Short notes on Liability Insurance

Short notes on Liability Insurance

Liability insurance does not have direct policy-holder. Insurer does not deal with policy-holder but deals with third parties. Each liability policy has different nuances in its wording.

The claim handling is largely dependent on policy wording. The right to defend exists on the insurer. Claims procedures are worded in the policy. The insured risks and excluded risks are properly given in the policy. Liability claims deserve more attention.

Doctors are liable for ill-treatment of their patients. Employers are liable for accident or death of employees during performance. There are several other examples which can cause liability to a party.

Liability claims to be more complicated because of the sheer number of parties. The insurer is liable to pay the claims as per the contract of liability insurance and policy clause. The insured has to prove his liability to third party for which insurance is taken.

Liability policies may be assured either on claims. Made or an occurrence Based Wording Claims. Made Wording indicates that claim should have occurred during the period of insurance.

The claim should be made during the policy period of 12 months during which the policy is in force. In an occurrence Based Wording, the event giving risk to the clams must occur during the policy period. The insurer would respond whenever the claim is made.

Property and Casualty Risks :

Liability insurance in USA deals with property and casualty insurance. Controlled Master Programs (CMF) is widely used by insurers. It aims to provide global risk managers with the ability to manage and control worldwide exposure. CMP is a group of linked insurance policies.

The set of local policies is issued in conjunction with the master policy in any territories. Underwriters and intermediaries must assess the local laws and regulations. Certain laws require admitted liability policies. Non- admitted coverage is allowed.

CMP provides uniform coverage and uniform liability limits. Given the difference in the content of liability policies in different a country which is achieved through master policy.

Difference in conditions allows the coverage provided by the master policy. CMP specifies worldwide jurisdiction and territory, so that the insurance company can respond to third party claims regardless of where they arise.

Local Insurance Requirements :

The laws and regulations of local country govern the issue and operation of liability insurance. The business practices of the country also decide the procedure of insurance business.

Warehousing, manufacturing, after sale services, maintenance or specific contract would call for an admitted policy of liability insurance.

The local country’s requirement of standard policy and compulsory provisions should be followed by the multinational insurance companies. For example, General liability policies are prevalent in Germany.

Local policies limit the clause of operation. For example, mandatory risk retention is imposed in Brazil. Insurers should issue all policies on economical and efficient bases.

Contracts’ Liability Insurance:

The contracts are given by the principal business house when the contractors give the proof of insurance for workmen’s compensation, employers liability and general liability insurance.

American International Group Inc. (AIG) through its member companies around the world provides effective services to the contractors and business companies with its global experience and network.

Multinational Companies admit to their membership only which have experienced claim professionals familiar with the legal requirements of the country to provide effective services and handling worldwide liability claims. CNP provides its services to member countries with a true worldwide risk management tool.

Progress of Liability Insurance:

The liability claims totaled $ 84 billion in 2002 worldwide. It one-sixth of all non-life claims. The costs of general liability claims grew faster than overall economic activity in developed nations.

The most problematic lives of liability insurance are product liability, medical malpractices, directors and officers, errors, omissions and employment practices liability.

Insurers face the problems of premium calculation as the traditional methods of actuarial calculations are not suitable for it. So, they adopt risk prevention measures, limit accumulated risk.

Insurers have to be vigilant in pricing and offering cover for liability risks. They pay more attention to wording and policy language. Insurers should cease underwriting if the limit may cross insurability and beyond imagination.

The growth of liability insurance depends upon economic factors, medical expenses, property value and wages, life spans, legal expenses and others. The severity of claims is affected by rising medical costs, property value and wages. Trust and compensation are also influencing liability claims.

The growth rate of liability insurance during 1998-2004 was 8.8% twice than the growth rate in non-life insurance Brazil, Chile and Colombia recorded the highest growth rates ranging from 13% to 15%.