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The Story of Property and Casualty

Written by W. Lane Startin. Posted in Definitions, Research Last Updated: 08/18/2011

What property and casualty insurance is, the history of property and casualty insurance in general and auto insurance in particular, and how it all ties in to save you money.

Benjamin Franklin. Your Founding Father ... of insurance!

Your local auto insurance agent is probably what’s referred to in the insurance industry as a “property and casualty,” “P&C,” or “multi-line” agent. What does that mean, anyway?

Well, it means that he or she sells and services more than just auto insurance. While there’s plenty to write about auto insurance (and believe us, we’ve proven it), it’s just the tip of the iceberg when it comes to the larger insurance realm.

Auto insurance is part of a larger group of insurance types, or “lines” as they’re known in the industry, known as property and casualty or P&C. Other forms of property and casualty insurance include homeowners, renters and most commercial and general liability insurances.

Most states require a special type of insurance license to sell and service property and casualty insurance. Because most large auto insurance carriers are multi-line companies, they require their agents to be property and casualty generalists as opposed to auto insurance specialists.

A Short History of Property and Casualty

Crude forms of property and casualty insurance can be traced all the way back to Hammurabi’s Code in ancient Babylonia. Actuary tables developed by Blaise Pascal were in use in Europe in the 1600s. Property and casualty insurance in America can be traced back to 1752 Philadelphia, when a group of property owners banded together to form the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. The prime mover in this organization? None other than Benjamin Franklin, who later had a hand in forming the first life insurance company in America as well.

In addition to forming the precursor to homeowners insurance and therefore the beginnings of property and casualty insurance in America, the Philadelphia Contributionship also pioneered underwriting techniques by refusing to insure houses that were considered unacceptable fire risks (and in 18th Century Philadelphia, there were a lot of those) as well as ushered in some of the country’s first zoning ordinances and building codes.

The History of Auto Insurance

Auto insurance, of course, came a bit later in our history with the advent of the automobile itself. The first recorded auto insurance policy was written by Travelers in 1897 for Dayton, Ohio, resident Gilbert J. Loomis. Loomis paid a cool $1,000 – a fortune in 1897 – for a policy that covered only property damage, bodily injury or accidental death. In other words, a liability only policy.

Auto insurance began to assume its modern form in the 1920s with the formation of companies like State Farm in Illinois and Farmers in California, both founded on the premise that farmers were safer drivers than the general population. Although harder statistical data is used today, the same basic concept that some groups are cheaper to insure than others remains a central tenet of auto insurance marketing and pricing.

How It’s Related

Underwriting in all property and casualty lines is driven by statistics. What’s more, auto insurance discounts are often available by purchasing other property and casualty products from the same company. These “package discounts” are often a great way to get cheaper car insurance. Ask your agent for more details.

Does a Driver not living in the Home Have to Have Their Own Insurance?

Written by Michele Wilmonen. Posted in Ask An Insurance Question, Research Last Updated: 08/15/2011

To be able to drive each state requires that you carry liability insurance on your vehicle, but what if you don’t own a vehicle?

In insurance, each state has their own set of rules and regulations that insurance companies and drivers have to abide by. One rule that is the same in every state is that you have to carry at least liability insurance on your vehicle in order to be able to drive.

Not everyone that has a driver’s license owns a vehicle though and these drivers are handled differently state by state.

Specifically, in the state of Ohio you have to have insurance to drive, whether you own a vehicle or not. In addition, it is illegal to allow anyone that does not have insurance or is not listed on your insurance policy to operate your vehicle (Ohio Financial Responsibility Law).

If you are concerned about insurance coverage for a driver that does not own their own vehicle, contact a local insurance agent in your state.

How Long Does an Insurance Company Have to Refund Unearned Premium?

Written by Michele Wilmonen. Posted in Ask An Insurance Question, Research Last Updated: 08/15/2011

Premium that you have overpaid to an insurance company is not theirs and should be returned immediately.

When you pay for your insurance, the insurance company generally makes you pay for the coverage in advance. It doesn’t matter what payment plan you are on, they want to make sure that they get their money before they provide you with insurance coverage. This is to make sure that if you have a claim and cancel your policy that you have already paid for your coverage for the day of the accident.

On the consumer side, when you cancel your insurance policy and you have paid premium for coverage that you have not used yet; you are owed a refund immediately. There is no specific timeframe that an insurance premium has to be returned, but insurance companies are expected to process refunds in a “reasonable amount of time”.

If you have not received your refund, contact the insurance company to find out why you don’t have it yet. Second, if they claim that you are not owed a refund demand (nicely) to be sent a billing breakdown showing how much your pro-rated premium was each day and how many days you paid for.

If the breakdown shows that you are owed a refund and the insurance company still won’t pay, file a complaint with your state Insurance Commissioner. In the state of Washington the Insurance Commissioner has fined insurance companies and agents for not refunding unearned insurance premiums to former customers within a reasonable amount of time.

Are Broken Windshields Countable Losses?

Written by Michele Wilmonen. Posted in Ask An Insurance Question, Research Last Updated: 08/15/2011

Any damage that an insurance company pays out for you is considered a claim, but each type of claim can affect your policy differently.

Everyone that drives knows that you can lose your insurance coverage with a company if you have too many accidents or driving violations. Insurance companies are in business to turn a profit and if they are paying out one claim after another for you, they are losing money.

But what about claims that aren’t your fault, like broken windshields?

Glass claims are generally not counted by insurance companies as claims that stack up to a policy cancellation or non-renewal. But, like all things in the insurance industry it completely depends on your insurance company. Best thing to do is to contact your agent or insurance company and ask what their policy is in regards to this.

In the state of Massachusetts, an insurance company cannot cancel your policy in the middle of a term for too many claims. If they decide to not renew your policy they have to give you 45 days notice before they stop your coverage. In the case that you feel this is an unjust non-renewal, contact your own state’s Department of Insurance or Insurance Commissioner’s office.

Indemnification: How Auto Insurance Works

Written by W. Lane Startin. Posted in Definitions, Research Last Updated: 06/11/2013

What indemnification is, how it works and how to recognize exclusions and policy language that may lessen its impact.

Indemnification is how this loss can be compensated.

Like any other professional field, insurance is full of terms that may be unfamiliar to the outsider. One of these is “indemnification.”

Aside from being a mouthful, what is indemnification? Well, it’s a very important insurance concept which deserves a closer look.

What is Indemnification?

Indemnification is a central concept of insurance in general, not just auto insurance. It’s a term that comes up in every form of insurance, be it homeowner’s, renter’s, life, commercial liability or what have you. Indemnification is, in the recent words of a major carrier, the means insurance companies use to “get you back to where you belong.”

The concept is simple: by definition insurance should replace or otherwise pay for exactly what you lost. There should neither be profit nor loss in an insurance claim. That’s the theory, anyway.

How Indemnification Works

Say you’re in an auto accident and the other driver is found at fault. For the sake of simplicity (and because we like you) we’ll say that you weren’t injured, but your car was totaled. We’ll also assume the other driver had adequate liability coverage on his vehicle.

Depending on the policy and your preference you may be able to do one of two things: get a new car comparable to the one you had, or take a cash payment equal to the value of your car at the time of loss. Either way, the insurance company indemnifies you for your loss.

In another example, assume you have full coverage on your vehicle and you accidentally hit a tree. The car isn’t totaled, but there is $3,000 worth of body work needed. After your pay your $500 deductible, the insurance company picks up the remaining $2,500. While the deductible isn’t covered per the terms of your insurance contract, the rest is. That $2,500 claim payment is indemnification for your loss. You would profit from any further payment, but lose out from any less.

Indemnification isn’t automatic. Your claim must go through the proper channels and be investigated by a claims adjuster, who determines the amount of loss and what the insurance company is responsible for. If you disagree with the amount, you can hire a third party adjuster to take another look, or in extreme cases take the insurance company to arbitration or court.

Pitfalls of Indemnification

One should bear in mind indemnification does not take into account exclusions such as depreciation. It is very important to know if an item is covered for “replacement cost” or “actual cash value.” If the latter, you’ll only be covered for what the item was worth at the time of loss, which may or may not be enough to replace it.

Aftermarket accessories on separate auto inland marine policies are often covered at actual cash value, for example. Many commercial policies also make wide use of actual cash value clauses in their contracts. Ask your agent to be sure.

What indemnification is, how it works and how to recognize exclusions and policy language that may lessen its impact.

Like any other professional field, insurance is full of terms that may be unfamiliar to the outsider. One of these is “indemnification.” Aside from being a mouthful, what is indemnification? Well, it’s a very important insurance concept which deserves a closer look.

What is Indemnification?

Indemnification is a central concept of insurance in general, not just auto insurance. It’s a term that comes up in every form of insurance, be it homeowner’s, renter’s, life, commercial liability or what have you. Indemnification is, in the recent words of a major carrier, the means insurance companies use to “get you back to where you belong.”

The concept is simple: by definition insurance should replace or otherwise pay for exactly what you lost. There should neither be profit nor loss in an insurance claim. That’s the theory, anyway.

How Indemnification Works

Say you’re in an auto accident and the other driver is found at fault. For the sake of simplicity (and because we like you) we’ll say that you weren’t injured, but your car was totaled. We’ll also assume the other driver had adequate liability coverage on his vehicle. Depending on the policy and your preference you may be able to do one of two things: get a new car comparable to the one you had, or take a cash payment equal to the value of your car at the time of loss. Either way, the insurance company indemnifies you for your loss.

In another example, assume you have full coverage on your vehicle and you accidentally hit a tree. The car isn’t totaled, but there is $3,000 worth of body work needed. After your pay your $500 deductible, the insurance company picks up the remaining $2,500. While the deductible isn’t covered per the terms of your insurance contract, the rest is. That $2,500 claim payment is indemnification for your loss. You would profit from any further payment, but lose out from any less.

Indemnification isn’t automatic. Your claim must go through the proper channels and be investigated by a claims adjuster, who determines the amount of loss and what the insurance company is responsible for. If you disagree with the amount, you can hire a third party adjuster to take another look, or in extreme cases take the insurance company to arbitration or court.

Pitfalls of Indemnification

One should bear in mind indemnification does not take into account exclusions such as depreciation. It is very important to know if an item is covered for “replacement cost” or “actual cash value.” If the latter, you’ll only be covered for what the item was worth at the time of loss, which may or may not be enough to replace it. Aftermarket accessories on separate auto inland marine policies are often covered at actual cash value, for example. Many commercial policies also make wide use of actual cash value clauses in their contracts. Ask your agent to be sure.

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