Quantum is the Latin word for amount. You may see the term used in short term insurance, such as car insurance when referring to the quantum of a loss; or the quantum of the damages incurred as well as the quantum of the settlement – in each case the meaning refers to the amount.
When you as an insured person institute a claim on your car insurance policy the insurance company will first establish if they are legally liable to meet your claim. They will do this by checking if the peril or risk you are claiming against is indeed an insured peril or risk included in your policy. Once that is confirmed the process will start to establish the quantum of your claim. If your car was damaged in an accident the insurance company assessor will establish the quantum. A quotation from a panel beater will be required to establish the quantum of the settlement.
From the settlement quantum will follow deductions for items such as the excess payable and possible under-insurance if applicable. Under-insurance is calculated by using the average clause. Please see the glossary item for average clause for a full description of the term.
Quota Share is a term used in re-insurance. Please see the glossary entry for re-insurance for an explanation of re-insurance and re-insurers. Short-term insurance companies, including those that sell car insurance spread the risk they carry by re-insuring some of it through re-insurers. This process is referred to as a re-insurance treaty.
When a new insurance company that specializes in car insurance starts out in the business it will need to buy more re-insurance in the beginning until it has build up sufficient reserves and has established a claims record. Short term insurance is by its very nature an unpredictable form of business.
A quota share treaty is a form of re-insurance where the re-insurer takes on a specific percentage quota of the risk. If it accepts a 40% quota share it will take on 40% of every risk that the ceding company accepts. The ceding company is also known as the direct writer or insurer – the one who wrote the business with the insured person.
The quota share system is more favourable to the re-insurer as the ceding company cannot keep the better risks for himself. The quota share system is mostly used in the case of a new insurance company during the early stages of business or where the re-insurer insists on using quota share.