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LM2 > 8. Business Process > Flashcards

8. Business Process Flashcards

1
Q

What are the legal implications of an insurer providing a quotation?

A
  • They do not remain valid indefinitely.
  • If the client tries to accept the quotation after the expiry date, the insurer can agree if it wishes, but it is not obliged to do so.
  • If the insurer does not specify on the quotation the time period for which it remains open for acceptance, then the concept of ‘reasonable time’ applies.
  • The insurer is not on risk if a client has received its quotation only and not yet accepted it.
  • If the client accepts the quotation on the terms provided in the time period, the insurer cannot back out of the agreement.
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2
Q

If an insurer issues a quotation and the client agrees but wants to change some of the terms, what is the position for the insurer?
a. It must accept the client’s changes and honour the quotation.
b. The quotation must be accepted exactly as issued, so the insurer is not bound to accept the client’s changes.
c. The insurer is obliged to reissue the quotation, including the client’s changes.
d. The insurer must reissue the original quotation and the broker must persuade the client to accept it.

A

b. The quotation must be accepted exactly as issued, so the insurer is not bound to accept the client’s changes.

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3
Q

Calculation for signed line?

A

Written line / overall percentage written x signed line % left = Signed line

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4
Q

What are the reasons for natural termination?

A
  • Cancellation by the Insured -
  • Cancelled by the Insurer
  • Fulfilment
  • Expiry of the policy period
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5
Q

WHat are the reasons for unnatural termination?

A
  • Breach of Duty of fair presentation
  • Breach of warranty
  • Fraud
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6
Q

What are the reasons existing insurers may choose not to renew?

A
  • Contract is running at a loss
  • Not covering that business anymore
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7
Q

Which of these is not a valid reason for an insurer to refuse to renew an insurance contract?

a. It is no longer authorised to write that class of business.

b. It does not have sufficient capacity.

c. The broker has approached other insurers looking for competing quotes which has offended the insurer.

d. The risk was loss-making this year.

A

c. The broker has approached other insurers looking for competing quotes which has offended the insurer.

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8
Q

In line with new regulatory rules introduced by the FCA in 2017, what do insurers and intermediaries selling general insurance need to do?

A
  • Disclose last years premium
  • Include text to encourage clients to shop around
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9
Q

What do proposal forms include?

A
  • Name, address, nature of business
  • Insurance information
  • Turnover
  • Geographical spread of risk
  • Amount of insurance required
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10
Q

What are the roles of the MRC?

A
  • It is a document which the broker puts together that summarises their client’s risk into a
    standardised format for presentation to the underwriters.
  • It is also the document on which the underwriters formally indicate their written lines.
  • It can be the document which is sent to the client as their copy of the insurance contract.
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11
Q

What are the types of MRC?

A
  • Open Market MRC - where the broker visits each risk individually one by one and visits each underwriter separately.
  • Lineslip MRC- Preset group of underwriters, if 2 agree, the rest have to follow.
  • Binder MRC - Where UW’s have been given DUA to an external 3rd party.
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12
Q

What are the 6 sections of the MRC?

A
  • Risk Details
  • Information
  • Security Details
  • Subscription information
  • Fiscal and Regulatory
  • Broker Remuneration
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13
Q

What is the purpose of the General Underwriters Agreement (GUA)?

A
  • create an agreement between all the underwriters on a particular MRC as to who will deal
    with any contract changes
  • clarify the extent of the authority given to the leaders and any other identified underwriters
    to agree the changes
  • enable flexibility for each class of business to refine the rules to suit their own
    requirements
  • ensure that all underwriters are advised of the changes even if they are not involved in
    the agreement process themselves
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14
Q

The GUA Schedule on the MRX is split into 3 segments, what are they?

A
  • Part 1 - Slip Leader only
  • Part 2 - Slip Leader plus agreement parties
  • Part 3 - All Underwriters
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15
Q

What are the segments of the Market Reform Contract Endorsement (MRCE)?

A
  • Risk and endorsement identification.
  • Contract changes.
  • Information (if required).
  • Agreement.
  • Contract administration and advisory (if required).
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16
Q

For what does the General Underwriters’ Agreement (GUA) set out provisions?

a. Agreeing changes to the contract.

b. Renewing the contract.

c. Claims handling.

d. Accepting premium under the contract.

A

a. Agreeing changes to the contract.

17
Q

What is a condition precedent to contract?

A

A condition precedent to contract would include the requirement to have an insurable interest at the point of purchase and at the point of claim.

18
Q

What is a condition precedent to liability?

A

A specific claims notification clause.

19
Q

What is a warranty?

A

Warranties are promises made by the insured relating either to facts or to performance concerning the risk.

20
Q

What is a service company?

A

contracted agent for an insurer authorized to process claims and make payment of compensation on behalf of the insurer

21
Q

What does cross border basis mean?

A

insurers can stay within their own country and write risks coming out of other countries. They are regulated only by their home regulator.

22
Q

What does establishment business mean?

A

This means that insurers can choose to set up an office in another country and write the risks from there.

23
Q

If an insurance company based in the UK is writing business in France without setting up an office there, on what basis is it writing?

a. Services.

b. Establishment.

c. Delegated.

d. Legal.

A

a. Services.

24
Q

Why was Lloyds Brussels set up?

A

It was set up to ensure that when the UK left the EU, syndicates operating within the Lloyd’s market could still enjoy the benefits of the mutual recognition by regulators that allows them to operate cross border in Europe.

25
Q

What is contract certainty?

A

Contract certainty can be summarised as all parties to a contract knowing exactly what is going on at the point the contract comes into force.

26
Q

What is meant by a ‘quotation’ in insurance?

a. The presentation of the risk by the insured.

b. An indication from the insurer of potential terms.

c. The passing of information between insurer and insured by the broker.

d. The acceptance of terms by either party.

A

b. An indication from the insurer of potential terms.

27
Q

What is the insurer’s obligation if the quotation is accepted exactly as offered within the stated timeframe?

a. To finalise insurance on those exact terms offered.

b. To review the offer within 24 hour and see if any changes need to be made.

c. The insurer is under no obligation relating to quotations.

d. To agree to certain amount of brokerage.

A

a. To finalise insurance on those exact terms offered.

28
Q

For a risk placed on a subscription basis, at what point is the contract concluded between each insurer and the insured?

a. When the insurer receives the premium.

b. When the insured agrees the terms.

c. When the insurer confirms their formal commitment to the contract on the slip or an eplacing system.

d. When the risk data is submitted to Xchanging/DXC.

A

c. When the insurer confirms their formal commitment to the contract on the slip or an eplacing system.

29
Q

What is meant by ‘signing down’?

a. The insurer reducing the line they are prepared to write.

b. The broker reducing the insurers lines proportionately.

c. The presentation of the risk information to Xchanging/DXC.

d. The point at which the insurer signs the contract document.

A

b. The broker reducing the insurers lines proportionately.

30
Q

Which of these is NOT a way in which a contract of insurance can terminate naturally?

a. Cancellation by the insurer.

b. Cancellation by the insured.

c. Fulfilment (i.e. paying a total loss on the subject-matter of the insurance).

d. Insolvency of the insurer.

A

d. Insolvency of the insurer.

31
Q

When will an insurer put ‘Warranted no known or reported losses’ (WNKORL) on the Market Reform Contract (MRC)?

a. When the risk is being placed after the intended inception date.

b. When the risk has a poor loss record.

c. When the insured is not known to the insurer.

d. When there are several brokers between the insurers and the insured.

A

a. When the risk is being placed after the intended inception date.

32
Q

Which of these is NOT one of the three main purposes of the Market Reform Contract?

a. The document on which the broker summarises their client’s risk for underwriters’ consideration.

b. The document on which the insurers formally agree to accept a share of that risk.

c. The document which is sent to the tax authorities to evidence tax payment.

d. The document which can be sent to the client as their copy of the insurance contract.

A

c. The document which is sent to the tax authorities to evidence tax payment.

33
Q

What is the role of the General Underwriters’ Agreement?

a. To set out who will agree claims.

b. To set out who can agree cancellation of the policy.

c. To set out who can agree post bind changes.

d. To set out who can agree delegation of authority.

A

c. To set out who can agree post bind changes.

34
Q

What is meant by a ‘condition precedent to liability’?

a. Something that must be done otherwise the contract will suspend.

b. Something that must be done before insurers will be liable.

c. Something that must be done before the contract comes into force.

d. Something that must be done or insurers will come off risk.

A

b. Something that must be done before insurers will be liable.

34
Q

What is meant by a ‘condition precedent to liability’?

a. Something that must be done otherwise the contract will suspend.

b. Something that must be done before insurers will be liable.

c. Something that must be done before the contract comes into force.

d. Something that must be done or insurers will come off risk.

A

b. Something that must be done before insurers will be liable.

LM2 (10 decks)

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