Question

9. Why are there indemnities and hold harmless wordings in contracts? Are they fair?

10. Why would you procure a retrospective rated insurance plan and how does it differ from an experience rated insurance approach?

Answer 1

9. INDEMNITY v/s HOLD HARMLESS WORDINGS

1. Indemnity gives a protection against any financial loss or liabilities. In contracts one person agrees to make good the loss happens to the other party. Insurance is an example for Indemnity. When the risk happens insurer pays the amount of loss or policy amount whichever is lower to the insured in return for premiums. Indemnity may be cash payment or repair means the damaged propeety will be reepaired and pit into the previous position or to the state of before the risk.
2. In a hold harmless wordings one party promises to hold other party harmless or not legally bounded . It gives protection from potential as well as actual loss. It provides a liability insurance coverage. It provides protection against both loss and liability. Usually used in loss contracts.

Many people view both of them as same. But it may vary. In many cases hold harmless re replaces and cut short to Indemnity.

10. Retrospective Trade Insurance plan.

This policy make adjustments in premium of the policies on the basis of actual loss occurred during time period of policy. By this a insured may get benefited or suffers loss. Companies usually have a incentive that is ensured safety and tries to avoid high premium amount. This plan is used in auto liability . Here premiums are based on the losses expected. There is a minimum and maximum premium amount.

Experience Rated Insurance Approach

Here a rating is used to compare risks with experience loss expected and insureds rating.Then a modification factor is applied. Or comparing the amount of loss suffered by insured with the amount of loss suffered by another insureds with same situation. Through which premium is adjusted.