3: Polciy And Practice Flashcards
What is the difference between a corporate strategy and an underwriting strategy?
Corporate strategy applies to the whole organisation where as underwriting strategy is more insurance related and will focus on:
Premium
Claims and expense ratios
Investment returns
What would an underwriting strategy aim to increase premiums :
To reduce loss ratio and increase ROCE
Why would they add in a min prem?
To improve expense ratios
Why an uwr exit or enter non standard markers
- high risk usually generates higher rewards (e.g that roofs)
What are the pros and cons of personal lines insurance for the uwr?
Pros:
Not much cost for specialist underwriting as mainly computer driven
Cons:
Competitive market
High acquisition cost driven by marketing expenses
What are the pros and cons of non-standard lines insurance for the uwr?
Pros:
Higher premium due to more skilled underwriting being needed
Cons:
High expense ratios usually due to high commission rates
A moral hazard usually involves?
- misleading or false answers
- poor attitude
- delays or exaggeration
A physical hazard usually involves
- health and safety compliance
- material damage: e.g sprinklers
- BI: if more suppliers then they’d have higher chance of BI
The corporate objectives are implanted into the organisation through the X strategy which can achieve the corporate results and is then translated into business plans used by X X
The corporate objectives are implanted into the organisation through the UNDERWRITING strategy which can achieve the corporate results and is then translated into business plans used by Senior management
What is the operative clause?
OperatiVE = EV…
Details the type of EVENT insured against
What are the two types of exclusions
- general: apply to whole policy
- specific: apply to certain parts of the policy
What is the condition clause?
Condition of the insurer would be concerned with their….?
Expresses the policyholders rights and obligations
The schedule describes the…
Precise subject matter
What are the two types of excesses?
Compulsory
Voluntary
Why might an insurer have a compulsory excess?
Makes the policyholder more responsible to minimise risk
- reduce claims costs
- get rid of high frequency low severity claims
- reduce nuisance admin for small claims
What is the difference between an excess and a deductible?
Think about who their clients are and how they would price it
A deductible is mainly for commercial risks - pricing would be done on individual claims experience rather than on a whole class level
What is a franchise and how does it work? I f
Similar to an excess in that the insured takes on some of the risk
The insured will take on all claims that fall under the franchise limit but once it goes over then they will take all the claims
A policy has a 400k franchise in place. How much would the pilcyholder and insurer pay for each of the below
1) 300k
2) 400k
3) 700k
1) insurer= 0, insured=300k
2) insurer=0, insured=400k
3) insurer =700k, insured=0
Name 3 underwriting distribution channels
1) intermediaries
2) websites
3) direct sales (call centres)
What could you use for the below to rate accounts
1) motor
2) property
3) liability
1) motor: type of vehicle, age of driver, use of vehicle (type, age, use)
2) peppery: use of building, building materials, age of building
3) liability: occupation, turnover, product
What is delegated authority?
When an insurer authorises another party to act on its behalf
In delegated authority the person to whom authority has been delegated to is known as the ?
Cover holder
With regards to delegated authority, an agreement that sets up the scope/extent of authority as known as what?
Binding authority
What are the benefits of Delegated authority
- exposure to risks otherwise may not have
- specialist knowledge in an area they don’t have
- get income at low costs
- build relationships with intermediary they would not have worked with before
