Auto Module I

1
AUTO MODULE - I
2
Module Objectives

• Introduction to Auto Insurance
• Basic Policy Structure
• Liability Coverage
• Uninsured Motorist Covg
• Medical Coverage

• Personal Injury Protection
• Exclusions
• Physical Damage
• Comprehensive Coverage
• Towing and Labor
• Review Exercise

3
Insurance Terms

• Peril - The specific event causing a loss, such
  as fire, windstorm or accidental death.
• Hazard - Any factor that increases the chance of
  loss.
• Moral Hazard - subjective characteristic of the
  insured that increases the chance of a loss.
• Morale Hazard - insureds definite indifference
  to a loss.

4
Insurance Terms

• Indemnity - To restore the individual to the
  approximate financial position occupied prior to
  the loss.
• Insurable Interest - A relationship that assures
  financial loss following the destruction of
  property.
• Deductible - A certain dollar amount beyond which
  insurance protection begins.
• Earned Premium - The portion of the premium that
  represents coverage already provided.

5
Insurance Terms

• Pro Rata Cancellation - A cancellation by the
  company that refunds an amount equal to the daily
  earned premium multiplied by the days remaining
  in the policy.
• Short Rate Cancellation - A cancellation by the
  insured that refunds the unearned premium minus
  administrative expenses.
• Subrogation - Upon payment of a claim, the
  insurance company is entitled to the insureds
  legal and equitable rights against third parties.

6
Farmers Auto Companies

• MCA - Mid-Century Insurance Company
• TFIC - Texas Farmers Insurance Company
• TFIC no longer accepting new business
• TCM - Texas County Mutual

7
Mid-Century Insurance Company

• Mid-Century Insurance Company (MCA) is one of our
  preferred Companies. In this Company, we will
  place our prospective insureds who will be less
  likely to have claims in the future. Because
  our rates in this Company are very competitive
  the Underwriting requirements are the very
  stringent.

8
Texas County Mutual
Texas County Mutual (TCM) In this Company,
drivers may pay an increased rate because of
moving violations, lack of driving experience,
previous claims activity and driving a motor
vehicle without maintaining the state minimum
liability insurance. Unlike TFIC and MCA, County
Mutual rates are not promulgated by the State.
Therefore, we are able to offer a wide range of
rates based on all of the above mentioned
characteristics. In fact, we are even able to
offer an Ultra Preferred discount which can
reduce their rate below Mid Centurys rates!
9
Rate Classifications
Farmers uses a Rate Classification system to rate
for a drivers age, sex, marital status and
vehicle use. We have statistical information
supporting young single male working drivers are
more likely to be involved in an automobile
accident than older married female non-working
drivers thus, we can charge a higher premium for
these drivers. We cannot and do not use
discriminating factors such as race, religion or
socioeconomic status to determine rates.
10
Rate Classifications
Adult Rate Classes There is no male operator
under 25 years of age, no unmarried female
operator under 21, no operator 65 years or older
and The auto is not used for business nor driven
to or from work or school. (Clergy shall be rated
as 1A rate classes) Under 25
1A-1 45-49 1A-34 25-29
1A-2 50-54 1A-41 30-34
1A-31 55-59 1A-42 35-39
1A-32 60-64 1A-5 40-44 1A-33
11
Rate Classifications
Adult Rate Classes There is no male operator
under 25 years of age, no unmarried female
operator under 21, no operator 65 years or older
and The auto is not used for business but is
driven to/ from work or school more than 50 of
the time. Under 25 1B-1 45-49 1B-34 25-29
1B-2 50-54 1B-41 30-34
1B-31 55-59 1B-42 35-39
1B-32 60-64 1B-5 40-44 1B-33
12
Rate Classifications
Adult Rate Classes There is no male operator
under 25 years of age, no unmarried female
operator under 21, no operator 65 years or older
and The auto is not used for business but is
driven to or from work or school less than 50 of
the time. (Or drives to/from park and ride 5
times a week). Under 25 1C-1 45-49 1C-34
25-29 1C-2 50-54 1C-41 30-34
1C-31 55-59 1C-42 35-39
1C-32 60-64 1C-5 40-44 1C-33
13
Rate Classifications
Adult Rate Classes There is no male operator
under 25 years of age, no unmarried female
operator under 21, no operator 65 years or older
and The auto/truck is used for business. Under
25 3-1 (3A-1 truck) 45-49 3-34(3A-34
truck) 25-29 3-2 (3A-2
truck) 50-54 3-41(3A-41 truck) 30-34
3-31 (3A-31 truck) 55-59 3-42(3A-42 truck) 35-39
3-32 (3A-32 truck) 60-64 3-5 (3A-5
truck) 40-44 3-33 (3A-33 truck)
14
Rate Classifications
Mature Rate Classes There is no male operator
under 25 years of age, no unmarried female
operator under 21, but there is an operator 65
years or older and Pleasure Work/School Carpool
Business / Truck 65-69 6A-0 6B-0 6C-0
8-0 8A-0 70 6A-9 6B-9 6C-9 8-9
8A-9
15
Rate Classifications
Youthful Rate Classes There are one or more male
operators under 25 years of age, and the male is
either married or not the principle driver of the
auto 2A-11(lt17) 2A-12(17-18) 2A-13(19-20
) 2A-21(21-22) 2A-22(23-24)
16
Rate Classifications
Youthful Rate Classes There are one or more male
operators under 25 years of age, and the male is
unmarried and is the principle driver of the
auto 2C-11(lt17) 2C-12(17-18) 2C-13(19
-20) 2C-21(21-22) 2C-22(23-24)
17
Rate Classifications
Youthful Rate Classes There are one or more
female operators under 21 years of age, and is
unmarried and has no children 2D1(lt17) 2D2(17-18)
2D3(19-20) Note Female drivers will never get
a 2A rate. They will be 2D or Adult Class.
18
The Property and Casualty Insurance Contract

• Auto insurance contracts have similar
  components, which include declarations, insuring
  agreements, conditions and exclusions (DICE).

19
The Property and Casualty Insurance Contract

• Declarations
• The first page of the policy which indicates the
  insureds name, address, coverages, premiums,
  endorsements, leinholders, discounts/surcharges,
  vehicles covered, policy number, prematic account
  number, and the company name.

20
The Property and Casualty Insurance Contract
Insuring Agreements This section sets forth the
specific obligations assumed by the insurance
company. Here is where the coverages of the
policy are broadly defined.
21
The Property and Casualty Insurance Contract
Conditions Here is where the duties and
responsibilities of both the insured and insurer
are outlined.
22
The Property and Casualty Insurance Contract
Exclusions This section eliminates coverages that
were otherwise provided by the insuring
agreements. The policy is modified to eliminate
duplicate coverage, to remove coverage, to remove
coverage not needed by the average insured and
exclude perils, risks or property covered by
other policies.
23
Part A - Liability Coverage

• This coverage protects the insured person against
  liability for bodily injury or property damage
  arising out of the ownership, use or maintenance
  of the insured car. (It agrees to pay damages
  for which the insured is legally liable.)

24
Part A - Liability Coverage

• These are basic auto coverages which are packaged
  together and must be purchased together.
• Bodily Injury - Pays for bodily injury to other
  people if you are liable.
• Property Damage - Pays for damage to other
  peoples property if you are legally liable.

25
Part A - Liability Coverage
Q. What is the minimum liability limits that a
driver must have to operate a motor vehicle in
Texas? A. 20/40/15 Q. What does the 20 stand
for in 20/40/15? A. The BI limit per person
(20K) this is the max amount the policy will
pay any one person per accident or occurrence. Q.
What does the 40 stand for in 20/40/15? A. The
BI limit per accident or occurrence (40K) this
is the max amount the policy will pay regardless
of the number of claimants.
26
Part A - Liability Coverage
Q. What does the 15 represent in 20/40/15? A. A
maximum of 15,000 in property damage will be
paid per accident or occurrence.
Minimum coverage's are insufficient for any
insured or applicant who owns a house or has a
lot of assets to protect. In such instances, an
applicant may want to choose higher limits or
purchase an umbrella policy to provide adequate
protection. An Umbrella policy is an economical
way for insureds to protect their financial
security. Discuss the types of persons who may
need an Umbrella policy.
27
Part A - Liability Coverage

• Liability coverage does not cover
• Bodily injury or property damage caused
  intentionally by or at the direction of the
  insured person.
• Liability arising out of the ownership or
  operation of a vehicle used to carry persons or
  property for a fee.
• Damage to owned property.
• Bodily injury to an employee arising during the
  course of employment.

28
Part B1 - Medical Expense
Under this coverage, the company agrees to pay
reasonable expenses incurred for necessary
medical and/or funeral expenses because of bodily
injury sustained by an insured person covered in
Texas, in an automobile accident. This coverage
is paid regardless of fault. This coverage also
applies to the insured and family members as
pedestrians, or while in a non-owned automobile.
29
Part B1 - Medical Expense

• The limit of liability is the maximum limit
  payable for each injured person, regardless of
  the number of persons injured without a
  deductible.
• For example, a client may select a 10,000 limit
  per person per occurrence. If this insured
  person was involved in an accident in which three
  persons were injured, up to 10K will be paid for
  each injured party.
• In Texas, the options for medical coverage are
• 2,500
• 5,000
• 10,000

30
Part B2 - Personal Injury Protection
To prevent the long delays some injured accident
victims face receiving compensation and avoid
expensive litigation, No-Fault plans were
introduced. Personal Injury Protection (PIP) is
a no-fault insurance protection coverage. PIP
coverage covers the same areas Med Pay covers
however, lost wages are also included. An
insured cannot carry both Medical and Personal
Injury coverages because of the duplication of
coverages.
31
Part B2 - Personal Injury Protection
NOTE Because PIP Coverage is more expensive than
Medical Coverage and only adds lost wages, and
because many employees get paid for lost time on
the job, PIP coverage may not be needed.
Research your clients needs before recommending
these coverages.As an agent, you must offer PIP
coverage to each new applicant. If not wanted,
the insured must sign 2 rejection forms declining
the coverage. The agent must retain this form in
his/her file at all times, and 1 should be sent
to Austin.
32
Part C - Uninsured/Underinsured Motorist Coverage
While Texas law requires drivers to carry minimum
liability coverage to operate a motor vehicle,
the state does not require individuals to
maintain Uninsured Motorist Coverage. Because
all drivers do not obey the law, uninsured
motorists cause problems. When involved in an
accident, they can leave motorists without
recourse to recover damages. In Texas, UM/UIM
coverage must be offered to an applicant when
applying for liability coverage's. If not
wanted, the applicant must sign 2 rejection forms
stating they have been offered this coverage.
The signed rejection form must be retained in the
agents file. Send one to Austin Office.
33
Part C - Uninsured/Underinsured Motorist Coverage
The insuring agreement specifies that we will pay
for BI damages that the covered person is legally
entitled to recover from the owner or operator of
an uninsured or underinsured motor vehicle. The
operator of the uninsured vehicle must be
responsible for the accident. All losses are
subject to a 250 deductible.
34
Part C - Uninsured/Underinsured Motorist Coverage

• Insured person means
• The insured or family members (provided they are
  residents of the household.)
• Other persons occupying the insured vehicle with
  the insureds permission.
• Persons entitled to recover for damages because
  of bodily injury to persons described immediately
  above.

35
Part D - Physical Damage Covg

• This section of the policy contract provides
  coverage to the insureds covered automobiles.
  The major coverage's under this section are
• Comprehensive (Other than Collision - OTC)
• Collision
• Towing and Labor

36
Part D - Comprehensive
Comprehensive covers damage to the insured
vehicle, less any applicable deductible, caused
by any accidental means except collision. Q.
What types of losses are covered under OTC? A.
Breakage of Glass. A. Theft A. Collision with a
bird or animal. A. Fire, Hail
37
Part D - Comprehensive

• Deductibles for OTC Coverage include

• 50
• 100
• 200
• 250
• 500
• 1000

38
Part D - Collision
Collision covers damage to the insured vehicle,
less any applicable deductible, caused by any
accident while driving the covered automobile
(unless covered by OTC). Q. What types of
losses are covered under Collision? A. Collision
with another automobile. A. Collision with a
fixed object.
39
Part D - Towing and Labor
Pays for reasonable and necessary towing costs
and/or for labor costs necessitated by the
disablement of the insured car. This amount is
subject to the flat dollar amount selected by the
insured. Flat dollar amounts include 40, 80
and 120. Average towing bills in the Houston
area are between 65 and 85.00. 1-800-FARM-TOW
is available in the Houston area. The towing
company directly bills Farmers for this service.
40
Part E - Insureds Duties After a Loss

• The insured must
• Give prompt notice to the insurance company.
  This notice should include time, place and
  circumstances of the loss, as well as names and
  addresses of injured persons and witnesses.
• Prevent further damage.
• Notify the police when a hit-and-run driver is
  involved.
• Promptly send company any legal notices related
  to the loss.
• DO NOT ADMIT FAULT.

41
Farmers Automated System for Glass Loss
Assignment Service (FASGLAS)
This program allows you to provide prompt and
professional service to clients. After receiving
the insureds report of a damaged windshield, you
merely call an 800 number for glass repair or
replacement. A Farmers glass representative
will then call the insured within 30 minutes and
coordinate the repairs. 800 344-8844
42
Circle of Dependability (COD)
To provide quality service to our customers and
speed up the time it takes to repair our
insureds damaged automobiles, Farmers designed
the COD program. All COD facilities are
inspected by Farmers and meet strict standards.
Repairs made by the COD facilities are guaranteed
for as long as the insured owns the vehicle
(excluding wear and tear).
43
Review Exercise

• Q. Briefly explain the purpose of the Declaration
  page.
• Q. What are the major sections of the Auto
  policy?
• Q. Explain the insureds duties after a loss.
• Q. What is the minimum liability limits offered
  in Texas?
• Q. What do each of these limits mean?

44
Review Exercise
Q. Can you insure a motorcycle under an auto
policy? Q. What coverage protects you if an
uninsured motorist runs into your vehicle,
injuring you and your passengers? Q. Is there an
additional charge for Uninsured Motorist
Protection? Q. Discuss the types of documents
discussed in this review that the agent is
required to maintain in his/her file? Q. Why
would an insured want to purchase Medical
coverage? Q. Why would an insured want to
purchase PIP coverage? Q. Can an insured carry
PIP and Med coverage? Why or why not?
45
Review Exercise
Q. What does OTC coverage cover? Q. What is the
deductible for a UM claim? Q. Who is covered
under your own liability coverage? TIME
PERMITTING Discuss liability coverage's and
recommendations to insureds on the amount of
coverage to carry. Discuss ways to quote and get
the policy, even if your apples to apples quote
is higher than their current provider.
46
Quote of the Day..
Men and women are limited not by the place of
their birth, not by the color of their skin, but
by the size of their hope. John Johnson