Legal principles of business insurance

Buying insurance is subject to a different rule of law than buying things such as buildings, cars, or refrigerators.

The general rule applicable to most purchases is "let the buyer beware." This has been much modified in these days of consumerism but still applies to many sales between private individuals, which is why you should be very careful buying a secondhand car from someone you don't know.

Insurance, by contrast, is subject to the rule of the "utmost good faith"

This means in practice that a business person taking out insurance must tell the insurance broker everything that would affect an underwriter's judgement in deciding whether or not to issue a policy or what premium to charge.

Just as the lawyers say, the applicant must disclose all the material facts. If these are not disclosed and the actual situation comes to light following a loss, the insurance company can say in effect "the risks are not what you said they were" _ and they don't have to pay. So come clean or you will probably have a useless piece of paper instead of policy worth thousands of dollars.

Top 10-quoted hybrid cars in 2008 has released the top 10 most popular hybrids quoted for 2008, as determined by auto insurance quotes sought on the site.
The top 10-quoted hybrids for the first six months of 2008 are:
• Toyota Prius
• Honda Civic Hybrid
• Toyota Camry Hybrid
• Ford Escape Hybrid
• Toyota Highlander Hybrid
• Lexus RX400h
• Honda Accord Hybrid
• Nissan Altima Hybrid
• Chevrolet Malibu Hybrid
• Saturn Vue Green Line Hybrid
With the rising cost of gas prices, the hybrid market seems to be steadily rising as well, according to a release.
"In the first six months of 2008, hybrid auto insurance quotes on our site have already reached 74% of 2007's total," George Small, co-founder of, explains in the release. "If the trend continues, 2008's total hybrid quote activity should not only match 2007 but actually exceed it by almost 50%."
Hybrids are marketed as an environmentally friendly way to save you gas money, Gregory Ellis, co-founder of notes in the release. "Of course, when it comes to money-saving potential there are other considerations, too -- like the cost of insurance."

Risks for oil business increase while risk management effectiveness decreases; study finds

National oil companies (NOCs) are failing to manage the risks of limited oil and gas resources, the recruitment and retention of a qualified workforce and energy price volatility, according to a Marsh study.
In the Marsh Oil and Gas Risk Report: 2008, more than 400 NOCs were surveyed and asked to rate the relevance of risks identified by the World Economic Forum and how effectively they felt they were managed by their firms.
The participants ranked the top five risks in order as: availability of oil and gas resources; recruitment and retention of a qualified workforce; energy price volatility; environmental impact of operations; and political/regulatory risk issues.
Marsh's NOC risk index score rose from 4.49 out of a possible six in 2007 to 4.51 in 2008, a release says.
"By contrast, the risk management effectiveness index score was 3.8."
The availability of resources as a risk issue was rated 5.3 out of a possible six (it was also the top-ranked risk in 2007 but with a rating of 4.9), a Marsh release says.
"It is no surprise that our survey has found that national oil companies are facing a riskier business environment," said Jim Pierce, Marsh's Global Energy practice leader.
"However, of more concern is the gap between the importance of the risk and how well it is managed."
This gap is increasing from year-to-year, Pierce noted.

Alberta decision projected to increase bodily injury claims costs by 29%

An actuarial report estimates bodily injury claims costs are expected to increase 29% -- implying an estimated 10.8% increase in the basic auto insurance premium -- following a decision in which the Alberta Court of Queen's Bench eliminated the province's Cdn$4,000 cap on payments for damages related to minor auto injuries.
The estimate is contained in a report submitted by the actuarial consulting firm Oliver Wyman Ltd. to the Alberta Automobile Insurance Rate Board.
The board will consider the report in deciding on the annual industry-wide rate level adjustment to become effective on Nov. 1, 2008.
Oliver Wyman's predictions were based in part on the findings contained in a 2004 KPMG report to the Alberta finance department. In it, KPMG found that out of the total 30.2% savings in bodily injury claims presented in the report, 21.3% -- or 70.5% of the total -- was due to the cap on minor injuries and the balance, 8.9%, was for non-cap-related auto insurance reforms.
"We assume this same relative split of costs, 70.5% versus 29.5%, is applicable today," Oliver Wyman notes. "As we estimate the minor injury cap to have resulted in a savings in bodily injury claim costs of 21.6%, we estimate that the repeal of the cap will result in an increase in bodily injury claim costs of 27.6% (1 divided by .784)."

AXA reports increased P&C revenues in 2008 Q1

AXA reported its 2008 Q1 property and casualty revenues increased by 2% to EUR8.885 million (Cdn$13.74 billion), up from EUR8.625 billion (Cdn$13.33 billion) in 2007 Q1.
"This solid performance resulted from positive new business volumes with personal motor and household net new contracts reaching 246,000 and 17,000 contracts, respectively, as well as prices holding up well across the board," the company noted in a press release.

Ontario auto rates increase in 2008 Q1

Ontario auto rates are on the rise, according to data posted by the Financial Services Commission of Ontario (FSCO), the regulator of the province's insurers.
Rate applications approved for 2008 Q1 averaged +1.05%, based on the entire market, FSCO noted in an online bulletin.
Rate changes approved in 2004, 2005, 2006 and 2007 were -10.60%, -2.43%, -1.27% and +0.55%, respectively, for the entire market.
In 2008 Q1, for the 43.37% of the market that had rate changes approved, the average rate change was +2.42%, when weighted by market share.

Carriers should offer long-term policies to homeowners in hazard areas

In an effort to better manage risks during a period of large-scale catastrophes, insurers should consider offering long-term policies to homeowners in hazard-prone areas.
"Such a long-term policy could be tied to a mortgage, and home improvement loans can encourage the adoption of cost-effective mitigation measures," says a report co-authored by the Wharton University of Pennsylvania, the Insurance Information Institute and Georgia State University.
"A program of insurance vouchers, similar in concept to food stamps, could assist low-income residents in disaster-prone areas to purchase adequate insurance coverage."
The report found that, among other things, most homeowners in hazard-prone areas consider only premium payments, without taking into consideration the benefits of protection, when considering their insurance purchases.

AIG suffers US$5 billion loss in 2007 Q4

American International Group, Inc. (AIG) reported loss of US$5.3 billion for 2007 Q4, and a net income of US$6.2 billion for the full year 2007, representing a 55.9% decrease over the prior year.
In 2006 Q4, AIG reported a profit of US$3.4 billion. "The 2007 other-than-temporary impairment charges resulted primarily from the significant, rapid declines in market values of certain residential mortgage-backed securities in the fourth quarter, for which AIG cannot reasonably determine the recovery period will be temporary," the company reported in a statement.

Focus on micro-solutions

In order to respond to the rising costs of climate change-related damages, insurance companies are going to have to focus more on micro-solutions (i.e. on a policyholder-by-policyholder basis), Colin Empke, partner at Blaney McMurtry LLP, told delegates at the Canadian Defence Lawyers 4th annual insurance coverage symposium in Toronto on Feb. 28.
Empke was speaking on behalf of Anthony Saunders, partner with Guild, Yule and Company, who was unable to attend the symposium.
Empke observed an increasing number of weather-related insurance losses, causing the industry to seek ways to deal with increasing costs and solvency issues.