Introduction to Commercial Lines Insurance

1. Welcome toIntroduction to Commercial LinesAlison Cooper FCII

2. CLASSES OF INSURANCE

3. Module 9 Objectives At the end of this module you should be able to:- State what is understood by commercial property Identify risks for commercial property Explain the cover provided by a Fire & Special Perils policy Explain the difference between indemnity & reinstatement Explain the reinstatement clauses Explain the operations of the Day One clause and calculate premiums Explain the operations of the stock declaration clause

4. WHAT IS PROPERTY? • Buildings • structures • surrounding property • Fixtures & fittings • Contents • machinery, office equipment, • Stock • Raw materials, work in progress, finished goods

5. FIRE Actual ignition, fortuitous Excluding earthquake, subterranean fire ‘Its’ application of heat/spontaneous combustion LIGHTNING EXPLOSION Limited to? Full (Special peril) A.B.I STANDARD FIRE & SPECIAL PERILS POLICY

6. SPECIAL PERILS Aircraft Riot, Civil Commotion, Malicious damage Earthquake, Subterranean fire Spontaneous combustion Storm, Flood, Escape of Water, Sprinklers Impact – own or third party Subsidence, landslip, heave

7. Riot, Civil Commotion, War Radioactive Contamination Pollution and Contamination FIRE GENERAL MARKET EXCLUSIONS

8. Terrorism Marine Risks Consequential Loss More Specific Insurance FIRE GENERAL EXCLUSIONS 2 Profit

9. FIRE CONDITIONS Subsequent to the contract Under insurance Contracting Purchasers Non-disclosure Alteration Warranties Reasonable precautions • Precedent to liability • Claim notification • Fraud • Reinstatement • Insurer’s rights • Contribution • Subrogation • Arbitration

10. BASIS OF SETTLEMENT Indemnity Reinstatement Pay value at time and place Pay value at time and of loss less depreciation place of loss without wear and tear deduction for depreciation, wear and tear Sum Insured adequate Sum Insured adequate at at of loss time of reinstatement 100% Average clause85% Average clause

11. DAY ONE REINSTATEMENT Declared Value = Costs of reinstating on first day of policy Insurers Liability = Declared value + 50% Premium: Adjustable basis: add 7.5% and 50% of difference at year end Non-adjustable:add 15%

12. DAY ONE PREMIUM Adjustable: Day One Declared Value x Rate + 7.5% = Deposit £2,000,000 x 0.1% + 7.5% = £2,150 Non-adjustable: Day One Declared Value x Rate + 15% = Premium £2,000,000 x 0.1% + 15% = £2,300

13. STOCK DECLARATION Sum Insured = Maximum value risk 75% deposit premium Regular declarations Premium adjustment on average declaration Beware of declaration value Maximum SI if no declaration/high declaration Nil can be valid

14. Module 10 Objectives At the end of this module you should be able to :- Explain the legal definition of Theft and the cover provided State the exclusions and optional extensions of the standard Theft policy Briefly describe the application of the PA assault extension Explain the need for Goods in transit insurance and the cover provided State the exclusions under an ‘All Risks’ policy

15. ADDITIONAL COSTS Architect’s, Surveyor’s, Engineer’s fees Debris Removal Public Authorities Clause incurred following an insured eventproviding adequate sum insured

16. A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it.’ THEFT ACT 1968

17. THEFT COVER To indemnify the insured for loss or damage to the property insured as a result of entry or exit to the premises as a result of forcible and violent means Excluding: Methods of entry Types of property Cause of damage

18. PROPERTY INSURED Stock Contents excluding stock Buildings if insured responsible replacement of locks external glazing

19. THEFT POLICY EXTENSIONS First Loss Collusion Full Theft Temporary Removal Index Linking

20. THEFT UNDERWRITING

21. TYPES OF ‘ALL RISKS’ POLICIES Money Goods in Transit Industrial ‘All Risks’ Addition of Accidental Damage peril Contractors ‘All Risks’ Building works, machinery, tools, Liabilities

22. MONEY INSURANCE Covering ‘all risks’ of loss of money, the responsibility of the insured anywhere in the United Kingdom

23. MONEY EXCLUSIONS Errors and omissions Depreciation Use of keys Dishonesty of employees/directors Market exclusions

24. On premises - out of business hours £250 in safe safe limitLoss/damage to safe/strong-room UnlimitedPDH directors/ employees £500 In transit £5,000 employees security company £20,000 Non-negotiable money £250,000 Any other loss Specified Clothing/P.E. Insured, Director, Employee £500 MONEY POLICY LIMITS

25. PERSONAL ACCIDENT ASSAULT Accidental bodily injury as a result of an attempt to steal money Benefits Death Loss of limb/ eye Permanent Total Disablement Temporary Total Disablement Temporary Partial Disablement Medical Expenses

26. GOODS IN TRANSIT COVER

27. TYPES OF POLICY Specified Vehicle Limit agreed per vehicle Declaration policy Limits anyone consignment/loss Adjustable

28. G.I.T EXCLUSIONS Wear, Tear, Gradual deterioration Confiscation Consequential Loss Specified ‘hazardous’ goods Excess

29. G.I.T. EXTENSIONS Debris removal Tarpaulins, ropes, chains Sea Transits

30. INDUSTRIAL ‘ALL RISKS’ Accidental loss, destruction or damage to the property of the insured Special Machinery All property Exclusions of causes of damage very important

31. ‘ALL RISKS’ EXCLUSIONS ABSOLUTE OTHER DELETE BUYBACKSCLASSES WITH CARE War Marine Property in the Theft Terrorism Aviation open Money Radioactive Motor Unoccupied Goods in premises Transit Sonic Bang Livestock Computers Pollution Jewellery Subsidence Glass

32. Module 11 Objectives At the end of this module you should be able to :- Explain the intention of a Business interruption policy Define Gross Profit on a difference basis and calculate the figure from simple accounts Identify the sum insured and insurer’s liability under a Declaration Linked policy Explain indemnity period Illustrate the impact of time on the required sum insured Explain & outline cover

33. BUSINESS INTERRUPTION To indemnify the insured for for the effect which damage to property has on the income of the business

34. ACCOUNTS Record of business’s transactions in a snapshot of time Trading Account Items relating directly to costs of production Difference between two sides = Accountant’s Gross Profit Profit and Loss Account Reflects the indirect costs of production Difference between two sides = Accountant’s Net Profit

35. TURNOVER ‘The money paid or payable to the insured for goods sold and delivered and for services rendered in the course of the business at the premises’

36. TURNOVER Profit Othercosts RawMaterials Salaries Packing/carriage Wages Utilities

37. GROSS PROFITDIFFERENCE BASIS Sum of: Turnover plus closing stock and work in progress Less the sum of: Opening stock and work in progress plus Uninsured Working Expenses

38. DIFFERENCE BASIS GrossProfit

39. INDEMNITY PERIOD The period beginning with theoccurrence of the damage and ending not later than the Maximum Indemnity period during which the results of the Business have been affected in consequence of the damage

40. INDEMNITY PERIOD INDEMNITY PERIOD T B A Fire • T = Turnover • A = level of turnover equal to level at date of damage • B = level of turnover equal to • ‘would have been position’

41. I.P. FACTORS Availability of alternative premises Ease of repair existing premises Availability of raw materials Lead time on machinery Inter-group assistance Seasonal business Recover market position

42. ADEQUATE SUM INSURED £1,000’s LimitRequired 300 200 100 Growth Growth Growth CalculatedGross Profit Time Year ofaccounts CurrentYear Policy Year IndemnityPeriod

43. DECLARATION LINKED Declared Value = Insured’s Estimated Gross Profit for the period of insurance Insurer’s liability 133.3% of declared figure Average does not apply 75% Deposit premium, adjust within 6 months Maximum return – 50% of deposit

44. B. I. OPERATIVE CLAUSE IF - after payment of the premium any building or other property used by the INSURED at the PREMISES for the BUSINESS be DAMAGED DESTROYED by an INSURED PERIL and the business be INTERRUPTED then Insurers willPAY the amount of the LOSS in accordance with the policy TERMS AND CONDITIONS

45. B. I. PERILS Standard policy: Fire Lightning Explosion – Domestic & production boilers & domestic gas Additional perils: As per Material Damage policy All Risks Engineering risks Notifiable disease, Vermin, Defective sanitation, Murder, Suicide

46. MATERIAL DAMAGE PROVISO Material damage policy in force that has paid for material damage has admitted liability would have paid but for large excess Because Funds to rebuild and minimise effect of interruption Warranties of property policy apply Claim investigated

47. STANDARD B.I. EXCLUSIONS

48. STANDARD CLAUSES Professional Accountants fees Alternative trading Alterations Market conditions

49. Module 12 Objectives At the end of this module you should be able to :- Explain how liability arises in the UK State the statute that created the need for EL insurance Outline the meaning of employee, business, territorial limits and limits of indemnity for EL, TP and PL policies Distinguish between the cover provided by Employers, Public and Product Liability policies

50. CHARACTERS IN LAW ClaimantDefendant Judge The wronged party The party alleged Power to grantbringing the action to be liable damages; injunction or performance • ?