fin 461 inland marine insurance

Filed - Insurance Regulatory Classes of Business (inland marine)

Filed (Standard Risk)

• policy forms and/or rates must be filed with the state insurance department

• characterized by a large number of potential insureds and “reasonable homogenous loss exposures” (similar/predictable cases)

• ex: musical instruments and photographic equipment

Non-filed - Insurance Regulatory Classes of Business (inland marine)

Non-Filed (one offs)

• policy forms and/or rates NOT filed with the state insurance department

• insurers are responsible to determine state requirements regarding filing in each state in order to offer policies in the state

• Characterized by a relatively small number of insureds, diverse exposures or both

  • ex: “Floater” diverse loss exposure that covers property moved to diverse locations or “floating property”

• Can include: simple hand tools and small power equipment to very large cranes and earthmovers used in variety of locations and climates

Role of judgement rating for FILED inland marine forms

• Rating Methods for Filed Commercial Inland Marine forms are Contained in the ISO Commercial Lines Manual.

• Non-Filed- Due to a Large Number of Policies Written, insurers have developed their own manuals and rating schedules for this coverage

  • Based upon Historical Experience

• Judgment rating requires a thorough knowledge of the class of business for which coverage is being written

• Underwriters might have to draw on expertise in several fields: Fine Arts, Heavy Equipment, Construction, or Communications

  • To determine adequate rates for unique risks that are eligible for Inland Marine Coverage.

• Realistically, rates are often influenced by Market Conditions

Non-filed classes of inland marine insurance

• Contractor's Equipment

• Builders Risk

• Transit

• Motor Truck Cargo Liability

• Difference in Conditions

• Electronic Data Processing Equipment

• Bailees

• Instrumentalities:

  • Transportation/Communications

Contractor's Equipment- Non-filed classes of inland marine insurance

• Largest class: all equipment can be covered under a contractors equipment floater with a blanket for unscheduled hand tools and miscellaneous equipment.

• Named perils (fire, lightning, explosion, windstorms, hail, vandalism, theft, earthquake, flood, collision overturn, and collapse of bridges and culverts) or open perils that are not specifically excluded.

• CE floaters often include rental reimbursement

Builders Risk- Non-filed classes of inland marine insurance

• Covers a building in the course of construction, including building materials and supplies on or away from the building site.

• Provides open perils coverage, including flood, earthquake and theft of building supplies that have not been installed.

• Endorsements can include soft costs: additional interest, advertising expenses, real estate taxes

• and may include additional costs and commissions during lease negotiations

Transit- Non-filed classes of inland marine insurance

Covers Property while in Transit (Land, Air or Water) - Two Basic Types:

1. Trip Transit Policy: Purchased by Occasional Shippers

2. Annual Transit Policy: Designed for Frequent Shippers (One Year Open Perils Policy-Flood & EQ Covered)

• Excluded: Contraband (duh) Precious Metals, Furs, Jewelry, Money/Securities

• Sometimes Excluded: Electronics, Tobacco, Alcohol, and Fresh/Frozen Foods

Motor Truck Cargo Liability- Non-filed classes of inland marine insurance

• Covers trucker's legal liability(responsibility) for damage to cargo of others being transported by the trucker.

  • Not direct property insurance for the benefit of the cargo owner. (see commercial auto policy)

• Cargo targeted by thieves/hijackers are usually excluded.

• Property covered only in or on a land vehicle operated by the insured. or while located at insured's terminal for limited time.

Difference in Conditions- Non-filed classes of inland marine insurance

• Covers on an "all risk" basis to fill gaps in the insured's property coverage, especially gaps in flood & earthquake.

• Gaps like:

  • Flood & Earthquakes are not covered by basic policies

  • Provide excess limits over F/EQ (DIC) on basic policies

  • Property loss in transit, loss of business income from theft

  • Cover property at overseas locations

Electronic Data Processing - Non-filed classes of inland marine insurance

EDP Equipment Floater covers:

• Computer equipment, software, and electronic data owned by the insured, and similar property of others in the insured's care, custody & control.

• Some policies include medical equipment, robotics, and gaming equipment (slot machines) slot machine are also covered as business personal property (commercial property policies)

• Equipment valuation methods: acv, replacement cost or upgraded value.

• Data valuation methods: actual cost of reproduction or an agreed dollar amount

  • actual cash value= replacement cost - depreciation

Bailees- Non-filed classes of inland marine insurance

Two Basic Approaches:

• Bailee's Policy- Covers Customer's Good

  • Only if Bailee is Legally Liable for the Loss 

• Bailee's Customer Policy- Policy Pays

  • Even if Bailee is not Legally Liable for the Loss (for Customer Goodwill)

Instrumentalities- Non-filed classes of inland marine insurance

Tools of transportation and communication

• Essential Property: Bridges, Tunnels, Pipelines, Radio & Television Broadcasting Equipment.

Filed classes of inland marine insurance

Can be filed by

• Insurers- May file their own inland marine rates, rules and forms.

• Insurance Services Office (ISO) and American Association of Insurance Services (AAIS): Both file inland marine coverage forms, endorsements, manual rules, and loss costs for several classes of inland marine business.

• Insurers Affiliated with ISO & AAIS- Can use their forms and endorsements to compose a commercial inland marine part as a commercial package policy or issued as a monoline policy that provides inland marine insurance only.

• NOTE: The forms provide coverage on an open-perils basis, (other than losses specifically excluded) and valuation is typically on an actual cash value basis. ISO

  • Commercial Lines Manual (CLM) rules permit modification to the basis of valuation if insurer and insured agree.

Examples of filed classes of inland marine insurance

• commercial articles- photo equipment

• equipment dealers- stock in trade

• signs- fluorescent automatic or mechanical