Liability insurance insures you against damage for which you are legally liable. For example, if you cycle into a parked car, your cat knocks over an expensive vase or if your children shoot a ball through the neighbor's window. But also if you, your child or pet injure someone.
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In case of damage
The Motor Vehicle Liability Act aims to protect road users against the financial consequences of damage caused by motor vehicles. In this context, the WAM arranges various financial guarantees for anyone who may suffer damage as a result of a motor vehicle, including owners and occupants of other motor vehicles.
The five most important elements within the WAM are:
The obligation to take out insurance
A limited number of permitted exclusions
The direct right of action of the injured party
The motor traffic guarantee fund
The minimum insured sums
Every owner of a motor vehicle on the road is obliged to take out legal liability insurance for this motor vehicle. This also applies to motor vehicles that are parked or used on private property. Taking out comprehensive insurance is not mandatory. Exemption from the insurance obligation can be requested for a car that is not driven for a long period of time. This is also possible for certain periods, for example for a camper that is used for one month per year. This is of course subject to the condition that no one participates in traffic during the period of exemption. If no exemption has been applied for, the person is punishable. In order to check whether the insurance obligation of the WAM is being complied with, every insurer must report the third party liability insurance that it takes out to the RDW.
The WAM limits the permitted exclusions from the insurance. The WAM insurer is permitted to include other exclusions in the general insurance conditions, but on the basis of the WAM it is not permitted to subsequently rely on these exclusions against injured parties. This is to protect the victim and provide financial security in the event of damage caused by a motor vehicle.
There are four exclusions from the coverage of third party liability insurance that are permitted:
The liability of the person who has appropriated the motor vehicle causing the damage through theft or violence.
Damage to items transported by the motor vehicle that
caused the damage. Damage to the driver of the motor vehicle that caused the damage. itself
Damage caused during official speed or agility competitions
The direct right of action of the injured party
A victim or injured party with damage caused by motor vehicle traffic may directly sue the insurer of the perpetrator for compensation, so this does not have to be done through the perpetrator himself. This is called direct right of action. If necessary, the injured party can check with the RDW with which insurer a motor vehicle is insured, based on the license plate.
As mentioned, we have an insurance obligation in the Netherlands. Nevertheless, uninsured motor vehicles are still driving around. In addition, some drivers unfortunately continue driving without reporting after causing damage with their motor vehicle.
The motor traffic guarantee fund was established to provide financial protection in such situations, in which the injured party is not compensated for his damage by the insurer of the perpetrator.
The injured party can appeal to the guarantee fund if he has suffered damage due to:
Uninsured motor vehicle
Stolen motor vehicle
Unknown motor vehicle
Motor vehicle of an exempt conscientious objector
Motor vehicle insured with an insolvent insurer
The minimum insured sums
Pursuant to the 5th WAM Directive, the WAM requires the following minimum insured sums for private motor vehicles:
Amounts are indexed
Application for insurance
Most insurers can provide so-called provisional coverage. Damage may occur after completing the application form and before it has been accepted. They can provide provisional cover between this period.
D the insurance provides cover against risks can be described in two ways.
The causes/events are specifically mentioned in the conditions.
You also have exclusions that are mentioned.
This is the reason that even though they are actually covered events, they are still not insured. Everything is covered unless coverage is excluded.
The insurer provides cover against all external disasters, unless, for example, there is intent. The coverage is broader than event coverage.
An acceptor works for the insurer and assesses on behalf of the insurer and decides whether or not the application will be accepted. The underwriter then checks whether the average risk has been calculated correctly as stated earlier. The application will then be approved until the application is accepted. The policy is then sent to the customer.
The insurance contract is concluded when the application is accepted. There is then an agreement of wills. This means that the customer and insurer are bound. A will agreement can also be concluded word of mouth. The rights and obligations of both parties can apply after the will agreement but also before the policy is issued.
Sometimes the policyholder receives a written confirmation of coverage from the insurer in anticipation of the policy.
After the will agreement and any confirmation of coverage, the insurance policy follows. This is highly automated at many insurers. The policy consists of a policy sheet and policy conditions and sometimes clauses have been added.
The financial settlement consists of calculating and collecting the premium. The premium is collected either directly by the insurer from the policyholder or by the insurance advisor. The commission for the insurance advisor is also settled. All this is accounted for in a current account that the insurer maintains with the insurance advisor.
In legal liability, a distinction is made between:
Debt liability \ personal liability and
Strict liability \ qualitative liability
If someone causes damage and is held liable for this, there is fault liability, also called personal liability.
A person can also be held liable based on his capacity. This liability without direct fault of the person who is held liable is called strict liability. A more formal name for strict liability is qualitative liability. In the case of fault liability, the injured party must prove that the liable party is guilty of causing the damage, while in the case of strict liability, the burden of proof to the contrary lies with the liable party. It may therefore happen that someone is not to blame for an incident, but is held liable for the damage caused by the incident.
An insurance company is a company that covers financial risks for a fee. Most people need financial security in their lives. They want to protect themselves, and possibly their family, against the financial consequences of events that may occur. It may be that someone is faced with a loss after which he suddenly needs an amount of money, or someone may want the amount of money in his life at a certain time. Insurers play an important role in this. In addition to insurance products, many insurers also offer banking products, such as loans and savings products.
Hedging risks
As mentioned, the insurer provides people with financial security by taking over their risks. People pay an amount to the insurer and receive security in return. The insurer manages the money paid and pays out an amount in the event of damage, theft, death and the like.
Because insurers receive premiums for taking over their risks, they receive large amounts from all customers together.
The money raised in the form of premiums is placed on the asset market by insurers. Insurers invest their money in shares and real estate, among other things. Insurers also provide mortgage loans. For insurers, transformation is a derived function of covering risks.
Insurers and pension funds are institutional investors from the perspective of the derived transformation function.
For insurers, there are two important risks associated with the aforementioned activities:
The risk that less premiums have been received than must be paid out.
It is important that an insurer can pay out in the event of damage without getting into financial problems itself. An insurer must therefore properly assess the risks. It may happen that an insurer considers the risk of a particular insurance policy to be too great. A solution for such a case is risk spreading. An insurer then decides not to bear the risk alone. There are various options for spreading risk:
With coinsurance, a number of insurers take on a percentage of the insurance. Each insurance company then signs for part of the insurance. This often happens if the insured amount is very high. Coinsurance is usually established on the so-called insurance exchange.
Even when a so-called pool is formed, an independent insurance company, the risk is spread over several insurers. A pool is formed for very specific risks where the consequences of any damage are very extensive. Examples of a pool are the atomic pool and the environmental pool. Or Rialto, the pool for serious risks of motor vehicles or fire. The loss or profit from the insurance policies in the pool is distributed among the participating insurers.
A form of risk spreading that is also widely available is reinsurance. The insurer insures part of the risk with other insurers. The risks are then transferred to special reinsurers who operate internationally.
As mentioned, insurers are institutional investors. The premium income is invested in order to meet the obligations towards the policyholders. This investing is of course done with the aim of growing capital, but there is a risk involved. For example, if an insurer has used premium income to purchase shares, these shares may decline in value over time. In that case, an insurer suffered a loss when the shares were sold.
The internal organization of insurers can be structured in different ways.
A market-oriented approach involves a division into customer segments. This could include, for example, a private sector department, a department serving small and medium-sized businesses and a department serving large companies. With a product-oriented approach, there are departments per product type, for example a department for pensions, a department for legal expenses insurance, etc.
Most insurers offer all kinds of insurance. Insurers are required by law to organize their claims and life activities in different companies. The legislator has determined this this way because there is a risk that the non-life insurer could go bankrupt due to, for example, unexpectedly large claims payments. In this case, life insurance benefits may not be jeopardized. The division of the insurer's activities into different companies serves to protect consumers.
Insurers can have the following legal organizational forms:
Public limited company
Mutual insurance company
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