Property Not Covered

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Agricultural Output Program AgOP
Welcome to AAIS Interactive Web Seminar
Joseph Harrington, director, corporate
communications Deborah Summerlin, vice
president , insurance lines December 5,
2006 Audio - Dial 877/326-2337 Conference ID
5518405
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Todays Seminar

• PowerPoint presentation with comments by
  telephone
• Use the chat function at left
• Open phones at the end

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Todays Program

• What is AgOP?
• Output background
• Eligibility and classifications
• Coverage overview
• Rating concepts

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AAIS Farm Product Innovation

• Modular Farmowners Program
• Choice of dwelling form
• Choice of liability form (farm personal, farm
  commercial, CGL)
• Income and equipment breakdown coverage forms
• First standardized Farm Umbrella Program
• Maintain monoline Farm Properties Program

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AAIS Output Program Innovation

• Manufacturers output policies MOPs
• Developed in 1950s
• One maintained by the TIRB, predecessor to AAIS
• Commercial Output Program, 1993
• Added institutional and commercial uses
• Additional AAIS output programs
• Commercial Output XL
• Developers and Contractors Output (DOP)
• Agricultural Output (AgOP)

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Advantages of Output Programs

• Comprehensive property and marine forms
• Minimize potential coverage gaps
• Integrate inland marine terms for computers,
  mobile equipment, and other types of property
• Eliminate multiple deductibles
• Unique rating approach
• A single, integrated risk, rather than the sum
  of disparate exposures
• Deficiency points determine major loss load
• Loading for small loss history when deductible
  is less than 5,000

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Agricultural Output Program (AgOP)

• Provides broad property and marine coverage in
  one form
• Includes coverage for residential property
• Can be written on a blanket, scheduled, or
  combined basis
• Can be packaged with CGL and other coverage parts
• Features systematic, flexible rating procedure

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What the AgOP Provides . . .

• . . . to companies that write farmowners
• Evolved product for vertically integrated
  operations
• Product for non-farming ag risks
• . . . to companies that write commercial property
• A market segment tool with coverages, terms, and
  options designed for agribusinesses
• Alternative to modifying commercial forms

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AgOP versus Farmowners

• AgOP
• Processing operations that may not include the
  cultivation of crops or raising livestock
• Special terms for dwellings and household
  personal property
• Farmowners
• Farms supplying commodities for manufacturing or
  processing may not be eligible
• HO-style forms are used to insure dwelling and
  household personal property

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AgOP Eligibility

• Buying, selling, storing agricultural products
• Processing or manufacturing goods from
  agricultural products
• Sale of goods or services to agricultural or
  agribusiness customers
• Farming operations supplying commodities for
  manufacturing or processing

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AgOP Eligibility, cont.

• Classifications
• Ag Chemical Mixing and Storing
• Cotton Ginning
• Dehydrating Plants
• Farm Operations
• Feed Lots
• Grain Elevators
• Hatcheries (Fish or Poultry)
• Milling - Corn, Rice, Feed, Cereal
• Sugar Refining

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Primary Form

• Agribusiness Property and Income Coverage Part
• Comprehensive mix of property, marine, and income
  coverages
• Dec page entries control limits for
• Additional coverages
• Coverage extensions
• Supplemental coverages

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Primary Form, Property Covered

• Open perils coverage (risks-not-excluded)
• Building Property
• Personal Property (including most household
  personal property)
• Stock
• Coverage applies on or within 1,000 feet of a
  covered location

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Primary Form, Property Covered, cont.

• Buildings and personal property
• Blanket or scheduled coverage
• Values can be combined or treated separately
• Items may be separately scheduled and rated
• Stock
• Show separate limit(s)
• Blanket or scheduled coverage
• Items may be separately scheduled and rated

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Primary Form, Property Covered, cont.

• Computers and Mobile Equipment
• Open perils coverage
• Covered on a blanket or scheduled basis
• Coverage not linked to a described location

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Primary Form, Property Not Covered

• 24 classes of property are not covered
• Examples Animals, Growing Crops, Fences,
  Jewelry, Land, Silverware, Trees
• Some types of property listed under Property Not
  Covered are covered under a Coverage Extension or
  a Supplemental Coverage or may be covered by
  endorsement

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Primary Form, Internal Limits

• Form AG 0100 includes terms that describe
• Nine additional coverages
• Nine coverage extensions
• 19 supplemental coverages
• Six other coverages
• Dec page entries, not policy language, control .
  . .
• . . . which coverages apply, and . . .
• . . . the corresponding limit for each coverage.

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Primary Form, Additional Coverages

• Additional Coverages
• Consequential Loss to Stock
• Debris Removal
• Emergency Removal
• Emergency Removal Expense
• Fire Department Service Charges
• Glass Repair or Replacement
• Inventory and Appraisal Expense
• Pollutant Clean Up and Removal
• Recharge of Fire Protection Equipment

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Primary Form, Coverage Extensions

• Coverage Extensions
• Fraud or Deceit
• Newly Acquired Computers
• Newly Acquired, Constructed Buildings
• Newly Acquired Mobile Equipment
• Personal Effects
• Personal Property, Acquired Locations
• Property Away From Covered Location
• Stock -- Acquired Locations
• Trees, Shrubs, Plants, and Lawns

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Primary Form, Supplemental Coverages

• Supplemental Coverages
• Accounts Receivable
• Brands or Labels Expense
• Carrier Liability
• Fine Arts, Furs, Guns, Jewelry, Metals
• Loss of Use of Dwellings
• Ordinance or Law -- Increased Costs
• Overseas Transit or Location
• Property in Transit
• Property on Exhibition

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Primary Form, Supplemental Coverages, cont.

• Property Sold Under Installment Sales Plan
• Sales Representatives Samples
• Sewer Backup, Water Below the Surface
• Spoilage
• Surface Water Run-Off
• Tank Leakage
• Utility Service Interruption
• Valuable Papers, Research Cost
• Watercraft
• Wrongful Delivery of Liquid Property

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Primary Form, Other Coverages

• Coverages that do not increase applicable limits
• Collapse
• Computer Disturbance
• Tearing Out and Replacing
• Theft Damage -- Non-owned Property
• Electrical Breakdown -- May be limited to 1,000
• Ordinance or Law -- Undamaged Parts of Building

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Primary Form, Perils Covered, Perils Excluded

• Open perils coverage
• Named perils coverage in endorsements that cover
  hay, livestock, and poultry
• Perils excluded
• Ordinance or Law
• Earth Movement or Volcanic Action
• Civil Authority
• Nuclear Hazard
• Utility Failure
• War
• Water
• TerrorismIndicates special exceptions apply

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Primary Form, Perils Excluded, cont.

• Marine-style treatment for certain property
• Exceptions to these exclusions . . .
• Earth Movement/Volcanic Action
• Utility Failure
• Water
• . . . for these types of property
• Computers
• Mobile equipment
• Various supplemental coverages, including
• Accts. Receivable
• Fine Arts, Furs, Guns, etc.
• Property in Transit
• Spoilage
• Valuable Papers

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Primary Form, Perils Excluded, cont.

• Additional exclusions and restrictions include
• Animals
• Collapse
• Computer Virus or Hacking
• Contamination or Deterioration
• Criminal Acts
• Temperature/Humidity
• Voluntary Parting
• Wear and Tear
• Additional standard restrictions for specific
  exposures

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Primary Form, Income Coverage

• Additional premium charge
• Four income options
• Earnings, Rents, and Extra Expense
• Rents and Extra Expense
• Earnings and Extra Expense
• Extra Expense Only

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Primary Form, Income Coverage

• Exclusions and limitations
• Finished stock
• Leases, licenses, contracts, orders
• Mobile equipment (various requirements)
• Radio and television antennas
• Software - 60 days or longer . . .
• Strikes, protests, other interference
• Coverage extensions - part of limit
• Interruption by Civil Authority - 30 Days
• Period of Loss Extension - Up to 90 Days
• Grain Storage Income
• Seasonal Coverage

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Primary Form, Income Coverage

• Additional Income Coverages
• Newly Acquired Locations, Earnings and Extra
  Expense OR
• Newly Acquired Locations, Extra Expense Only
• Supplemental Income Coverages
• Public Health Shutdown
• Dependent Locations
• Utility Service Interruption
• Contract Penalty
• Property In Transit, On Exhibition, or In The
  Custody Of Sales Representatives

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Primary Form, Valuation

• Triggered by dec page entries
• Actual Cash Value, Limited Replacement Cost
• Replacement Cost
• Stated Amount
• Special stock valuation terms
• ACV
• Market Price
• Selling Price
• Cash Shipping Value
• Point of Origin - Imported Stock
• Valued Seed, Foundation Seed
• Other, as shown on Declarations

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Primary Form, Remaining Provisions

• What Must Be Done In Case of Loss
• How Much We Pay - Dec page entries trigger . . .
• Peak Season Increase
• Inflation Protection
• Coinsurance
• Value Reporting
• Other Income Coverage Loss Settlement Terms
• Loss Payment
• Other Conditions

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AgOP Endorsements

• Countrywide Endorsements
• Computer Virus and Hacking Coverage
• Crime Coverages - Discovery Basis
• Employee Fraud and Dishonesty
• Computer and Telecommunications Fraud
• Counterfeit Currency, Money Orders, Travelers
  Checks
• Forged or Altered Charge, Credit, or Debit Card
  Written Instruments
• Forged or Altered Checks, Drafts, or Promissory
  Notes
• Money and Securities
• Keytrol Fraud
• Functional Replacement Cost

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AgOP Endorsements, cont.

• Hay, Straw, and Fodder Coverage
• Livestock Coverage
• Mortgaged and Stolen Grain Coverage
• Poultry Coverage
• Pro Rata Limit
• Property in Transit - Condemnation or Seizure
  Coverage
• Optional Exclusions
• Collapse
• Consequential Water Loss
• Sprinkler Leakage
• Theft
• Vandalism
• Water Damage
• Windstorm or Hail

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AgOP Endorsements, cont.

• Protective Devices and Services
• Rebuilding Coverage - Excess Insurance Amendment
• Scheduled Earthquake Coverage Earthquake
  Schedule
• Scheduled Flood Coverage Flood Schedule
• Theft Coverage - Amended Limit
• Waiver of Deductible - Commodities
• Warehouse Operators - Legal Liability Coverage
  Warehouse Operators Schedule
• Windstorm or Hail Deductible

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AgOP Rating Information

• Two types of rating information
• Basic policy premium developed by using output
  methodology Loads and Deficiency Points
• Premiums for many higher limits and coverage
  options developed by using traditional Loss Costs
• Company must file loss cost multiplier

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Basic Policy Premium

• Normal Loss Basic Charge - when deductible amount
  is less than 5,000
• Based on losses and values over the previous
  three years each loss is capped at 5,000
• Maximum Normal Loss Basic Charge is 1.00 Minimum
  .01 or .02, depending on deductible
• Basic Major Loss Load - Small loading, based on
  classification of the risk
• Deficiency Points modify Basic Major Loss Load,
  reflect unique aspects of risk

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Deficiency Points

• Deficiency points by risk characteristic
• Disaster Exposure
• Climatic Hazards
• Special Occupancy Hazards or Production
  Conditions
• Lack of Private Protection
• Inadequate Public Protection
• External Exposure (neighboring premises)
• Construction Exposures

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Deficiency Points, cont.

• Combustibility or Susceptibility not usual to the
  classification
• Coverage provided for property or perils usually
  excluded
• Transit exposures greater than those typically
  contemplated
• Property located in known flood areas, exposure
  to sewer back-up
• Earth movement exposures
• Lower deductibles on selected portions of the risk

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Property or Stock Final Factor

• Equals the sum of
• Normal Loss Basic Charge (when applicable)
• Basic Major Loss Load
• Deficiency Point Charge
• The PFF or the SFF Rate per 100 of
  insurance

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Additional AgOP Rating Info

• Rating higher limits and optional coverages
• Reflected in the assignment of deficiency points
• Rated as a factor of the PFF or SFF
• Loss costs

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AgOP Support Materials

• AAIS educational material, including rating
  Examples
• Excel-based rating worksheet
• Sample dec page format
• IRMI Risk Report, December 2001

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Additional Information

• AAIS Contact
• Rick Maka
• AAIS Director of Marketing
• 1745 South Naperville Road
• Wheaton, IL 60187-8132
• rickm_at_AAISonline
• Tel. [phone], ext. 222
• Fax [phone]
• Web www.AAISonline.com