Insurance Industry Overview – Insurance Products

In insurance, the product is a promise. This promise is detailed in a contract between the insured and the insurer

called a “policy” which defines which risks are included and excluded and what amounts will be paid if the risk event occurs.

There are hundreds of risks which individuals and businesses face which they may want insurance to protect them from.

The insurance industry groups these into three main categories: Property & Casualty or “P&C” Life; and Health

P&C and Health are sometimes referred to as “non-life,” and P&C specifically is also sometimes called rGeneral Insuance‘.

We’ll start with P&C.

Property includes things owned, like cars and buildings, or a business.

Casualty, otherwise known as liability, covers your responsibilities to others: what you might have to pay because of something you did, or failed to do.

If you hit another car, the damage to your car is an example of property, but the damage to the other car is liability.

The value of property is broadly fixed, so the maximum cost – or ‘exposure’ – is defined in the policy

For casualty, the range of outcomes is unknowable: a car accident could cause no harm, or it could result in millions of dollars of damages.

To manage their exposure, insurers usually set a limit on casualty insurance.

Although some property and casualty risks can be insured individually, most insurance policies include both.

There are two main segments: Personal and Commercial In Personal, the two largest categories are home, and motor or ‘auto’ insurance.

Within home, you may need owner’s, renter’s or condominium insurance, each covering a different mix of property and liability risks.

Similarly with ‘Motor’ insurance, there are different policies for different combinations of risks.

To get additional protection for the amount above the liability limits in your auto or home insurance, you can buy an umbrella or excess liability policy.

And there are many other Personal policy types, for example pet and travel insurance.

Buildings and motor risks appear again in Commercial policies, as well as a whole range of risks specific to businesses.

Property risks include a company’s stock and assets, and also financial loss due to business interruption or customers not paying.

under Casualty, most service businesses need professional liability insurance, otherwise known as ‘Errors and Omissions’ or ‘Professional Indemnity’, to cover failure to deliver or damage caused.

The exact risks differ by profession, so a policy for plumbers will be different to one for consultants.

Liability for your product causing harm is covered by product liability, while workers’ compensation covers responsibility for harm experienced by employees at work.

Regulators or business relationships like a lease or contract may require businesses to have insurance, for example workers’ compensation or professional liability.

Some further risks are covered by specialty policies.

Cover for these risks can be sold standalone but are often packaged into single policies.

A standard Business Owner’s Policy or”BOP” in the US includes basic risks for small businesses.

Professions like lawyers and doctors with high value, industry-specific risks have them packaged into their own specialist policies as do companies in specialist sectors such as aviation and marine.

The insurance industry calls these different groups “Lines of Business”.

This might refer to the overall group, for example “Personal lines”, or the categories beneath them, for example ‘home lines’ or ‘motor lines’.

Most property claims happen within the year of the policy: a car accident or property damage is usually known immediately.

Liability claims may take longer, for example a product’s impact on public health might not be identified for many years.

So insurers will have a good idea by the end of the year how big the claims are for property risks.

For liability, the risk may in theory play out at any time in the future but as each year passes insurers can be increasingly confident about the size of any future claims they will need to pay out.