5 - Legal And Regulatory Requirements

Question 1

What insurance is compulsory for private individuals?

Answer 1

Third party motor
Public liability for dangerous dog ownership

Question 2

What insurance is compulsory for professions and businesses?

Answer 2

Motor insurance
Employers liability
(Professional indemnity in some cases)

Question 3

The minimum employers liability limit is £5m, but what is offered as a minimum by insurers?

Answer 3

£10m

Question 4

Why is public liability insurance necessary in certain businesses?

Answer 4

Indemnifies insurers against claims from:
1. The use of their equipment/property
2. Injury to members of the public whilst in use of equipment/property

Question 5

Which type of compulsary insurance usually falls within another policy?

Answer 5

Ownership of dangerous animals

Question 6

Why is compulsory insurance important?

Answer 6

Protects innocent victims and provides funds for their compensation

Question 7

What is long tail business?

Answer 7

When losses can take time to be notified and claims take time to develop

Question 8

Why are most compulsory insurances required even after a business stops?

Answer 8

To continue to protect customers even if it takes time for a claim to be made

Question 9

Under the employers liability (compulsory insurance) regulations 1998, what will the impact be if the insured breaches a policy warranty?

Answer 9

Underwriters still have to settle claims, but can then take action against the insured to return some of the money.

Question 10

Why is the duty of good faith complicated in compulsory insurance?

Answer 10

The cover is for third parties, so has to be in place regardless of the actions/negligence of the insured.

Question 11

What is workers’ compensation in the USA?

Answer 11

Employer’s liability insurance

Question 12

Is motor insurance compulsory in the USA?

Answer 12

Only for commercial vehicles, not private

Question 13

Under the consumer rights act, what does is prevented?

Answer 13

Unfair terms - which will no longer be binding on the consumer, but the consumer can choose to claim upon if beneficial to them

Question 14

What is an example of a potentially unfair term?

Answer 14

Making the insurer’s commitments subject to compliance with a particular formality, eg. following the claims process correctly

Question 15

What is privity of contract?

Answer 15

Only the two parties involved in a contract can enforce the terms of the contract

Question 16

What role does the contracts (rights of third parties) act 1999 play?

Answer 16

Ensures a third party has the right to enforce a term of a contract, ignoring privity of contract

Question 17

To what insurance does the contracts (rights of third parties) act 1999 not apply?

Answer 17

Cargo

Question 18

What is freely assignable insurance?

Answer 18

When the person making the claim may not be the one who bought the insurance, eg. In cargo insurance

Question 19

What are the rates of insurance premium tax (IPT)?

Answer 19

Standard = 12%
Higher = 20%

Question 20

What insurances would fall under the higher IPT?

Answer 20

Travel insurance and warranties, eg. On a new car

Question 21

Who collects the IPT from the insured?

Answer 21

Typically the broker, who pays the insurer through Xchanging

Question 22

What does the insurer do with the tax paid by the insured?

Answer 22

Held in an account and paid to HMRC on a quarterly basis

Question 23

What do regulators want the Senior Managers and Certification Regime to achieve?

Answer 23

1. To encourage staff to take personal responsibility
2. Improve conduct at all levels
3. Make sure it is clear who does what in a firm

Question 24

Who does the Senior Managers Regime apply to?

Answer 24

Certain roles known as senior management functions (SMF)

Question 25

What does the Senior managers Regime require?

Answer 25

Any firms planning a new appointment of an SMF must submit an application to FCA & PRA

Question 26

Who does the certificate regime apply to?

Answer 26

Individuals who are capable of causing significant harm to a firm, but not an SMF

Question 27

What are the three parts of SM&CR?

Answer 27

1. Senior managers Regime
2. Certificate regime
3. Rules of conduct

Question 28

What are the two tiers of the rules of conduct?

Answer 28

First tier - individual conduct rules
Second tier - senior manager conduct rules

Question 29

A key function in a regulated firm is one that

Answer 29

Is part of an effective system of governance.