Audit on Policy

 An audit on a General Liability policy involves a thorough examination of the policyholder's records to ensure that the insurance coverage accurately reflects the level of risk exposure and the premiums paid. This audit process is typically conducted by the insurance company or a third-party auditor to verify the policyholder's information and determine if any adjustments are needed. Here's an overview of what's typically involved in a General Liability policy audit: Policy Information Review: The auditor will start by reviewing the policyholder's insurance policy and the terms and conditions of the coverage. They will verify the policy details, such as the policy period, coverage limits, exclusions, and endorsements.

Business Activities Assessment: The auditor will assess the insured's business operations and activities to ensure that the correct classification codes are assigned. Different industries and business activities may have varying levels of risk, which affects the premium calculations.

Payroll Records Examination: For businesses with a premium based on payroll, the auditor will review payroll records to determine if the number of employees and their job classifications aligns with the policy declarations. Misclassifications or underreported payroll could result in premium adjustments.

Sales and Receipts Verification: If the General Liability premium is based on sales or receipts, the auditor will examine financial records to verify the accuracy of reported figures.

Certificates of Insurance Verification: If the policyholder has subcontractors or vendors, the auditor may request certificates of insurance to ensure that adequate coverage is in place and that the policyholder is not unknowingly exposed to additional risks.

Additional Insured Status: The auditor will check if any entities or individuals have been added as additional insureds on the policy and confirm that these endorsements are correctly applied. Coverage Gaps and Limit Adequacy: The auditor will look for potential coverage gaps and assess whether the policy's limits are sufficient to protect the policyholder adequately.

Endorsements and Changes: The auditor will check for any mid-term changes or endorsements that might have been added to the policy during the coverage period and verify their accuracy.

Premium Calculation Accuracy: The auditor will review the premium calculations to ensure that they align with the policy terms, business activities, and other relevant factors.

Report and Adjustments: After completing the audit, the auditor will provide a report outlining any discrepancies or adjustments needed. If the audit results in additional premium owed, the policyholder will receive a billing notice, and if there's a surplus premium, a refund will be issued.

It's essential for policyholders to cooperate fully during the audit process to ensure accurate and fair premium assessments. Failure to cooperate or providing inaccurate information may lead to policy cancellations or other penalties.

Example : Audit can be performed in two cases

1) On Expired policy we can perform Audit

2) On a cancelled policy we can perform Audit

Types of Audit:

1) Final Audit

2) Final Audit Revise

3) Final Audit Reversal

For example on a policy you performed Final Audit & Audit premium generated as $500

Now you want to Reverse it. We can do reversal on same policy by performing Final Audit Reversal. Where $500 will be negated again.

Example for Final Audit Revise: On a policy you performed Final Audit & Audit premium generated as $500. Now you want to Revise it. Perform Final Audit Revise & change exposure or add new location. So that Revise can generate more premium which is positive or negative depending on the changes made by the Insured.

What is the use of non-premium bearing policy change or Endorsement?

 Non-premium bearing Policy Change or Endorsement use:

When we want to do any specific change without charging any premium. Then it is called Non-premium bearing policy change or Endorsement.

Example: If want to update Named Insured or any minor address change or change in company or organization name.

In case of Commercial Auto insurance Named Insured or any minor address change or change in company or organization name, adding Chasis Number or change in color o the vehicle

Offsets costs in a Composite policy

 In the context of insurance, a composite policy refers to a type of insurance policy that combines coverage for multiple risks or perils under a single contract. These policies are typically tailored to meet the specific needs of the insured, and they can include various lines of coverage, such as property, liability, and other specialized coverages.

"Offsetting costs" in a composite policy generally means that the premium or cost of the overall policy is reduced or balanced by the inclusion of multiple coverages within the same policy. This approach is often used to provide cost savings compared to purchasing individual policies for each risk separately.

The idea behind offsetting costs is that the insurance company can offer a more competitive premium when bundling several coverages together since it spreads the risk across multiple types of coverage. By doing so, the insurance company can provide better pricing for the insured and make the composite policy more attractive.

For example, suppose a business owner wants to purchase insurance for their retail store. Instead of buying separate policies for property insurance, general liability insurance, and workers' compensation insurance, they might choose a composite policy that combines all these coverages into a single package. This composite policy could have a lower overall premium compared to the combined premiums of individual policies, helping the business owner save on insurance costs.

It's important to note that while composite policies can offer cost savings and convenience, it's essential for the insured to carefully review the policy terms and coverage details to ensure that all their specific risks and needs are adequately addressed. Working with an experienced insurance agent or broker can be beneficial in understanding the coverage and finding the best policy for the individual or business.

Composite policy

 Composite policy is a group policy in which Composite Rating is used for premium calculation. Instead of Individual User a specific group of people will buy composite policy to cover multiple risks with shared premiums. So that premium will be less for every individual in the group.

Composite Rating: In insurance, a composite rating is a method where an insurer groups together various insured entities or individuals and determines a single premium rate for the entire group. The premium is calculated based on a weighted average of the risk characteristics of the members in the group. This approach allows the insurer to simplify the underwriting and rating process, especially when dealing with large groups with diverse risk profiles.

In composite policy, composite groups will be created based on premises only, prodops only or depending on both. Again those will be assigned to the exposure to generate group premium.

In Composite policy offset costs will be generated. We can include or exclude additional coverages from Composite premium.

Difference between Duckcreek VS Guidewire

 Duck Creek and Guidewire are two separate software companies that provide insurance software solutions to the industry. They offer different products and services, but their primary focus is on serving the insurance industry and helping insurance companies manage their policies, claims, billing, and other operational aspects. Here's a comparison of Duck Creek and Guidewire:

Company Background:

Duck Creek: Duck Creek Technologies is a global software company that specializes in providing core systems for property and casualty insurers. They offer various software solutions, including policy administration, rating, claims management, billing, and underwriting.

Guidewire: Guidewire Software, Inc. is another global software company that focuses on providing core system software for property and casualty insurers. Their flagship product is Guidewire InsuranceSuite, which includes policy, billing, and claims management systems.

Product Offerings:

Duck Creek: Duck Creek offers a range of products, including Duck Creek Policy, Duck Creek Claims, Duck Creek Billing, Duck Creek Rating, and more. These products are designed to help insurers streamline their operations and enhance customer experience.

Guidewire: Guidewire's primary offering is the Guidewire InsuranceSuite, which includes PolicyCenter for policy administration, BillingCenter for billing management, and ClaimCenter for claims handling. In addition to these core products, Guidewire provides various other related solutions.

Technology and Integration:

Duck Creek: Duck Creek's software is known for its modern architecture and flexibility, making it easier for insurance companies to integrate it with other systems and third-party applications.

Guidewire: Similarly, Guidewire's solutions are built on a modern technology platform, allowing for seamless integration with existing systems and other industry-specific tools.

Market Presence:

Duck Creek: Duck Creek serves a global customer base, ranging from small regional insurers to large multinational carriers. They have a significant presence in the property and casualty insurance market.

Guidewire: Guidewire is also a well-established player in the insurance software market, with a strong presence in North America and expanding to other regions as well.

Customer Base:

Duck Creek: Duck Creek caters to a diverse set of customers, including carriers from personal, commercial, and specialty insurance lines of business.

Guidewire: Guidewire primarily targets property and casualty insurers, including those offering personal and commercial lines of insurance.

It's important to note that the insurance industry is highly diverse, and the software needs of each company may vary depending on their size, geographical location, and specific business requirements. As such, the choice between Duck Creek and Guidewire (or any other insurance software provider) would depend on the insurer's specific needs and priorities. Companies often conduct a thorough evaluation of different software solutions before selecting the one that best aligns with their business objectives.

Duckcreek is built on .net frame work & Guidewire is built on Java platform.

I have used both Duckcreek & Guidewire PAS. Currently we are using Guidewire PAS.

What is Line of Business in Insurance or LOB?

 In the insurance industry, the term "line of business" refers to the different categories or types of insurance products and services that an insurance company offers to its customers. Insurance companies provide coverage and financial protection to individuals, businesses, or organizations against various risks in exchange for regular payments known as premiums.

Here are some common lines of business in the insurance industry:

Property Insurance: This includes insurance coverage for physical properties such as homes, commercial buildings, and other real estate against damage or loss due to perils like fire, theft, vandalism, or natural disasters.

Casualty Insurance: Casualty insurance primarily covers liability risks and provides compensation for injuries or property damage caused to third parties by the insured. It includes auto insurance, general liability insurance, and professional liability insurance (errors and omissions insurance).

Life Insurance: Life insurance offers financial protection to the beneficiaries of the insured in the event of their death. Different kinds of life insurance, including term life insurance, whole life insurance, universal life insurance, and variable life insurance.

Health Insurance: Health insurance benefits are coverage for medical expenses, including hospitalization, surgeries, medications, and preventive care.

Commercial Insurance: This line of business focuses on providing insurance solutions to businesses and organizations. It may include property insurance for commercial properties, liability insurance, and other specialized coverages tailored to the needs of the business.

Workers' Compensation Insurance: This line of business provides coverage for medical expenses and lost wages to employees who are injured or become ill while performing their job duties.

Specialty Insurance: Specialty insurance covers unique or specific risks that are not typically addressed by standard insurance policies. Examples include travel insurance, aviation insurance, marine insurance, and cyber insurance.

Each line of business may have different underwriting guidelines, pricing structures, and risk assessment processes. Insurance companies may choose to specialize in one or multiple lines of business based on their expertise and market focus. By offering a diverse range of insurance products, companies can cater to the specific needs of their customers and mitigate various types of risks.

Examples of LOB are: General Liability Insurance, Commercial Auto Insurance, Primary Casualty Insurance, Commercial Property Insurance, Inland marine etc.

Difference between Commercial lines vs Personal lines Insurance

 Commercial lines insurance and personal lines insurance are two broad categories within the insurance industry that serve different markets and types of policyholders. The main differences between them:

Target Market:

Personal Lines Insurance: This type of insurance is designed for individuals and families to protect their personal assets and provide coverage for their personal needs. Examples of personal lines insurance include auto insurance, homeowners insurance, renters insurance, and personal umbrella insurance.

Commercial Lines Insurance: Commercial lines insurance is tailored for businesses and organizations. It provides coverage for businesses' assets, liabilities, and risks associated with their operations. Examples of commercial lines insurance include commercial property insurance, general liability insurance, commercial auto insurance, and workers' compensation insurance.

Policyholder:

Personal Lines Insurance: Individual policyholders, families, or households purchase personal lines insurance. The policies cover risks related to their personal property, vehicles, or potential liabilities.

Commercial Lines Insurance: Businesses, corporations, nonprofit organizations, and other entities are the policyholders for commercial lines insurance. The coverage focuses on the risks associated with the business activities and the assets owned by the organization.

Coverage Scope:

Personal Lines Insurance: The coverage under personal lines insurance is designed to protect the policyholder's personal property, assets, and provide personal liability protection. Examples include coverage for personal vehicles, homes, personal belongings, and personal liability in case of accidents.

Commercial Lines Insurance: Coverage under commercial lines insurance addresses the specific needs of businesses, covering their commercial property, equipment, legal liabilities arising from their operations, and risks unique to their industry or sector.

Complexity:

Personal Lines Insurance: Personal lines insurance policies are generally more straightforward and standardized, as they are designed for individuals and families with relatively simple insurance needs.

Commercial Lines Insurance: Commercial lines insurance can be more complex and often requires customized policies tailored to the unique risks and requirements of each business.

Premiums:

Personal Lines Insurance: Premiums for personal lines insurance are usually based on factors such as the individual's driving record, location, age, and claims history.

Commercial Lines Insurance: Premiums for commercial lines insurance are calculated based on various factors such as the size and type of the business, industry risks, revenue, and claims history.

In summary, personal lines insurance is for individuals and families, offering coverage for personal assets and liabilities, while commercial lines insurance is for businesses and organizations, providing coverage for commercial assets, risks, and liabilities associated with their operations.

What is Additional Premium(AP) & Return Premium RP in Policy Change(Endorsement)?

 What is Additional Premium(AP) & Return Premium RP in Policy Change(Endorsement)?

Additional Premium:

For example we have GL policy as CBC200000100 with New Business premium as $5,000. User has performed policy change on the same policy by adding location & exposure to that particular location or by increasing existing exposure or adding a premium bearing form. Then obviously premium for that particular policy change will increase. This increase in premium which is positive is called as Additional Premium or AP.

Return Premium:

For example we have GL policy as CBC200000100 with New Business premium as $5,000. User has performed policy change on the same policy by deleting location & exposure of that particular location or by decreasing existing exposure or by removing a premium bearing form. Then obviously premium for that particular policy change will decrease. This decrease in premium which is negative is called as Return Premium or RP.

Difference between Admitted Lines & Non - admitted lines in US General Liability Insurance

 In the context of General Liability insurance in the United States, there are two main types of insurance carriers: admitted and non-admitted carriers. These terms refer to the status of the insurance companies and the regulatory oversight they are subjected to. Here's the difference between admitted and non-admitted lines in USA General Liability insurance:

Admitted Lines:

Admitted insurance carriers are companies that have been licensed and approved by the state's insurance department to operate within that specific state.

These carriers comply with all the state's insurance regulations and are subject to oversight and supervision by the state's insurance department.

They are required to submit their insurance policy forms and rates to the state for approval before they can use them in the market.

Policies issued by admitted carriers generally offer more protection to policyholders as they benefit from the state's guarantee funds in case the insurer becomes insolvent.

Admitted carriers are typically considered safer and more reliable since they undergo strict financial and regulatory scrutiny.

Non-Admitted Lines:

Non-admitted insurance carriers, on the other hand, are not licensed by the state's insurance department to operate within that specific state.

These carriers do not have to comply with the state's insurance regulations, including policy forms and rate filings.

Non-admitted carriers often provide coverage for high-risk or unique risks that admitted carriers may be unwilling to cover.

Because they are not subject to state regulations, they have more flexibility in underwriting and pricing policies, but they also carry higher risks for policyholders.

Policyholders do not benefit from the state's guarantee funds in case the non-admitted carrier becomes insolvent, which means there is no safety net if the carrier cannot fulfill its obligations.

In summary, admitted lines in General Liability insurance are provided by insurance companies that are licensed and regulated by the state, offering more protection and reliability. Non-admitted lines are offered by carriers that are not licensed in the state, providing more flexibility but also carrying higher risks for policyholders. Businesses and individuals should carefully assess their insurance needs and the financial stability of the insurer before selecting a policy from either an admitted or non-admitted carrier.

Difference between written premium vs return premium in GL Insurance

 In general liability (GL) insurance, there are two terms related to premiums: written premium and return premium. Here's the difference between the two:

Written Premium: The written premium refers to the total amount of premium charged by an insurance company to provide coverage for a specific period, typically a policy term. It represents the initial premium payment made by the policyholder to secure insurance coverage. The written premium is based on various factors, including the type of business, risk exposure, coverage limits, deductible amounts, and other underwriting considerations. It is determined at the inception of the policy and is typically paid upfront or in installments throughout the policy period.

Return Premium: The return premium, also known as a refund premium or earned premium return, is the portion of the written premium that is returned to the policyholder if the policy is canceled before its expiration date. It represents the unearned portion of the premium, as the insurance coverage has not been provided for the entire policy period. The return premium is calculated based on the time remaining on the policy and the insurance company's cancellation policies. It is often pro-rated, meaning the policyholder receives a refund for the unused portion of the premium.

To summarize, the written premium is the total premium amount paid by the policyholder to secure insurance coverage, while the return premium is the portion of the written premium that is refunded if the policy is canceled before its expiration.

Policy change return premium:

For example New Business premium for a GL policy was $5000. Then again a policy change was performed on the same policy & exposure value was reduced. Due to reduced exposure value negative premium of -$2000 got generated. This negative premium which got generated in a policy change is return premium. Initial exposure was 1000,000 & it was reduced 600000.

Not only reducing exposure. We can delete location, delete any premium bearing form, delete exposure etc.

Working Fund in a General Liability Insurance

 A working fund, in the context of general liability insurance, typically refers to a reserve of funds set aside by an insured party to cover deductibles or self-insured retentions. Let's break down the key components:

General Liability Insurance: General liability insurance provides coverage for third-party claims against a business or individual for bodily injury, property damage, or personal injury. It helps protect against liabilities arising from day-to-day operations, products, or completed work.

Deductible: A deductible is the amount the insured is responsible for paying out of his own pocket before the insurance coverage comes into picture. For example, if a policy has a $1,000 deductible and a covered claim amounts to $5,000, the insured would pay the first $1,000, and the insurance company would cover the remaining $4,000.

Self-Insured Retention (SIR): A self-insured retention is similar to a deductible but typically applies to larger commercial policies. It represents the insured party's financial obligation for losses up to a certain amount before the insurance coverage applies.

Working Fund: A working fund is a reserve of funds established by the insured party to cover the deductible or self-insured retention in case of a claim. It ensures that the insured has readily available funds to meet their financial obligations when a claim arises.

By maintaining a working fund, the insured party can efficiently handle claims without facing immediate financial strain. It allows for the prompt payment of deductibles or self-insured retentions, enabling the insurance coverage to respond to the remaining amount of the claim.

It's important to note that the specifics of a working fund may vary depending on the insurance policy, the insured's risk profile, and any contractual agreements between the insured and the insurer. It is recommended to consult with an insurance professional or the insurance company to understand the specific requirements and guidelines for establishing and utilizing a working fund in general liability insurance.

Deductible as Program Structure in General Liability Insurance

 In the context of general liability insurance in the United States, a deductible is a specific provision within the insurance policy that determines the insured's financial responsibility for covered claims. It represents the amount of money the policyholder must pay out of pocket before the insurance coverage kicks in.

When a claim is filed under a general liability insurance policy, the insurance company will typically evaluate the claim and determine the amount of covered damages or losses. The deductible is then subtracted from this amount, and the insurance company will reimburse the insured for the remaining portion, up to the policy's coverage limits.

For example, let's say a business has a general liability insurance policy with a $1,000 deductible and faces a covered claim of $10,000. In this case, the business would be responsible for paying the first $1,000 of the claim, and the insurance company would cover the remaining $9,000 (assuming it falls within the policy limits).

It's important to note that deductibles can vary based on the policy and insurer. They are typically established when the policy is purchased or renewed, and higher deductibles often result in lower insurance premiums, while lower deductibles generally lead to higher premiums. Policyholders should carefully consider their risk tolerance and financial capabilities when selecting a deductible amount.

Additionally, deductibles usually apply on a per-claim basis, meaning that for each separate claim, the insured must meet the deductible requirement before the insurance coverage takes effect. This is in contrast to an annual deductible, which is common in health insurance policies, where the deductible applies to all claims within a specified policy year.

It's always essential to review the terms and conditions of your specific general liability insurance policy to understand the deductible structure and how it may impact your coverage in the event of a claim.

Program Structure as Integrated Program in US Admitted General Liability

 In the context of US General Liability Insurance, an integrated program refers to a comprehensive insurance solution that combines multiple coverages under a single policy. It is designed to provide broad protection for businesses against a range of liabilities they may face.

The program structure of an integrated General Liability Insurance policy typically includes the following components:

General Liability Coverage: This is the primary coverage and protects the insured business against third-party claims for bodily injury, property damage, personal injury, and advertising injury. It typically includes defense costs, settlements, and judgments arising from covered claims.

Products and Completed Operations Coverage: This coverage extends protection to the insured business for claims arising from products it sells or work it has completed. It covers injuries or damages caused by defective products or faulty workmanship that result in bodily injury or property damage.

Premises Liability Coverage: This coverage addresses claims arising from accidents or injuries that occur on the insured premises. It can include slip-and-fall incidents, inadequate security claims, or injuries caused by the insured's operations on the premises.

Contractual Liability Coverage: This coverage indemnifies the insured for liabilities assumed under written contracts or agreements. It applies when the insured assumes liability for bodily injury or property damage that would otherwise be the responsibility of another party.

Independent Contractor Liability Coverage: This coverage protects the insured when they hire independent contractors whose work results in bodily injury or property damage. It helps mitigate the risk of being held vicariously liable for the actions or omissions of independent contractors.

Additional Coverages: Depending on the specific policy and the insured's needs, additional coverages may be included, such as employee benefits liability, liquor liability, employment practices liability, or cyber liability.

The integrated program structure allows businesses to have a comprehensive insurance solution that addresses multiple liability exposures they may face. It simplifies the insurance process by consolidating various coverages under a single policy, reducing potential coverage gaps and administrative complexities. This approach also facilitates consistent underwriting, claims handling, and policy management for the insured and the insurance provider.

Program Strucure as Guaranteed Cost in Admitted General Liability US Insurance

 In the context of General Liability Insurance, the term "guaranteed cost" refers to a specific type of insurance policy structure where the insured pays a fixed premium amount to the insurance company. Under a guaranteed cost policy, the premium remains the same regardless of the actual losses or claims incurred by the insured during the policy period.

The program structure of a guaranteed cost General Liability Insurance policy typically includes the following components:

Policyholder: The individual or business entity that purchases the insurance policy to protect against potential liability claims.

Insurance Company: The entity that provides the insurance coverage and assumes the financial risk associated with liability claims.

Coverage Limits: The maximum amount of liability coverage provided by the insurance policy. These limits define the total amount that the insurance company will pay for covered claims.

Premium: The fixed amount of money paid by the insured to the insurance company in exchange for the insurance coverage. In a guaranteed cost policy, the premium remains constant throughout the policy period.

Policy Period: The specific duration of time for which the insurance policy provides coverage. It could be one year, multiple years, or any other agreed-upon period.

Deductible: The amount that the insured is responsible for paying out of pocket before the insurance coverage kicks in. In a guaranteed cost policy, the deductible may or may not be applicable, depending on the policy terms.

Claims Handling: The process by which claims are reported to the insurance company, investigated, evaluated, and settled. Under a guaranteed cost policy, the insurance company handles the claims and pays for covered losses up to the policy limits, regardless of the actual cost of the claims.

The guaranteed cost structure provides the insured with predictable premium payments, allowing for easier budgeting and financial planning. However, it also means that the insured is responsible for any losses or claims that exceed the policy limits. If the insured experiences high claim activity, it may lead to increased premiums upon policy renewal or the need to seek alternative insurance options.