Travelers 2004 Annual Report Download - page 18

underwriting risks of business in hurricane-prone, earthquake-prone and target risk areas. The Company relies
upon this analysis to make underwriting decisions designed to manage its exposure on catastrophe-exposed
business. See “—Reinsurance.”
Product Lines
Commercial Multi-Peril provides a combination of property and liability coverage. Property insurance
covers damages such as those caused by fire, wind, hail, water, theft and vandalism, and protects businesses from
financial loss due to business interruption resulting from a covered loss. Liability coverage insures businesses
against third parties from accidents occurring on their premises or arising out of their operations, such as injuries
sustained from products sold.
Workers’ Compensation provides coverage for employers for specified benefits payable under state or
federal law for workplace injuries to employees. There are typically four types of benefits payable under
workers’ compensation policies: medical benefits, disability benefits, death benefits and vocational rehabilitation
benefits. The Company emphasizes managed care cost containment strategies, which involve employers,
employees and care providers in a cooperative effort that focuses on the injured employee’s early return to work,
cost-effective quality care, and customer service in this market. The Company offers the following three types of
workers’ compensation products:
• guaranteed cost insurance products, in which policy premium charges are fixed for the period of
coverage and do not vary as a result of the insured’s loss experience;
• loss-sensitive insurance products, including large deductible and retrospectively rated policies, in which
fees or premiums are adjusted based on actual loss experience of the insured during the policy period;
and
• service programs, which are generally sold to the Company’s National Accounts customers, where the
Company receives fees rather than premiums for providing loss prevention, risk management, and claim
and benefit administration services to organizations under service agreements. The Company also
participates in state assigned risk pools as a servicing carrier and pool participant.
Commercial Automobile provides coverage for businesses against losses incurred from personal bodily
injury, bodily injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles
and other property resulting from the ownership, maintenance or use of automobiles and trucks in a business.
Property provides coverage for loss or damage to buildings, inventory and equipment from natural
disasters, including hurricanes, windstorms, earthquakes, hail, and severe winter weather. Also covered are
manmade events such as theft, vandalism, fires, explosions, terrorism and financial loss due to business
interruption resulting from covered property damage. For additional information on terrorism coverages, see
“—Terrorism Risk Insurance Act of 2002.” Property also includes specialized equipment insurance, which
provides coverage for loss or damage resulting from the mechanical breakdown of boilers and machinery, and
ocean and inland marine, which provides coverage for goods in transit and unique, one-of-a-kind exposures.
General Liability provides coverage for liability exposures including bodily injury and property damage
arising from products sold and general business operations. Specialized liability policies may also include
coverage for directors’ and officers’ liability arising in their official capacities, employment practices liability
insurance, fiduciary liability for trustees and sponsors of pension, health and welfare, and other employee benefit
plans, errors and omissions insurance for employees, agents, professionals and others arising from acts or failures
to act under specified circumstances, as well as umbrella and excess insurance. Errors and omissions insurance
for professionals (such as lawyers, accountants, doctors and other health care providers) is sometimes also known
as professional liability insurance.
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