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
I am going to talk about:
What is insurance?
The insurance process
Civil Liability
Motor Vehicles
On this topic I will talk about the following points, here are the points:
Risks and risk management
The principle of insurance
The technology of insurance
The types of insurance and sectors
Social insurance and private insurance
Insurers and the insurance industry
We always run risks. Insurance is therefore there to reduce or eliminate the financial consequences. Insurance costs money. That is why most people do not want to be insured against everything. To know which risks you do or do not want to be insured against, the risks can be mapped out.
You can choose against which risks you want to be insured. Some things are worth so much or valuable that you want to have them insured. Think of your car, jewelry or your house.
Below are risks that you can insure, must insure or cannot insure:
Life or death, for example: life insurance, supplementary pension.
Property and assets, for example: buildings and contents insurance, car comprehensive insurance.
Health, for example: supplementary health insurance.
You must insure.
Insurance that is required by the government: third-party liability insurance for motor vehicles or basic coverage for the Health Insurance Act.
Social insurance, for example: AOW, WW
Not insured
Risks that occur very often, such as wear and tear on clothing and the like
Risk= chance * consequence
A risk increases as the likelihood of occurrence and consequences increases.
A risk is generally less important if: The chance is minimal, but the consequence is high
The consequence is minimal, but the chance is high
So a big opportunity does not necessarily have to be a big risk. If the chance of an event is reasonably high, but its adverse effect is reasonably small, then the risk is not too great.
Many risks can be insured, but insuring all risks would entail too many costs. We have also seen that some risks cannot be insured. It is therefore important to manage risks well.
Risk management is identifying and assessing risks and then determining measures to prevent, reduce, outsource or accept the risks.
The way in which a private individual deals with risks can be changed.
Dealing with risks is also called determining risk strategies. There are four ways to deal with a risk or there are four risk strategies; Preventing risks
Reducing risks
Outsourcing risks
Accepting risks
For both private individuals and companies, the financial interest in whether or not an event occurs is the reason for concluding an insurance contract. One of the requirements that the law imposes on an insurance contract is that the timing of the payment is uncertain. Examples include benefits after a burglary, a collision or a death. So-called consequential damages are often also insured. This could, for example, be the clean-up costs after a fire or the so-called range of expected benefits.
How is it possible that insurers can bear the risks that private individuals do not want or cannot bear?
Insurers can fulfill their role because they can assess the various risks based on, for example, CBS figures or information from CVS.
In recent years, approximately 9,500 traffic accidents with injuries have occurred per year. Compared to the large number of road users in the Netherlands, this is a fairly stable average. Being able to estimate the risks, because they generally have a stable average, is also called the law of large numbers. It is important for an insurer to have a large number of insurance policies in order to calculate the average risk of damage as accurately as possible and to be able to bear the risks.
To calculate a good premium for a specific insurance policy, an insurer takes past statistics into account. In the case of John van de Meer's scooter insurance in the example, an insurer looks at the number of stolen (e.g.) scooters and the number of damages to (e.g.) scooters in recent years. A premium is calculated on this basis. However, it may happen that an insurer does not achieve a result in a particular year based on past statistics. That is why an insurer works with a reservation. The insurer creates a reserve fund in the event that circumstances require an additional fund of money to pay out claims in a particular year.
All people who want to insure the same risk periodically transfer an amount to an insurer. The insurer manages the money and pays out an amount to the person who has suffered damage.
The so-called indemnity principle applies to the damage payment.
This means that a payment from a non-life insurance policy may not put the customer in a more financially favorable position than was the case before the damage. However, this does occur in practice, because insurers are allowed to deviate from this in their policy conditions.
These insurances have been made mandatory by the government for the entire population or for certain groups.
Social insurance can be subdivided into: Employee insurance
This insurance is only mandatory for salaried employees.
Examples: WIA and the WW National Insurance
National insurance policies are mandatory for all residents of the Netherlands. Examples: AOW, ANW and the AWBZ
Through private insurance, insurers offer security by taking over the financial consequences of risks. In addition to the government, the private insurance industry also offers many opportunities to transfer risks. Private insurers provide cover for ownership risks, asset risks and income risks. Social insurance is limited to income risks and the coverage of medical costs.
People tend not to insure risks if they expect little or no damage from them, while they do want to take out insurance for risks for which they consider the risk of damage to be high.
For example, people in good health are less likely to take out disability insurance than people in poor health. They call this anti-selection or auto-selection. If insurers do nothing about this, the calculations for their premiums based on the general statistics will not be correct. By charging different premiums for different groups of people, an insurer can combat anti-selection.
So not everyone pays the same premium for the same insurance. For example, a 50-year-old man pays less premium for scooter insurance than a 16-year-old boy because the 16-year-old boy poses much more risk. This is called premium differentiation. Insurers not only look at age but also at living environment. Someone who lives in a village pays less premium than someone who lives in a city. There is a greater chance of damage in the city than in a village. Health, age and living environment play no role in social insurance.
Private insurance is divided into two branches:
Life insurance
Non-life insurance
Life insurance deals with human life and death. In the technical classification of insurance, life insurance falls under the life sector. Pensions also belong to the life sector.
The non-life insurance policies are divided into the fire sector, the transport sector and the miscellaneous sector.
The fire insurance sector mainly includes property insurance. With property insurance you own an asset. In insurance terms, this is also called an object or an insured item. This could be, for example, a car or the contents of a house. Home insurance provides cover for damage caused by fire, storm, burglary and some water damage.
The transport sector includes all kinds of insurance policies associated with the risks of transport and travel.
Such as insurance for ships, cargo and liability of the carrier. Private individuals can also take out transport insurance, such as travel insurance and pleasure boat insurance.
Industry miscellaneous includes all other insurance policies.
The miscellaneous sector can be divided into the following categories: Medical miscellaneous insurance, these are insurance policies that deal with human health, but are not life insurance.
Liability insurance, these are insurance policies that cover damages resulting from errors.
Motor vehicle insurance, these are the third party liability insurance policies that compensate others for damage caused by a motor vehicle and the comprehensive insurance policies that cover damage to your own motor vehicle.
Other miscellaneous insurance, such as travel and cancellation insurance and pleasure boat insurance.
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