List of Property and Casualty Insurance Categories - Casualty insurance provides protection against damages to property and losses from legal liability that are not covered under the policies describe above. A wide range of lines of insurance fall into this category, including: Auto insurance, commercial multi-peril, Medical malpractice, Workers’ compensation, General liability, Mortgage and financial guaranty, Aircraft, Glass, Burglary and theft; and Boiler and machinery.
a. Automobile Insurance
A detailed description of each of the coverage is beyond the scope of this text, but it is useful to describe several of the more prominent lines of casualty insurance that occupy a good share of regulators’ attention. Of these lines, personal auto insurance often receives considerable attention. In states in which accident victims can sue in tort to collect damages, auto liability insurance typically covers liability for bodily injury (BI) and property damage (PD), as well as uninsured/underinsured motorists losses (UM/UIM). Bodily injury liability coverage indemnifies the insured against claims for damages to others from accidents caused by the insured.
These damages include medical expenses, lost wages and pain and suffering. Property damage insurance covers damages caused by the insured to the property of others. Uninsured and underinsured motorists coverage protects the insured directly for damages the insured suffers because of accidents caused by other drivers who do not have sufficient liability insurance. These coverages are subject to specified benefit limits and many states mandate minimum limits for these coverages.
In the 1970s, a number of states enacted no-fault auto insurance laws intended to lower costs and expedite benefit payments to accident victims. Under the purest form of no-fault, insureds would have no legal right to sue in tort for damages caused by another driver. In this system, accident victims would be covered by their own insurance policy for medical expenses and wage loss, regardless of who was at fault. In actuality, no state has implemented a pure no-fault system, and restrictions on lawsuits vary widely among the states. For those states that restrict lawsuits, damages are required to meet a certain threshold — verbal or monetary (more common) — in order for the victim to sue. 1
In states with some form of no-fault law, drivers purchase personal injury protection (PIP) insurance to cover their medical expenses and wage losses from auto accidents. They also purchase residual liability insurance to cover any damages they are obligated to pay to others for accidents caused by their own negligence. In some states, it is also possible to buy personal injury protection (PIP) coverage even though there are no or very limited restrictions on lawsuits (these are typically referred to as “add-on” systems). More recently, a few states have experimented with choice no-fault systems whereby the insured, at the time of purchase, elects the type of system they wish to have governed their rights and obligations.
Collision coverage pays for physical damage to the insured’s vehicle caused by its collision with another vehicle or object. Comprehensive coverage pays for damages to the insured’s auto from most other causes, including weather, theft and vandalism. These property insurance coverages are purchased with various deductibles that lower the required premiums. Other incidental coverages can be purchased for items such as medical payments, rental reimbursement and towing.
b. Workers’ Compensation Insurance
The second list of property and casualty insurance category differs from other insurance lines in that benefits are set by state law and most employers are required to have coverage. Insurance texts classify workers’ compensation as a form of social insurance because of its compulsory nature and other characteristics. The workers’ compensation system is designed to provide a statutory-based set of benefits that must be accepted by employees as their exclusive remedy for work-related injuries. The basic benefit structure is the same among the states but there are differences in the types of injuries covered and the amount of benefits paid. In all states, workers’ compensation will pay for accidental injuries and occupational diseases that arise in the course of employment.
Medical benefits are essentially unlimited and are not subject to deductibles or co-insurance provisions. Indemnity or disability benefits cover wage loss from work-related injury, subject to limits and co-insurance provisions intended to give injured workers an incentive to return to work. Coverage requirements for rehabilitation expenses vary among the states. More recently, some states have experimented with allowing insurers and risks to coordinate workers’ compensation insurance with medical insurance plans through variations of managed care, medical fee schedules and 24-hour coverage. Insurers also sell excess risks liability coverage for suits that workers are still allowed to file against employers.
Because workers’ compensation benefits are set by law, insurers compete on price and different services associated with workers’ compensation coverage, such as loss prevention and case management. Insurers also offer different pricing arrangements that vary the amount of risk retained by the insured in return for lower premiums or make other adjustments to reflect variations in risk. These pricing arrangements include retrospective rating plans, experience-based dividend plans, schedule rating and large-deductible policies.
c. Medical Malpractice Insurance
Medical malpractice insurance covers health providers’ liability for medical accidents caused by their negligence. The scope and cost of medical malpractice insurance has expanded over time as medical care has become more complex and given rise to more adverse outcomes for which providers have been sued. Severe injuries have resulted in large court awards and legal settlements for malpractice, which have tightened the supply of insurance and raised rates. Premiums have escalated, especially for high-risk specialties and procedures such as obstetrics and surgery. Recent market conditions and issues in medical malpractice insurance were examined in an NAIC report (see Nordman, Cermak and McDaniel, 2004).
d. Commercial Multi-peril Insurance
The fourth list of property and casualty insurance category, commercial multi-peril insurance utilizes a package policy that combines two or more commercial property and liability coverages into a single policy. Coverages can be added in a modular form to customize a policy to meet the needs of a particular insured. A package policy offers the advantages of fewer gaps in coverage and lower costs/premiums because individual policies are not purchased.
The typical commercial package policy contains a common policy declarations page, a common policy conditions page and two or more coverage parts. The different coverage parts available are listed: Commercial property, Commercial general liability. Crime, Boiler and machinery, Inland marine, Auto, and Farm
e. Other Liability Coverages
Various other coverages have been developed to protect individuals and businesses against their liability exposures from their activities. Individuals can purchase personal liability insurance separately or as part of their homeowners coverage. They also can buy umbrella policies that provide broad liability coverage at relatively high limits (e.g., $1 million) in excess of the liability coverage provided by their auto and home policies.
Different business liability coverages also are available to cover specific risks, such as product liability, professional liability or errors and omissions, directors and officers liability, and employment practices liability. Commercial general liability policies offer broad coverage for liability exposures arising from commercial activities. Coverage can be purchased on an occurrence basis or a claims-made basis. The trigger for occurrence policies is bodily injury and property damages that occur during the policy period. The trigger for claims-made policies is the filing of a claim during the policy period. Insureds also can purchase tail coverage separately if they purchase a claims-made policy. Tail coverage provides insurance against claims reported after the end of the policy period.