Introduction to Risk Management and Insurance
Chapter 21- Unemployment and Workers Compensation
Review Q6 (pg. 341): What parts do the state and federal governments play in providing the unemployment insurance program?
Unemployment insurance is a type of insurance that offers short-term wages to persons who have lost their jobs involuntarily and they are capable and willing to accept available jobs. The insurance helps unemployed workers to meet their daily needs and that of their families while they look for new employment. During an economic slowdown, this insurance program is also beneficial to those employers that do not wish to lay off their most skilled workers (Oliphant, Wagner, & Alunaru, 2012). The program operates based on a partnership between the federal and state governments. The federal government makes the laws that govern the program while the state governments administer it.
Employers pay unemployment taxes to the federal government yearly and it also provides for a fund that the states can borrow from when unemployment rates are very high. At the same time, the state governments collect revenues from employers for each of their workers depending on their salaries and the number of hours they work. The tax rates vary from one state to another depending on the unemployment rate of each state. The federal law requires the states to raise the unemployment taxes paid by employers when the unemployment rate increases. These funds go to the unemployment insurance program so that employees will have access to them when they are undergoing difficult periods of unemployment (Oliphant, Wagner, & Alunaru, 2012).
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Review Q13 (pg. 341): Why is workers' compensation known as the exclusive remedy available to an injured worker?
The laws that provide certain benefits to injured workers and the procedures on how the employees can get these benefits are known as worker's compensation. At the same time, the workers' compensation statute in various states limits the employee's remedies for work-related injuries to employees' compensation claims against his/her employer. However, in narrow circumstances where the employer intends to cause harm to the employee, no matter how egregious the employer behaves, the employee's sole remedy against the employer will be through the employee's compensation system.
Additionally, employee compensation laws correspondingly limit actions against a co-worker who causes the employee injury. Therefore, the employee compensation coverage is defined as the executive remedy available to an injured employee, where mostly it works in the favor of the employee because the employee will receive medical care, benefits for the lost wages, and rehabilitation even when the employee inflicts the injuries on his/her own (Oliphant, Wagner, & Alunaru, 2012).
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Discussion Q1 (pg. 342): Has the cost of workers' compensation increased or decreased in recent years? Explain the factors that have led to this trend. In your answer, describe how the type of workers' compensation benefits paid has changed in recent years.
There has been a gradual annual increase in the worker's compensation costs in the country in the past few years. This increase is caused by many factors such as demographic changes and new disease trends among the working people such as obesity-related diseases and the aging of the workforce. The procedures of claiming the benefits can be very long and, therefore, costly.
Also, cases of workers faking injuries to receive wage-loss compensation have been increasing. Other forms of compensation fraud by employees are: claiming the old injury was inflicted at work, inflating injuries and workers stay at home by pretending that a disability is still there even after healing. One of the changes in the benefits is that the workers can get private insurance in collaboration with the worker's compensation system (Oliphant, Wagner, & Alunaru, 2012).
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Chapter 22- Commercial Property Insurance
Review Q1 (pg. 357): What is the difference between real and personal property? Why is this difference important in insurance underwriting and pricing (rating)?
According to professionals, real property is the tangible property that consists of land, any structures attached to the land, and anything that is growing on the land (Cummins, 2002). Examples of real property are a home, rental property, plants, and minerals that are on or in the land. At the same time, personal property is different from real property and is defined as movable and private property as it is opposed to real property. Some of the examples of this type of property include jewelry, furniture, household goods, and clothing.
Also, personal property is termed intangible property such as patents, copyrights, and trademarks. Therefore, when insuring the real and personal property, an insurance underwriter will evaluate the risks of insuring the property and will thereafter use the information to set premium pricing for the insurance policies for both types of properties. That is why determining the difference of what is a real or personal property will be important when pricing for the premiums (Trupin, Flitner, & American Institute for Chartered Property Casualty Underwriters, & Insurance Institute of America, 2003).
Review Q23 (pg. 358): Define the term collision.
Collision is a type of insurance coverage that will compensate the insured for any damage sustained to his/her personal automobile that is due to the fault of the insured driver. Additionally, this type of insurance is often added as an extension of a basic policy and does not cover any damages due to cases of theft or vandalism. Collision insurance also does not cover any damage paid from another driver's policy if the other driver has been at fault. This type of insurance will also help if any person or something else hits the car while it is parked.
A collision can only be purchased when it is combined with comprehensive coverage and liability. When a person needs to purchase coverage, one of the most important factors to consider is the cost of the coverage and the value of the car, thereafter one will have the ability to cover damages out of your own pocket (Trupin, Flitner, American Institute for Chartered Property Casualty Underwriters, & Insurance Institute of America, 2003).
Chapter 23- Commercial Liability Insurance
Review Q2 (pg. 376): Why are class action lawsuits a particularly challenging risk management exposure?
A class-action lawsuit occurs when one party files a lawsuit on behalf of a group of persons who are having a similar complaint. The people request a law firm to represent all of them in court since the compensation might not be adequate to pay lawyers for the separate individual suits.
Companies that operate over a broad range of industries continue to be affected by class action lawsuits and corporate legal firms are coming up with better management tools to control them. They involve high risks and costs brought about by the high number of lawyers allocated to handle them. Class action cases often take much longer to be resolved than the usual cases because of their complex procedures. Finding, storing, accessing, and managing the large volume of data that is needed to defend these cases can also affect the daily operations of the legal firm. Furthermore, there is a possibility of reputational risk and the probability of winning the cases is not high. All these risks pose challenges to the risk management system of companies (Cummins, 2002).
Review Q13 (pg. 376): What is product liability insurance designed for?
Any business that specializes in providing products to the public is recommended to purchase product liability insurance. This is a type of insurance designed for manufacturers, suppliers, and distributors who sell products to the public. It protects against any claims of property damage or personal injury that may be caused by products supplied or sold by the business. This protects the business from incurring litigation costs in case of damage or injury claims which can lead to business failures.
Consumers are also protected by this insurance since they can claim legal fees and damages by filing a case against the manufacturer or supplier. The potential defective product liability claims are product design defects, manufacturing flaws, and defective instructions or warnings. The policy premiums are based on the volume of sales, the responsibility of the insured in the business process, and the type of product. Therefore, different businesses and suppliers purchase product liability insurance according to their needs (Cummins, 2002).
Review Q15 (pg. 376): Identify some of the major federal laws affecting employment practices.
The federal government has enacted many laws that protect U.S employees against any form of discrimination. Both employees and employers should be conversant with these laws to create a conducive work environment. One of the main laws is the Civil Rights Act of 1964; a comprehensive act that bans discrimination in the workplace based on color, religion, race, sex, or national origin. The second one is the Equal Pay Act (1963) which stipulates that all employees should receive equal pay if they are doing equal work regardless of their gender.
The Age Discrimination in Employment Act (1967) protects workers that are forty years and above from discrimination in the workplace. The other federal law is the Occupational Safety and Health Act (1973) that prohibits discrimination against employees because they have filed complaints related to occupational health. The National Labor Relations Act of 1935 gives employees the right to join a labor organization for collective bargaining (Robinson, Franklin, & Wayland, 2010).
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