8. Business Process Flashcards
What are the legal implications of an insurer providing a quotation?
They do not remain valid indefinitely
If the insurer does not specify on the quotation the time period for acceptance, then ‘reasonable time’ applies
If the client accepts the quotation on the terms provided in the time period, the insurer can’t back out
What is another term for the share of a risk?
Order “a 50% order to place”
Broker may only be given 50% of a risk to place
When is the contract between insured and insurer concluded?
At the point when the UW puts their line down on the slip (written line)
What does ‘signing down’ mean?
When the shares of a risk are reduced to 100%. Each insurer’s written line is reduced proportionally
What are natural reasons for contract termination?
Cancellation by insured
Cancellation by insurer
Fulfilment
Expiry of the policy period
What are reasons for unexpected termination?
Breach of the duty of fair presentation
Breach of warranty
Fraud
What are two practical reasons an insurer might want to renew?
It is cheaper to renew than write from scratch
The more stable the portfolio of clients, the more reliable the statistical data
What is meant by ‘days of grace’?
Best described as a perceived elastic end to the previous policy which allows the insured some scope should they be late in renewing their insurance - THIS IS AN URBAN MYTH
How do UWs prevent paying for losses before they write their line?
Rely on duty of disclosure from client / broker
Use a warranty called warranted no know or reported losses
What is a proposal form?
Used to present a risk in conjunction with MRC / slip - rarely used outside of yacht and professional indemnity
What is a market reform contract?
Document summarising the risk in a standard format
Underwriters can formally indicate their lines in a non-electronic placement
Document shared with client as copy of contract
What is the Core Data Record (CDR)?
Critical transaction data that must be captured at the point of bind in order to complete
- premium validation and settlement (Lloyd’s + companies)
- Claims matching at first notification of loss (Lloyd’s + companies)
- Tax validation and reporting (Lloyd’s)
- Regulatory validation and reporting (Lloyd’s)
What is endorsement?
Document which the broker presents changes in the contract to the UWs
What is the General Underwriters Agreement (GUA)?
- An agreement between UWs on who will deal with contract changes
- Clarify extent of authority given to leaders
- Enable flexibility for each class of business to refine the ruls
- Ensure that all UWs are advised of the changes even if they are not involved
What is a Market Reform Contract Endorsement (MRCE)?
Document for request of change to an insurance contract with sections for:
- Risk and endorsement identification
- Contract changes
- Information
- Agreement
- Contract administration and advisory
Describe premium processing documentation
3 documents a broker must prepare
- Client premium and insurance premium tax
- Insurer premium receipt less any deductions (for non-London insurers)
- A London Premium Advice Note (LPAN) for insurers using central settlement
What is a warranty?
A promise made by the insured relating to facts or performance concerning the risk
When does a breach of warranty by the insured not result in a loss discharge for the insurer?
Insurance Act highlights 3 provisions
- Particular types of losses
- Losses in particular locations
- Losses at particular times
Cannot rely on a breach of these conditions if a loss occurs in the insured can show it did not increase the risk of loss.
Burden is on the insured
What are some sources of wording and clauses?
Market bodies and organisations
- LSW
- ISO
- LMA
- NMA
- AVN
When is contract certainty achieved?
The complete and final agreement..
of all terms between insured and insurer..
at the time they enter into the contract..
with contract documentation provided promptly thereafter
Firm order
Process of the client giving the broker formal instructions to proceed
What does a line ‘to stand’ mean?
That insurers line will not be reduced proportionally during signing down
6 sections of MRC
Risk details
Information
Security details
Subscription agreement
Fiscal and regulatory
Broker remuneration and deductibles
Unique Market Reference
Risk Details
unique reference by the broker for every risk
Type
Risk details
Type of insurance
Insured
Risk details
Name of insured
Insured address
Risk details
Head office
Policy period
Risk details
Dates, time, time zones
Interest
Risk details
What is being insured
Limits of liability
Risk details
Policy limits
Insured’s retention
Risk details
Any amount the insured is keeping (excess / deductible)
Situation
Risk details
Territorial limits
Conditions
Risk details
T&Cs of contract
Loss payee
Risk details
Who else might be paid
Subjectives
Risk details
Provisions required by insurers before they come on risk (surveys)
Law and jurisdiction
Risk details
Location of court in dispute
Premium
Risk details
Consideration
Premium payment terms
Risk details
Time to pay premium
Tax payable
Risk details
Insurance Premium Tax
Recording, transmitting, storing data
Risk details
Non mandatory - data protection details
Insurer contract documentation
Risk details
Policy issuement
Notice of cancellation provisions
Risk details
Terms of cancellation
Insurer’s Liability
Security details
Extent of liability of each insurer
Order
Security details
Share of the risk placed on MRC
Basis of written lines
Security details
Percentage of risk
Basis of signed lines
Security details
Basis different to written lines
Signing provision
Security details
How will signing be done
Written lines
Security details
UW stamps and write their lines
Slip leader
Subscription agreement
Bureau leader
Subscription agreement
Company market lead
Basis of agreement to contract changes
Subscription agreement
Combination of insurers to agree to changes
Basis of claims agreement
Subscription agreement
Combination of insurers to agree to claims
Claims administration
Subscription agreement
Other claims info
Delegated claims agreement
Subscription agreement
Delegated claims individuals
Experts fee collection
Subscription agreement
Settlement due date
Subscription agreement
Date when premium should be paid
Bureaux arrangements
Subscription agreement
Signing on a de-linked basis
Tax payable by insurers
Fiscal and regulatory
Country of origin
Fiscal and regulatory
Overseas broker
Fiscal and regulatory
Regulatory risk location
Fiscal and regulatory
Regulatory interest in risk
Surplus lines broker
Fiscal and regulatory
Identify surplus lines broker
State of filing
Fiscal and regulatory
US State to file in
US Classification
Fiscal and regulatory
US should be notified about any risk from US or paid in USD
Allocation of premium to coding
Fiscal and regulatory
Risk code
Allocation of premium to years of account
Fiscal and regulatory
Used if policy exceeds 18 months
Regulatory client classification
Fiscal and regulatory
Fee payable by the client
Broker remuneration and deductions
Indication of client fee to broker
Brokerage amounts
Broker remuneration and deductions
Total figure or split by retail / wholesale
Other deductions
Broker remuneration and deductions
Sections of MRCE
Risk and endorsement identification
Contract changes
Information
Agreement
Contract administration or advisory
Structure of general insurance policy document
Heading
Recital
Signature
Operative clauses
Exceptions
Conditions
Schedule
Two types of condition
Condition precedent to contract
Condition precedent to liability
Condition precedent to contract
Requirement to have an insurable interest
Non-marine must have this at point of purchase AND point of claim
De linking
Risk sent to Xchanging before payment of premium
In a GUA, who agrees under part 1, 2, and 3
Part 1 - slip leader (not buerau leaders)
Part 2 - slip leader + agreement
Part 3 - all underwriters
