AK Property & Casualty cheat sheet

Insurance transfers pure risk from an individual to a pool of insureds in exchange for premium; speculative risk (gambling, investing) is not insurable because loss must be accidental.

Insurable risk traits: accidental, definite as to time, place and cause, measurable, calculable loss cost, a large number of similar exposure units, and losses that are not catastrophic to the pool.

Law of large numbers: as the number of similar independent exposure units increases, actual loss experience converges on expected loss experience, so rates become more predictable.

Adverse selection is the tendency of higher-than-average risks to seek or keep coverage; underwriting, exclusions, and rating classes keep premiums aligned with expected losses.

A valid contract requires offer, acceptance, consideration, legal purpose and competent parties; insurance adds insurable interest, indemnity, and utmost good faith, and is a conditional, unilateral contract of adhesion.

Insurable interest in property must exist at the time of loss and be measurable in money; in life insurance it must exist at policy inception, not at death.

The indemnity principle restores the insured to approximately the pre-loss financial position, no better; actual cash value, replacement cost and agreed value measure that restoration differently.

Agent authority arises three ways: express (stated in the agency contract), implied (customary to perform the duties), and apparent (created by the insurer's words or conduct); a broker represents the insured, not the insurer.

Subrogation gives the insurer the right, after paying a loss, to pursue the negligent third party responsible, preventing the insured from collecting twice for the same loss.

HO-3 insures the dwelling and other structures on an open-peril basis but personal property on a named-peril basis; HO-5 is open peril on both; HO-2 is named peril throughout.

Standard homeowners limits as a percentage of Coverage A: Coverage B other structures 10%, Coverage C personal property 50%, Coverage D loss of use 30%.

Homeowners forms impose special dollar limits on categories such as money, securities, theft of jewelry, theft of silverware, and business property in the home; higher limits require scheduled endorsements.

Loss of use pays additional living expense and fair rental value needed to maintain the household's normal standard of living while the residence is being repaired or replaced.

80% replacement-cost rule: if the dwelling limit is at least 80% of full replacement cost at the time of loss, the dwelling is settled at replacement cost; if underinsured, payment is limited to the greater of ACV or a proportional share of the limit.

Commercial property coinsurance formula: (limit carried divided by (coinsurance percentage times value at time of loss)) times the loss, then subtract the deductible, never exceeding the policy limit.

Causes of loss forms: basic (named perils such as fire, lightning, windstorm, vandalism), broad (adds falling objects, water damage, glass breakage), and special (open peril, all risk of direct physical loss unless excluded).

Business income coverage pays lost net income plus continuing normal operating expenses during the period of restoration, subject to a coinsurance percentage or a monthly limit of indemnity.

Standard property exclusions include flood, earth movement, ordinance or law, intentional loss, neglect, and wear and tear; flood and earthquake require separate policies or endorsements.

Negligence requires four elements: a legal duty owed, breach of that duty, proximate cause, and actual damages; liability does not attach unless all four are proven.

An occurrence form covers injury or damage that takes place during the policy period regardless of when the claim is reported; a claims-made form covers claims first made during the policy period, limited by a retroactive date.

The CGL carries an each-occurrence limit, a general aggregate (typically twice the occurrence limit), and a separate products-completed operations aggregate.

CGL Coverage A pays sums the insured is legally obligated to pay for bodily injury and property damage; Coverage B covers personal and advertising injury; Coverage C pays medical expenses without regard to fault.

Workers compensation Part One pays statutory benefits regardless of fault; Part Two, employer's liability, responds to employee lawsuits outside the statutory system; Part Three lists other states whose laws are covered.

Workers compensation benefits include medical care, temporary total and partial disability, permanent partial and total disability, rehabilitation, and death and survivor benefits.

Personal auto policy parts: A liability, B medical payments, C uninsured/underinsured motorists, D coverage for damage to your auto (collision and other than collision), E duties after an accident, F general provisions.

Alaska requires liability limits of at least $50,000 per person and $100,000 per accident for bodily injury plus $25,000 for property damage; Alaska is an at-fault (tort) state rather than a no-fault state.

Umbrella liability sits above required underlying auto, general liability and employers liability limits, paying excess amounts and dropping down for certain exposures not covered by the underlying policies.

Alaska insurance law is codified in Title 21 of the Alaska Statutes and is administered by the Division of Insurance within the Department of Commerce, Community, and Economic Development, headed by the director of insurance.

Alaska resident producer licenses are renewed biennially and require 24 hours of approved continuing education each two-year term, including at least 3 hours of ethics.

Producers must keep the Division informed of changes of name or address (generally within 30 days) and must report administrative actions and criminal convictions.

Alaska taxes authorized insurers at 2.7% of gross premiums written; retaliatory provisions apply when an insurer's home state imposes heavier taxes or fees on Alaska insurers.

Unfair trade practices under AS 21.36 prohibit misrepresentation, false advertising, twisting, rebating, boycott, coercion, unfair discrimination, and unfair claim settlement practices.

Insolvency protection comes from the Alaska Insurance Guaranty Association for property and casualty claims and the Alaska Life and Health Insurance Guaranty Association, each paying covered claims up to statutory limits.

Surplus lines coverage may be placed with a nonadmitted insurer only through a licensed surplus lines broker, after the risk has been declined by authorized insurers through a documented diligent search.

Alaska licenses producers, surplus lines brokers, adjusters, and other license types; nonresident producers are generally qualified through reciprocity based on a valid home-state license.

The director may examine insurer and producer records, hold hearings, issue cease-and-desist orders, and impose fines; authorized insurers must file annual statements and required rate and form filings.