Page 300 - M97TB9_2018-19_[low-res]_F2F_Neat2

11/10 M97/February 2018 Reinsurance

Table 11.3: Extent of cover and exclusions
Disability benefit Lump sum benefit or annuity in the event of permanent damage to health, the amount of
benefit usually being determined on the basis of the degree of disablement referenced to
an embedded dismemberment schedule.

Death benefit Lump sum benefit following accidental death.
Daily allowance Lump sum benefit per day of occupational disability caused by an accident. The benefit
is usually limited to a maximum payment period of one year.
Daily hospitalisation Lump sum benefit per day of hospitalisation as a result of an accident with benefit again
benefit usually limited to a maximum payment period of one year.

Medical expenses Indemnification of medical expenses actually incurred, usually on a subsidiary basis,
after any payments by private and statutory health insurers. As an indemnity insurance
type of benefit, this is the main exception to the principle of fixed-sum benefits under the
remainder of the policy.

C2 Underwriting considerations
In personal accident business, underwriting considerations turn mainly on the disability and death
benefits provided under standard policies. Where reinsurance is concerned, major losses and
accumulations of losses are of prime importance. The risk of major losses arises with personal accident
insurances having high sums insured, which are often reinsured on a facultative basis. Accumulation
risks arise where a number of insureds gather in the same place or are exposed to the same peril.

Be aware
In the case of death or disablement, a high sum insured could be considered to be one which exceeds six times the
insured person’s annual income.

The following underwriting considerations would affect the reinsurance of a personal accident account:
• Limit per person and the limit for known accumulations. Reference copy for CII Face to Face Training
• Ratio of retention to liability.
• Premium volume of accident business in the client’s overall portfolio.
• The composition of the portfolio in terms of individual and group business, sums insured and
risk types.
• Gross results for the past five years. For a fledgling business, sight of a business plan may be
stipulated.
• Information on major losses and known accumulations.
• Comparison of the primary insurer’s rate to the market level.
• Following 9/11, the accumulation from terrorism has become a substantial concern and reinsurers
seek to avoid this risk wherever possible.
• In the case of high levels of sums insured the moral hazard of the person insured may need to be
clarified, including why this level of benefit is needed.
• Finally, especially where standard exclusions are concerned, the relevant market conditions should be
taken into account.

C3 Accumulations

Where several insured persons are affected by one and the same accident event, one talks of an
Important to
distinguish between ‘accumulation of persons’. Where an insured person has taken out several personal accident policies,
known and unknown there is a ‘policy accumulation’ in the event of a loss. It is also important to distinguish between known
accumulations
accumulations, which are usually reinsured on a facultative basis, and unknown accumulations. In the
case of known accumulations, the insurer knows before the risk attaches which insured persons and
sums insured are exposed to a common risk of accident.

C3A Known accumulations
Known accumulations can be seen in cases where teams of professional sports players, ships’ crew or
mine workers are all covered by group personal accident insurance.
11
Chapter