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
