CAIB 2, Chapter 2 - Underwrtiting Commercial Property Insurance

A submission can include

1. An application
2. Additional verbal information
3. Additional written information: including previous policy premium, loss history & loss details, financial statements and photographs

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Process for Underwriting submissions can include

1. Completion of survey
2. Search for interested insurer
3. Meet with prospect, discuss quotes and select Insurer
4. Request Binding coverage with selected insurer
5. Review policy and deliver to client

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1. Completion of Survey - goals

1. Assists in identifying loss exposures
2. Helps determine coverages needed
3. Develops other underwriting information needed by Insurer

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Completion of Survey, continued:
Surveys & Commercial Property Checklists can benefit broker by

1. Alerts broker to potential loss exposure
2. Ensures that needed coverages are not forgotten or ignored
3. Helps reduce potential for E&O claim

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2. Search for interested insurer

To shop or market the risk to as many insurers that are interested in quoting

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3. Meet with prospect, discuss quotes and select insurer

To meet with Insured and discuss advantages/disadvantages of coverages offered

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4. Request binding coverage from selected insurer

On complex risks, insurers may inspect/survey risk or use independent firm to do this, such as IAO
Some insurers require completed written applications for all commerical risks
Generally: more complex the risk = more detailed the application

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5. Review Policy and deliver to client

1. review to ensure issued in accordance with request
2. Discuss important coverages, limitations, exclusions with insured

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Building Construction: 5 main types

1. Fire Resistive
2. Non-combustive
3. Heavy Timber
4. Ordinary
5. Frame

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1. Fire-Resistive

1. Meets minimum standards = hours it can withstand specific controlled test fire
2. Usually steel frame, encased in concrete, reinforced concrete, concrete brick and concrete. Usually 2-3 hours burn time
3. If building supported in whole or part by bare steel, building not qualified as fire-resistive

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2. Non-combustive

All structural members, floors, roofs & supports made of steel, iron, concrete, brick and other non-combustible materials.
Usually just falls short of Fire-Resistive category

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Heavy Timber

Rare: usually in old buildings: solid or laminated wood in columns, trusses, beams, girders, arches & trusses.
Floor & roof construction also wood

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Ordinary

Usually a combination of the other classes:
Brick/joist and concrete block/wood roof types.
Exterior bearing walls non-combustive materials; 2 hour fire-resistive.
Roofs, floors, interior framing wholly or partially wood or other combustible material.

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Frame

Supporting walls of wood. Exterior sheathing = wood, stucco, metal, or masonry veneers, like brick veneer.

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Miscellaneous Building Information: where building 25 years or older

Roof
Wiring
Over-current protection: circuit breakers and fuses
Plumbing
Heating

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Common Hazards: 5

1.Heating
2.Electrical
3. Detachment
4. Protection
5. Occupancy

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Heating

Fuels: natural & liquid propane, gas, oil & solid fuels such as coal and wood
Chimneys: Better - masonry lined and built from floor up superior to unlined supported by bracket
Manufactured metal chimneys also available
Need CSA/ULC approval

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Electrical Service: Failure of mechanical or electrical equip one of biggest cause of fires

Wiring: Copper in conduit preferred (metal casing) protects from damage & decay. 1965-73 aluminum often used - inferior
Fuses/Circuit breakers: prevent max allowable current through wiring: circuit breakers best

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Detachment

Proximity to other commercially rated buildings:
distance, height, occupancy, construction routinely sought by insurers
Neighbouring business represent potential for loss which could spread to insured property = rate or premium increase

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Protection: Private and Public

Private: Fire extinguishers, sprinklers, fire& intrusion detection equipment
Insurer normally provides rate credit for protection

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Public Protection

Proximity to fire hydrant/distance to responding fire hall.
If no external protection provided within reasonable distance, risk is UNPROTECTED and requires rate increase

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Occupancy

Presence of nightclub, restaurant, auto repair garage in same building = less desirable to insurer
Broker must provide accurate description of all occupancies to reduce risk of E&O

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Special Hazards: Could include Churches

1. Churches: use of candles/braziers

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Special Hazards 2. Garage Service Stations

2. Garage/Service Stations/cooking (?)
Welding, spraying, painting, dipping,

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Special Hazards 3: Bakeries, hotels, restaurants

Deep fat frying, baking

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Special Hazards 4: Butcher shops/locker plants

Smoking & rendering

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Special Hazards Summary

Generally, businesses engaged using flammables and painting. dipping, welding, repairing, woodworking & cooking = special hazard. Insurer usually requires supplementary questionnaire to evaluate property = usually rate increase

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Brokers Statement & Supplementary Information

1. Physical condition & upkeep of premises
2. quality of housekeeping, character of neighbourhood.
3. Number of years in biz, number in this location
4. Current/past financial difficulties
5. Loss history - 3/5 years & corrective action
6. Denial/cancellation by other insurers
7. Photos/scaled drawings