periodically monitor the hazards. Determining Policy Terms and Conditions Selection and Pricing are intertwined with the third underwriting activity — determining policy terms and conditions. With judgment rating. With some insurers underwriting authority is highly.

Treaty requires that primary insurer is required to reinsure and reinsurer must accept all the business covered by the treaty. Treaty Reinsurance and Facultative Reinsurance. There is no individual selection of policies. Arranging Reinsurance Another aspect of Underwriting Management is arranging reinsurance. Delegating Underwriting Authority An underwriting authority is the limit on decisions that an underwriter can make without receiving approval from someone at a higher level.

There are two broad categories of reinsurance i. Facultative Reinsurance This involves a separate transaction for each reinsurance policy and it is not an automatic binding between the primary insurer and the reinsurer that is the reinsurer evaluates individually each policy that is asked to reinsure. Treaty Reinsurance It is an arrangement whereby an reinsurer agrees to reinsure automatically a portion of all the eligible insurance of the primary insurer. Monitoring the results of underwriting guidelines Monitoring the results of Underwriting Guidelines includes taking steps to ensure that the underwriters are following guidelines in that underwriting objectives are being met.

An underwriting audit attempts to determine whether underwriters are following the guidelines. The Underwriting process comprises the following steps: If the guidelines are not followed there is no evidence as to whether they will work. If the guidelines are being followed it is necessary to determine whether they are having the desired results..

Other insurers are highly centralized with many or all final underwriting decisions are being made in the home office. The Underwriting Process An underwriting decision must be made on every new insurance application as well as on the renewal policies.

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Underwriting Management delegates extensive underwriting authority to the personnel in the field offices. The guidelines list the factors that should be considered by the underwriter for each type of insurance. Underwriting guidelines and bulletins explain how underwriter should approach each application. Many insurance companies also grant some underwriting authority to the agents who represent the company called frontline underwriters.

Consumer investigation reports — Several independent reporting services investigate and provide background information on prospective insureds.

Underwriting Information forms parts of the important element based on which underwriters make decisions. Hazards are condition that increase the chance of a loss occurring. Premium audit reports — A premium auditor provides such information as whether the premium charged is adequate. Production records — The record of the producer who brings in business also gives information. Analyzing Hazards An underwriter must evaluate four categories of hazards: Claim files — Claim files maintained by insurance companies also provides valuable information in forming decisions as to renewal of insurance.

Making the Underwriting Decision To make an underwriting decision. Government records — such as Motor Vehicle Records. Underwriters derive information from several sources: Inspection reports — Loss control representatives of insurance company inspect the premises and operations of insurance applicants. Field marketing personnel — Field personnel often provide additional insights to the underwriters based on their personal observation.

Financial rating services — There are firms involved in Credit rating business and provide such relevant information. Moral Hazards are dishonest tendencies in the character of the insured or applicant that increase the probability of a loss occurring. Evaluating Underwriting Options In evaluating each application. Hazards in a legal environment might include court decisions that interpret policy language in a way unfavorable to insurers.

Recommendation of additional loss control measures. Morale Hazards also known as attitudinal hazards involve carelessness about. The third option requires the greatest amount of underwriting creativity.

And finally implementing the Underwriting Decision. This can happen by modification of coverage.. Finally cancel or rejection of renewal depending upon the experience on the particular account. According to state insurance laws. Restrictions on Cancellation and Non-renewal Most state requires that insurers notify the insured a specified period such as thirty days before a policy is to be cancelled or non-renewed.

This notice is intended to give the insured an opportunity to replace the coverage. Regulation of Underwriting Activity Two important examples of the regulation of underwriting activity are: Modifying coverage. In other cases. A claimant is anyone who submits a claim to an insurance company.

For insurance purposes. A claim representative. Responsibilities of the Claim Representative The adjuster or the claim representative has the following responsibilities in the processing of a claim which are as under: In some cases. Respond Promptly to the Submitted Claim When a claim is reported. The first party to an insurance contract is the insured. Obtain Adequate Information. A third party to an insurance contract is a person or business that is not a party to the contract but who might assert a claim against the insured.

He should empathically. This text uses the term claimant to refer to a third-party claimant. Although the second party is technically the insurer. This evaluation hinges on two critical elements of the claim handling process: They are: Treat All Parties Fairly Throughout the claim handling process.

A reservation of rights letter is a notice sent by the insurer to an insured advising that the insurer is proceeding with investigation of a claim but that the insurer retains its right to deny coverage later.

A reservation of rights letter serves two purposes: Types of Claim Representatives Several different types of people participate in claim handling. If a question of coverage exists and insurer wishes to investigate.

Next in the process is to obtain adequate information pertaining to the claim to enable its processing. Properly Evaluate the Claim Valid and accurate information enables the claim representative to evaluate the claim. A Draft is similar to a check. Since agent is a person who gets all the relevant information about the claim the delay and expenses involved in contacting the insurance claim staff are eliminated.

Depending upon the size of the office. An Outside claim representative field claim representative is an insurance company employee who handles claims that cannot be handled easily by phone or mail. An inside claim representative is an employee who handles claims that can be settled.

They spend much of their time visiting the scene of loss. If a third party is involved the inside claim representative might use a tape recorder to take statements about the loss from the insured. Draft Authority is given to agents because insurance companies have found that allowing agents to handle small or routine claims results in both expense saving and increased goodwill. Independent Adjusters They are independent claim representatives who offer claim handling services to insurance companies for a fee.

A Staff Claim Representative in an insurance company performs some or all of the insurance claim handling activities. These independent adjusters can be either self employed or work for an independent adjusting firm.

Draft Authority is an authority expressly given to an agent by an insurer to settle or pay certain type of claims by writing a claim draft upto a specified limit.


If an agent has a draft authority. They handle claims that are clearly either covered or not covered and that do not involve questions about the circumstances or validity of the claim.

Agents An agency usually receives the first notification of a claim. Large independent adjusting firms sometimes function as TPAs for self insured business in addition to providing independent claims handling services to the insurers. This involves handling of the claim through establishing an internal claim department or by hiring third party administrator. Public Adjusters A public adjuster is a person hired by the insured to represent the insured in handling a claim.

Usually insured hires a public adjuster either because of claim is complex in nature or because of loss negotiation are not progressing satisfactorily. Internal Claim Departments If an organization is large enough.. Claim Handling Process. Product Liability. Internal Claim Administration Many organizations have developed self insurance plans to cover part or all of the loss exposure. Third Party Administrators The growth of self insurance plans has created a need for third party administrators who agree to provide administrative services to other businesses that have self insurance plan in handling their claims.

A Self Insurance Plan is an arrangement in which an organization pays for its losses with its own resources rather than purchase an insurance. Verifying Coverage In addition to determining the facts surrounding the loss the claim representative must determine the coverage provided by the policy will pay any or all claims submitted.

This investigation is necessary to determine the cause of loss. The claim handling procedures can vary widely depending on the type of claim involved. There are three steps that are involved in processing most claims: Investigation must reveal sufficient information to verify whether the coverage exists under the policy and the physical condition of the property before the loss occurred.

Determining the cause of loss and assessing damage For a property insurance claim investigation involves visiting the site to inspect the damaged property in determining the cause of loss and assessing the damage occurred. Property Insurance Claims Step 1: Investigation When a claim representative receives the initial report of a claim. Assessing damages involve such activities as valuation of the property damaged by verifying the market value.

In case of liability claims it takes years to settle and in case of property claims it might take few months to settle despite the unique challenges and variations in case to case.

Following are the checklist of questions which forms part of verifying the coverage: Is damaged property covered under the policy? Is the cause of loss covered under the policy? Step 2: Valuation For a claim representative the valuation of loss can be most difficult aspect of settling property insurance claims. Replacement Cost is the cost to repair or replace the property using new material or like kind and quality with no deduction for depreciation.

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Based on that specification. In commercial lines of insurance. Agreed Value is a method of valuing property in which the insurer and the insured agreed on the value of property at that time of policy is written. Depreciation is the allowance for physical wear and tear or technological or economic obsolescence. What is the value of the damaged property? In order to indemnify the insured according to the policy provisions. The most common property valuation methods are: How does the policy specify that the property be valued?

All property insurance policies include a valuation provision that specifies how to value covered property at the time of loss. Personal Property In case of replacement cost method the claim representative will buy the exact style and brand of the damaged property if the property is not obsolete.

AINS 21 Property and Liability Insurance Principles

Personal property and real property present different valuation problems. Once the claim representative has verified coverage and identified the valuation method specified in the policy. Step 3: Negotiation and Settlement claim representative estimates to those used for estimating payment of ACV takes place place once the actual repair or After the valuation process is complete.

Replacing the property when a partial loss had occurred involves restoring the property to its previous state as closely as possible. Real Property The replacement of the real property can be usually determined by using three factors: In some claims. If the party no longer available. For actual cash value however depreciation must be estimated.

For policies specifying Actual Cash Value method. He must use some guidelines to determine both replacement cost and actual cash value. Liability Insurance Claims Liability Claim handling can be complex for several reasons.

Constructive Total Loss exists when a vehicle or other property cannot be repaired for less than its actual cash value minus the anticipated salvage value. In liability claims. Investigation After receiving the first report of injury or damage. When insurer pays an insured for a loss.

While it is not always easy to determine the amount of loss in the property damage liability claims. The following points concentrates on the issue of legal responsibility. In case of bodily injury claims these damages usually include hospital expenses. Properly evaluating this medical report is critical in determining the amount of damages and is a distinguished factor in settlement of claims.

Punitive Damages are damages awarded by a court to punish wrong doers who. Valuation When bodily injury is involved. Step 3 Negotiation and Settlement While the award for damages might result from court decisions. The court then decides who is responsible and determines the value of the injury or damage. General Damages are compensatory damages awarded for losses such pain and suffering.

Doctor and miscellaneous medical expenses. Legal liability might involve following type of damages: The evaluation aspect of bodily injury claims requires experience and skill. Damage refer to a monetary award that one party is required to pay to another who has suffered loss or injury for which first party is legally liable. Special Damages Specific. If negotiations do not bring about a settlement.

Chapter 7: Refusing to pay claim without first conducting reasonable investigation based on all available information. Loss Exposures and Risk Management. Unfair Claim Practices Laws These laws are state laws that specify claim practices that are illegal. The validity of the contract depends upon four essential elements: An insurance policy must meet the same requirements as a valid contract which is legally enforceable agreement between two or more parties.

Segment C: Insurance Contracts. Failure to acknowledge and promptly respond to communications with respect to the claims arising out of insurance. Actions that compelled an insured to sue to recover amounts due under insurance policies by offering amounts that are substantially lower than the amounts ultimately recovered in legal actions brought by such insureds. Competent Parties For the contract to be enforceable. If either party to the contract can prove any of these circumstances.

If the property is illegally owned or illegally possessed goods then it is a invalid contract. One party must make a legitimate offer and another party must accept the offer. The One essential element of the contract is that agreement must exist between the parties of the contract. Insurance contracts must involve a legal subject matter.

Consideration Consideration is something of value given by each party to a contract. Individuals are generally considered to be contract and able to enter into legally enforceable contracts unless they are one or more of the following: The exam course material is available as a book and insurance terms, practice test are available in net. Also you can practise using Sample tests. Please download from the below link. This material is for review only.

Please buy the hard copy of the book. Varun's Weblog Diary of Experiences and thoughts…. Stay updated via RSS. February 24, in Day 2 Day Tags: Share this: Facebook Twitter.