930 chap 3 - how brokers deal with insurers

Question 1

what is a fair market analysis (requires a sig large number of insurance contracts available in the market to make recommendations in accordance with professional criteria- challenges for brokers:

Answer 1

1. what is a sufficiently large number of risks
2. what are professional criteria
3. how is process of fair analysis managed and evidenced?
4. how do staff maintain knowledge of the market

Question 2

fair market analysis process ( 3 stages)

Answer 2

1. stage one - identify potential insurers for class of business. use list that picks up lists of certain insurers, some pre loaded with insurers risk appetites
2. stage two- refine the list of potential insurers based on the clients demands and needs to produce a short list of potential insurers.
3. refine a short list using specialist broking knowledge, expertise and reasoning for review

Question 3

9 good reasons to deal with a wide range of insurers

Answer 3

1. FAIR ANALYSIS- broker to demonstrate it is using enough markets to meet ICOBs requirements
2. CLIENT EXPECTATIONS- client will expect broker to have access to more than 1 or 2 markets otherwise they may aswell seek direct quotes
3. MERGERS & TAKEOVERS- result in changes to uw strategy and r.ships
4. UNUSUAL RISKS- many uw’s write the same standard lists, so broker needs to find the ones that writes the diff risks eg unoccupied property
5. CAPACITY- large or hazardous risks may need multiple carriers
6. COMPETITIVE TERMS- if broker deals with only one insurer unlikely to get competitive rates.
7. COMPETITION FROM OTHER BROKERS- the real test- all brokers need a constant flow of business, many clients will receive offers from other brokers to save money.
8. NEW ENTRANTS- be alive to new insurers entering the market, new terms ect, willing to trade or deal with claims in a diff way

Question 4

professional criteria for assessing insurer capability

Answer 4

1. services to clients- confidence claims will be paid quick
2. service to the broker- fast response to quotations
3. uw appetite and specialist areas- some carriers only interested in vanilla risks, others adventurous
4. breadth of cover- important for client needs and brokers on a agreed wordings.
5. innovation- broker needs an insurer willing to think diff- eg one that will quote non conventionally
6. credit facilities- obvious benefit depending of course upon the conditions
7. capacity
8. geographical spread
9. technical advice and specialist expertise
10. competiveness
11. survey risk and control
12. reputation
13. financial security
14. continuity
15. brokerage and other payments
16. access to decision makers
17. r.ship management and attitude of the insurer to the broker

Question 5

possible broker strategies

Answer 5

1. micro sme- maximum auto rating- focus on ‘preferred lines’ (small panel of insurers)
2. small- mga panel- benefits of mga model vs panel- how is the business selected for the panel as opposed to mga. 3. medium facilities & panel- needs portfolio uw
3. upper medium- open market but defined criteria such as agreed wording- broker needs to invest time in getting wording right.
4. large and global- open market but with wording and service criteria
   FOR LARGER FIRM
5. PA- broker facility- all business set up to a premium limit- need to consider adverse client reaction
6. excess PL- preferred online facilities- insurer technology used

Question 6

possible broker strategies for smaller firms

Answer 6

1. micro sme- single insurer internet facility - renew every 3 yr, no active marketing
2. small - 4 major insurers- can this type of panel accomodate a broad range of risks
3. private motor- 2 insurer facilities, 1 writes other personal business- risks in limited markets
4. high networth personal- limited binder, renew every 5 yrs, service based with no aim to be cheapest

Question 7

info to support a broking strategy

Answer 7

1. good database of current clients
2. good understanding of insurer performance in relation to broker activity
3. understanding of broker account profitability with given insurers
4. broker discretion on whether its worth collecting account profitability info- weigh up value of collecting against costs

Question 8

rules of engagement might comprise

Answer 8

1. ensuring that insurer is fully aware of client views and any issues
2. advising insurer if a marketing exercise is to be done- objectives in current enviro
3. making sure deadlines are understood
4. ensuring incumbent insurer is aware of the limits to feedback eg they will have the chance to respond but will not get competing details (its a nuance to brokers)

Question 9

methods of trading with insurers

Answer 9

1. direct communications- fax-phone-email-face2face
2. electronic systems- broker/insurer websites, insurer propriarty systems eg for instant uw, prem payment, POLARIS iMARKET (electronic market place for insurance products- personell lines, sme and commercial- to set data standards, develop rating technologies, provide security and infrastructure
3. propriertry systems - direct acess to insurer data eg acturis open gi, insure.com
4. broker proprietry trading systems - insurance and reinsurance
5. INDUSTRY FACILITIES
6. mgas
7. lloyds exchange
8. ACORD- open consensus data standards and forms- globally improving data communication across platforms

Question 10

advantages of electronic trading & internet based systems

Answer 10

1. improved efficiency
2. responds to client demand for e trading
3. meets enviro concerns
4. facilitates outsourcing
5. improves management info
6. improves management info
7. image system - removes paper files
8. provides world wide access
9. facilitates self serve for clients

Question 11

disadvantages of online trading

Answer 11

1. cost- eh investment in systems- only works best when all the company data is e based
2. email- easy to send, can be used as legal info as they never disappear, procedures, out of office protocols
3. security- viruses - hackers
4. legal and reg scruitiny over electronic docs

Question 12

transacting business in the london market - 4 ways

Answer 12

1. through traditional face to face- lloyds room
2. through use of delegated authorities
3. through business that syndicates have set up outside of lloyds (motor, personal lines- bermuda us)
4. through meetings at uw’s office

Question 13

open market risks (risks outside of lloyds placed insurer to broker)

Answer 13

1. slips
2. leading uw’s
   3/ the law and lloyds
3. market reform
4. role of the broker
5. xchanging (public comp specialising in outsourced office processes- receives and checks policies - replaces lloyds policy signing office (lpso) and the policy signing and accounting centre