2 Learning ObjectiveKnow the brief history and status of auto insurance in the worldDescribe the liability coverage under the Personal Auto Policy (PAP)Explain the medical payments coverageDescribe the uninsured motorists coverageExplain the coverage for damage to your autoExplain the duties imposed on the insured after an accident or lossThe status of auto insurance in Chinese market
3 Main ContentsBrief introduction to the history of auto insurance from global perspectiveLiability Coverage of Personal Auto Policy (PAP) in USAMedical Payments CoverageUninsured Motorists CoverageCoverage for Damage to Your AutoDuties after an Accident or LossGeneral Provisions
4 History and Status of Auto Insurance in the World The Automobile Insurance ( shorted as auto insurance) came into being in late 19th century on the basis of ocean marine insurance, fire insurance, theft insurance.UK was the first country established auto in 1896.USA is the No.1 in auto insurance in the world. Japan is the No.2. UK is the No.3.
5 Auto Insurance in U.S.In 1898, the first auto liability insurance policy was established in U.S.In 1899, auto property loss insurance policy (physical damage coverage on atuo) came into being.In 1902, vehicle insurance came into being.
6 Auto Insurance in U.S.In 2000, the total premium of auto insurance was $136 billion, covering 45.12% of the property insurance.
7 Highlights: Auto insurance in 2000 in U.S. (billion) PercentageNet Written Premium13645.12% of the total amount of property insuranceauto liability coverageproperty loss coverage825460.3%39.7%Combined RatioNet loss claimOperation expenses105.4%79.3%26.1%
8 Brief introduction to PAP in U.S. The Personal Auto Policy (PAP) PAP was introduced in 1997 and has been revised several times. The following discussion is based on the latest 1998 edition of the PAP.
9 Brief introduction to PAP Eligible Vehiclesfour-wheel motor vehicleowned by the insured or leased by the insured for at least six continuous months.Not apply toincidental use of vehicleRanching or farming
10 Brief introduction to PAP The PAP consists of a declarations page, a definitions page, and the following six parts:Part A: Liability CoveragePart B: Medical Payments CoveragePart C: Uninsured Motorists CoveragePart D: Coverage for Damage to Your AutoPart E: Duties after an Accident or LossPart F: General Provisions
11 Part A：Liability Coverage Insuring agreementInsured personsSupplement paymentsExclusion
12 Part A：Liability Coverage Insuring agreementthe insurer agrees to pay any damages for bodily injury or property damage for which an insured is legally responsible because of an auto accidentSplit limits$250,000/$500,000/$00,000a single limit$500,000The amount paid includes:loss+ defense costs+ interest
13 Part A：Liability Coverage Insured PersonsThe following four groups are insured under the liability section of the PAP:the named insured and resident family membersany other person using the named insured’s covered auto with permissionany person or organization legally responsible for the acts of a covered personany person or organization legally responsible for the named insured’s or family members’ use of any auto or trailer
14 Part A：Liability Coverage Supplementary PaymentsIn addition to the policy limits and a legal defense, certain supplementary payments can be paidUp to $250 for the cost of a bail bondPremiums on appeal bonds and bonds to release attachmentsInterest accruing after a judgmentUp to $200 daily for the loss of earningsOther reasonable expenses
15 Part A：Liability Coverage ExclusionsIntentional injury or damageProperty owned or transportedProperty rented, used, or in the insured’s care.Bodily injury to an employee （Why？）Use as a public or livery conveyanceVehicle used in the automobile business.Other business vehicles（Why？）Using a vehicle without reasonable belief of permission.Nuclear energy exclusionVehicle with fewer than four wheelsVehicle furnished or made available for the named insured’s regular use（non-owned vehicleVehicle owned by, furnished, or made available for the regular use of any family memberRacing vehicle.
16 Part A：Liability Coverage Other insuranceIf more than one liability policy covers a loss, PAP has a provision for determining the amount and priority of payments:Pro rata share the lossExample: (P100)
17 Primary and excess insurance (Pro rata share of loss) Ken is the named insured and borrows Karen’s car with her permission. Both policies will cover any loss. Ken has $50,000 of liability insurance and Karen has $100,000. Ken negligently injures another motorist and must pay damages of $125,000. The rule is that insurance on the borrowed car is primary, and other insurance is excess. Each company pays as follows:Karen’s insurer (primary) $100,000Ken’s insurer (excess) ,000Total $125,000Karen’s insurer pays $100,000 while Ken’s insurer pays the remaining $25,000.
18 Part B：Medical Payments Coverage Insuring agreementInsured personsExclusionOther insurance
19 Part B： Medical Payments Coverage Insuring agreementThe insurer agrees to pay all reasonable medical and funeral expenses incurred by an insured for services rendered within three years from the date of the accidentCovered expenses include medical, surgical, X-ray, dental, and funeral expensesNot based on faultMedical payments can be paid to the insured and the passengers in the car
20 Part B： Medical Payments Coverage Insured PersonsNamed insured and family membersOther persons while occupying the covered auto
21 Part B： Medical Payments Coverage ExclusionsMotorized vehicle with fewer than four wheelsPublic or livery conveyanceUsing the vehicle as a residenceInjury occurring during course of employmentVehicle furnished or made available for the named insured’s regular useVehicle furnished or made available for the regular use of any family memberUsing a vehicle without a reasonable belief of permissionVehicle used in the business of an insuredNuclear weapon, radiation, or warRacing vehicle
22 Part B： Medical Payments Coverage Other insuranceIf other automobile medical payments insurance applies to an owned vehicle, the insurer pays its pro rata share of the loss based on the proportion that its limits bear to the total applicable limits.Example: (P101)
23 Part C：Uninsured Motorists Coverage The uninsured motorists coverage pays for the bodily injury (and property damage in some states) caused by an uninsured motorist, by a hit-and-run driver, or by a negligent driver whose insurance company is insolvent.Insuring agreementInsured personsExclusionOther insurance
24 Part C： Uninsured Motorists Coverage Insuring agreementThe insurer agrees to pay compensatory damages that an insured is legally entitled to receive from the owner or operator of an uninsured motor vehicleDamages include medical bills, lost wages, and compensation for a permanent disfigurement resulting from the accidentSome conditions must be met
25 Part C： Uninsured Motorists Coverage Insured Personsthe named insured and his or her family membersany other person occupying a covered autoany person legally entitled to recover damages
26 Part C： Uninsured Motorists Coverage ExclusionsNo uninsured motorists coverage on vehicle (owned by that insured)Primary coverage under another policy (family members occupying a vehicle are not covered)Settling a claim without the insurer’s consentUsing the vehicle as a public or livery conveyance.No reasonable belief of permission.No benefit to workers compensation insurerNo punitive damages
27 Part C： Uninsured Motorists Coverage Other insuranceWhen more than one uninsured motorist coverage provision applies to the lossTextbook P103
28 Part D：Coverage for Damage to Your Auto Part D provides coverage for the damage or theft of an automobileInsuring agreementTransportation expensesExclusionLimit of liabilityPayment of loss
29 Part D：Coverage for Damage to Your Auto Insuring agreementThe insurer agrees to pay for any direct and accidental loss to a covered auto or nonowned auto, including its equipment, less any deductibleTwo optional coverages are available：collision coverageother-than-collision coverage (also called comprehensive）
30 Part D：Coverage for Damage to Your Auto Collision LossCollision is defined as the upset of your covered auto or nonowned auto or its impact with another vehicle or object （including your car lose control, hits another car or building, damage from parking )Other-Than-Collision Lossloss from any of the following perils is considered to be an other-than-collision loss:Missiles or falling objectsFireTheft or larcenyExplosion or earthquakeWindstorm，hail, water, or floodMalicious mischief or vandalismContact with a bird or animalGlass breakage
31 Part D：Coverage for Damage to Your Auto DeductibleBoth the collision coverage and other-than-collision losses is written with direct deductibles ($250 or higher amount)The purpose of deductibles：reduce small claimsHold down premiumsEncourage the insured to be careful in protecting the car
32 Part D：Coverage for Damage to Your Auto Transportation ExpensesPart D also pays for temporary transportation expenses, up to $20 daily to a maximum $600 due to loss of covered auto.
33 Part D：Coverage for Damage to Your Auto ExclusionsUse as a public or livery conveyance.Damage from wear and tear, freezing, and mechanical or electrical breakdownRadioactive contamination or warElectronic equipment designed for the reproduction of soundOther electronic equipmentTapes, records, and discsGovernment destruction or confiscationTrailer, camper body, or motor homeLoss to a nonowned auto used without reasonable belief of permissionRadar detection equipmentCustom furnishings or equipmentNonowned auto used in the automobile businessRacing vehicleRental car
34 Part D：Coverage for Damage to Your Auto Limit of liabilityThe amount paid for a physical damage loss to a covered vehicle is the lower of ：actual cash value of the damaged or stolen property, oramount necessary to replace the property with other property of like kind an qualityIn practice, insurers declare a total lossif the estimated cost of repairs and salvage value exceed the value of the car.
35 Three terms:BettermentDiminution in valueGap insurance
36 Part D：Coverage for Damage to Your Auto Payment of lossThe insurer has the option to pay for a physical damage loss in money, or repairing, or replacing the damaged or stolen vehicles.
37 Part D：Coverage for Damage to Your Auto Other source of recoveryIf other insurance covers a physical damage loss, the insurer pays only its pro rata share.Any physical damage insurance on the borrowed car is primary, and your physical damage insurance is excess.
38 Part E：Duties After an Accident or Loss what to do if an insured driver has an accident or loss?determine if anyone is hurt, save the injured, and notify the policegive the other driver your name, address, and the name of your agent and insurer and request the same information from him or herget the name and address of any witnessesSend to the insurer copies of any legal papers or noticesSubmit a proof of loss at the insurer’s request
39 Part F：General Provisions Policy period and territoryTermination
40 Part F：General Provisions Policy period and territoryThe PAP provides coverage only in the United States, its territories or possessions, Puerto Rico, and Canada.
41 Part F：General Provisions TerminationAn important provision applies to termination of the insurance by either the insured to insurer. There are four parts to this provision:CancellationNonrenewalAutomatic TerminationOther Termination Provision
42 Part F：General Provisions CancellationThe named insrued can cancel at any time by returning the policy to the insurer or by giving advance written notice.The insurer also has the right of cancellation.
43 Part F：General Provisions NonrenewalThe insurer may decide not to renew the policy when it comes up for renewal, and giving notice to the named insured at least 20 days before.
44 Part F：General Provisions Automatic TerminationIf the insurer decides to renew the policy, an automatic termination provision becomes effective.
45 Part F：General Provisions Other Termination ProvisionMany states place additional restrictions on the insurer’s right to cancel or not renew.
46 Insuring Motorcycles and Other Vehicles The PAP excludes coverage for motorcycles, mopeds, and similar vehicles.You should be aware of several points if the miscellaneous-type vehicle endorsement is added to the PAP.
47 Insuring Motorcycles and Other Vehicles First, the liability coverage does not apply to a nonowned vehicle.Second, a passenger hazard exclusion can be elected, which excludes liability for bodily injury to any passenger on the motorcycle.Finally, the amount paid for any physical damage losses to the motorcycle is limited to the lowest
48 Insuring Motorcycles and Other Vehicles A miscellaneous-type vehicle endorsement can be added to the PAP to insure motorcycles, mopeds, and motor homes, etc.
49 SummaryThe personal auto insurance policy (PAP) consists of a declarations page, a definitions page, and six major parts: Part A (liability coverage), Part B (medical payments coverage), Part C (Uninsured motorists coverage), Part D (coverage for damage to your auto), Part E (duties after an accident or loss), and Part F (genera provisions)Liability coverage protests the insured from bodily injury and property damage liability arising out of the auto accident.Medical payment coverage pays all reasonable medical , dental, and funeral expenses incurred by an insured person.Uninsured motorists coverage pays for the bodily injury of a covered person caused by an uninsured motorist, a hit-and-run driver, or a negligent driver whose insurer in insolvent.
50 Review Questions1. Describe the major coverage that is found in the PAP.2. Who are the persons insured for liability coverage under the PAP?3. If you drive a non-owned auto an damage it, will your PAP pay for the damage? Explain.4. Who are the persons insured for medical payments coverage under PAP?5. Explain the major features of the uninsured motorists coverage in the PAP.6. Describe the insuring agreement under coverage for damage to your auto in the PAP?7. Explain the duties imposed on the insured after an accident or loss occurs.