CH 8 UNDERWRITING CONSIDERATIONS Flashcards
Under the CIDRA consumer must only
They must only answer,fully and accurately the questions that the insurer asks them
What’s the range of consumer insurance
Small shops and factories to large multi-national corporation with operation in many countries
The insurance underwriting process will always consist of an assessment of the following
- The major underwriting factors affecting claim experience for the particular class of b’ness
- The average claim per member of the group
- proposer’s characteristics in comparison with an average member
In essence what does the underwriter do
They are evaluating the hazard associated with the risk which is being proposed
What are the specific underwriting considerations for Motor Insurance
-Driver’s age
-Type and Make of vehicle
-Storage
-Driving record
-Type of use
-Geographical area
Cover required/extension required
-vehicle modification
Why is drivers age relevant specific underwriting consideration for motor
This is because certain age groups are more susceptible to claims than others
Which age group of drivers is more likely to be charged higher than the other
17-25 age group could be charged more that those 40-50 age group because they are less experienced and lack risk awareness
Why is type and make of vehicle relevant specific underwriting consideration for motor
Expensive/rare/unusual vehicles are more expensive and difficult to repair. Powerful vehicles will be more difficult to control in the hands of an inexperienced driver
why do commercial vehicles attract a higher premium
This is due to their frequency and nature of use,value,size and type of cargo that in result increase third party property damage/bodily injury risk
Why is Geographical area relevant specific underwriting consideration for motor
This due to some areas in the country have higher vehicle theft rates than the other/ where there are more vehicles on the road, there is more chance of an accident occurring
For Motor Insurance a poor claim history would mean
This would be evidence of poor moral hazard
What are the specific underwriting considerations for Health Insurance
- Occupation
- Age
- Family circumstances
- Lifestyle and physical condition
- Medical History
Why is occupation relevant specific underwriting consideration for Health Insurance
It’s actually a major factor for both personal accident and permanent health insurance (PHI)
General Practice for Health Insurance is to group occupation into how many groups, and they go by
To group them into 4/5 groups, and they range from no-low accident/health risks, and high/extra-hazardous risks
Why is it a general practice in Health insurance to group individuals in different groups
So as to impose premium according to the level of accident/health risks involved
What are examples of occupation with no/low accident/health risks
professional and administrative work
What are examples of occupation with high/hazardous risks accident/health risks
Coal miners
Who is Age a specific consideration for Health Insurance
As the age increases the risk also increases, but accident among young people is common thus they also represent a high risk as they are less aware and take more risks
Family circumstances is more common in
Its more required in specific financial details in Permanent Health Insurance (PHI)
Medical History is relevant specific underwriting consideration for Health Insurance
This is particularly important in Permanent Health Insurance policy, because the underwriter accepts a greater potential liability than accident only policy
What are some of the most important factors of house (the building) insurance are
- Construction
- Location
Why is construction an important factor in House/Building insurance for personal Insurance
Insurers are concerned with what the house is made of
Building lacking what type of construction material will result to an additional premium being charged
-Brick/stone/not roofed with slates/tiles/metal/concrete, it would increase a risk
With respect to the content of the building insurers will be concerned with
-Area
Occupation during the day
-Security
How will area of the contents make an insurer concerned
Some areas have high theft risks
How will Occupation during the day of the contents make an insurer concerned
Insures sometimes offer discount if property is occupied during the day or if the insured is part of a neighborhood watch scheme
For travel insurance what are the specific underwriting consideration
- Destination
- Purpose and duration of travel
- Group Policies
- Existence of pre-existing conditions
For Travel Insurance why is destination an underwriting factor
Medical expenses can be expensive in certain countries e.g USA
For Travel Insurance why is purpose and duration of travel an underwriting factor
So as insurer is aware if it a holiday/business travel
What are the main underwriting factors for Fire and Special Perils under commercial property insurance
- Use
- Types of goods stored on premises
- Construction and Material
- Safety Features
- Risk Management Features
- Number of floors and areas
- Method of heating and lighting
- Location relative to perils
For Theft Insurance what do underwriter require
- Trade
- Geographical area
- Any moral hazard of owner
- Theft precautions
- Nature and construction of the property
For glass insurance what is the insurers main consideration
- Use of the building in relation to the likelihood of glass being broken
- Geographical Area
For glass insurance what is the main concern for insurers
Vandalism when considering insuring large shop windows in town centers
For Money Insurance what does the insurer require
- How much money is handled(cash,cheques)
- Precautions taken in storing money and transporting money
- whether in a safe/strongroom
- how employees are paid
Why would an insurer consider how an employee is paid for money insurance
If employees are paid in cash then there is a great risk of a large amount of cash being on the premises
For Legal expense insurance what does an underwriter consider
- Proposer’s employment criteria( also current breakdown of staff according to sex/race)
- views and actions in respect of health and safety legislation
- occupation
For Business interruption what is an underwriter concern
How quickly a proposer can get their b’ness up an running again after an incident/interruption features
For Employers Liability what will the underwriter be mostly concerned about
They will be concerned about the trade and the occupation of the employee concerned
For Public Liability what will the underwriter be mostly concerned about
The major consideration is the proposer’s trade/b’ness
In public liability why is the insurers major consideration trade/business of the proposer
This is because of the nature of the cover meaning if the proposer has small or no contact to the public has less liability risk to the public arising and vice versa
In pollution liability what will the underwriter be mostly concerned about
- The Trade/b’ness
- The material used
- if there is adequate control to prevent the escape of pollution into the air/water
- Chemicals used
- Storage arrangement details
- Risk control measured
For product liability what will the underwriter be mostly concerned about
Similar to public liability, underwriter is concerned with the trade/b’ness
- quality control systems
- whether the products are being exported to north america
during the risk assessment of product liability underwriters will more specifically consider
- The final use of the product
- Its potential to cause bodily injury/damage to third party property
For Professional liability what will the underwriter be mostly concerned about
-The exact occupation,professional qualification/experience and degree of moral hazard
How are extended Warranty policies sold
They are sold at the point of sale,thus they are generally not underwritten as such
For Extended Warranty how will the underwriter set the premium accordingly
They will assess the likelihood of a product breaking down over a period of time
For Credit Rating what will an underwriter consider
They will consider a proposer’s credit worthiness in both accepting the risk and as a potential rating factor
Why is it difficult to quantify insurance fraud
This is because so much goes undetected
What is the first step towards eliminating fraud
Quantifying the effects of fraud
What is the impact on insurers if fraudulent claims are paid
As fraud costs can be large, this will impact the insurers bottom line/profit. And lead to increase in claims costs, that will impact the premiums and make them less competitive. they can also get a reputation as easy targets, thus being avoided by genuine insureds
What is the impact on insured if fraudulent claims are paid
The genuine policyholders will be affected by increase in premium not just the fraudsters
What is the impact on fraudulent claimants if fraudulent claims are paid
If they are able to get away with the fraud once , thew will be tempted to continue the practice in the future
Mainly which organisation deals with fraud prevention
The Insurance Fraud Bureau
Why was the Insurance Fraud Bureau established
- actively run public education campaigns
- coordinate industry wide action involving police forces/insurance companies and other agencies involved in fighting crime and fraud
- operate centers of expertise on fraudsters and their methods of operation
Which is one of the new technology used to detect fraud
The use of pooled claims database
What is a pooled claims database
This is where insurers share information from variety of insurers to try and tap those with repeated claimants by matching new claims against those already held
What are some of the Insurance fraud Detection Database
-Motor Insurance Anti-Fraud and Theft Register (MIAFTR)
-Motor Insurance Database(MID)
-Claims and Underwriting Exchange(CUE)
Art Loss Register(ALR)
What is the Motor Insurance Ant-Fraud and Theft Register
It contains all details of total loss and theft claims, so as insurers can use it to compare if total loss/theft of the vehicle is being claimed more than once
What is the Motor Insurance Database
It has details of all registered vehicle in the UK and related insurance details
Motor Insurance Database provides assistance to whom
It provides assistance to police in tackling motor vehicle crimes
What us the Claims and Underwriting Exchange
This is a database containing information on incidents reported to insurers by personal insurance policyholders, that may or may not turn into a claim
How long is information stored in claims and underwriting exchange
For 6 years but personal accident/illness claims are stored indefinitely
How does the claims and underwriting exchange work
Subscribing members submit data on their individual claimants and check the history of these individuals
What does Claims and Underwriting exchange aim to eliminate
Multiple claims on parallel policies held by single insured
Claims and Underwriting Exchange covers how many policies
- Domestic Building
- Contents
- Motor
- Personal Injury
- Illness policies
What is the Art Loss Register
Through the collaboration of insurance industry and art world in response to the increasing art theft
When did Art Loss Register founded
1991
The operation of Art Loss Register relies on
Subscription from insurers
What are the objectives of Art Loss Register
- increase the recovery of stolen art and antiques
- deter theft by making the resale of stolen articles difficult
The Art Loss Register is available to
- Insurance Industry
- the art trade
- law enforcement
- custom agencies
- collectors and ,museums
What is the role of claims handler
They play a vital role in detecting fraud
Claims handlers are trained to be cautious with claims that
- made soon after policy inception/renewal
- when insured has no documentation for lost items
- insured has several similar claims for similar accidental loss/damage in a short span
What are other measures within the industry of combating fraud while actually being implemented to enhance customer service and cut costs
- Completing claim forms over the telephone
- Claims settlement by replacement rather than cash
What is the main motive of cutting insurance fraud among the new breed of executive in the insurance industry
Gaining advantage over their competitors
Fraud can be committed in the context of claims and which other context
when proposer applies for a policy also known as application fraud
The Equality Act 2010 aims
It aims to harmonies and replace the Disability Discrimination Act 1995 and Sex Discrimination act 1975 and ensure consistency
Which groups does the Equality Act 2010 cover
age/disability/gender reassignment/race/religion/belief/sex/sexual orientation/marriage/civil partnership/pregnancy/maternity. Also known as protected characteristics
What are the four types of discrimination according to the Equality Act 2010
- Direct Discrimination
- Associative Discrimination
- Perspective discrimination
- Indirect Discrimination
What is Direct Discrimination
This is when someone is treated less favorably because of a protected characteristic they have/are thought to have or because they associate themselves with someone who has protected characteristics
What is Associative Discrimination
This is direct discrimination against someone because they associate themselves with someone who possess protected characteristics
What is Perceptive Discrimination
This is direct discrimination against someone because others think they possess a particular protected characteristics, even if the person doesn’t
What is Indirect Discrimination
This occurs when there is a condition/policy/rule/practice in a company that applies to everyone but particularly people who share protected characteristics
From an underwriting perspective when is less favorable treatment justified
Only if it’s based on information that is relevant to risk assessment. Thus including actuarial/statistical data, medical research information and medical reports about an individual
What ruling did the European court of justice make on gender
Insurers can no longer use gender when rating risks, thus removing any gender related rating from their product
The gender ruling has a large effect on which class of insurance
Motor Insurance for consumers,now most insurers moving rates on female drivers(identified as better drivers) in line with male drivers
Data Protection Act 2018 came into effect to coincide with
It came into effect in 2018 to coincide with implementation of General Data Protection Regulation and the Law Enforcement Directive (LED)
GDPR has direct effect across all EU member states/organisation have to comply with, however it allows member states a limited opportunity to make their own provision, how has the UK done this
The UK has done this by including Data Protection Act 2018, thus it is important that the GDPR and Data Protection Act 2018 are read side y sude
What are the main elements of Data Protection act 2018
- General Data Processing
- Regulation and Enforcement
According to the Data Protection Act 2018 what are the administration fines on data collectors and processors for most serious data breaches
17 million pounds/ 20 million Euros
-4% of global turnover
whichever is greater
The Data Protection Act 2018 wants to empower the commissioner to bring criminal proceedings to which offences
Where Data controller/processor has altered records with the intent to prevent disclosure following a subject access request
The general Data Processing Regulation applies to
Controllers and Processors
What is the role of the controller and processor
The controllers says how and why personal data is processed
The processor acts on the behalf of the controller
What are the specific legislation obligation on processors
-They are required to maintain records of personal data and processing activities
-Firm will have more legal liability if breach is their responsibility
Obligation on processors is a new requirement under the GDPR
Are controllers relieved of their obligation where a processor is involved
No, they are not further obligation is placed on controllers to ensure their contracts with processors comply with the GDPR
GDPR applies to which information
It applies to the personal data. Both Manual and automated
GDPR states which type of information should be included as personal data to
- Online identifier i.e IP address
- personal data that has been anonymised e.g key-coded depending on how difficult it is to attribute pseudonym to a particular individual
According to the GDPR, what are the special categories of personal data
- race
- ethnic origin
- politics
- religion
- trade union membership
- genetics
- bio metrics
- health
- sex life
- sexual orientation
Under the GDPR what does the data protection principles set out
It sets out the main responsibilities for organisations
The most significant addition by the GDPR compared to Data Protection 1998 is
The significant addition is accountability
Under the GDPR, what is the firm required to achieve for processing to be lawful
They must identify the lawful basis before they can process personal data and document it
In data processing why is a lawful basis significant
IT has an effect on individual right’s where a firm relies on someone’s consent to process data and thus individuals generally have stronger rights
Under the GDPR how must consent be given
Freely/specific/informed and unambiguous indication of the individual’s wish
According to the GDPR, consent can’t be inferred from
silence/pre-ticked boxes,inactivity. Firms must make it simple for people to withdraw their consent
Under GDPR consent must be separate from
Term and conditions and must be verified
Under the GDPR what are the individuals rights
-right to be informed right to access -right to rectification -right to erasure -right to restrict processing -right to data portability -right to object -rights in relations to automated decision making and profiling
Under the GDPR how can an individual find out if an organisation is using/storing their personal data
By submitting a subject access request(SAR) to the organisation concerned. The organisation will have one month to respond
How can a Subject Access Request be made
Verbally or in writing
What happens if the organisation concerned does not respond to the SAR submitted by the individual
The individual must complain to the organisation first instance, and if still no response the can make a complain to the Information Commissioner’s office
How does the individual pay for the personal data requested in the SAR
The first copy is free, but additional charges are permitted for additional copies
For Breach notification,what does the GDPR require duty on all organisation
It requires them to report certain types of data breach to the relevant supervisory authority and in some cases individual affected
UnThe GDPR imposes restriction on the transfer data to
It places restriction on the transfer of data outside the EU, to third countries or international organisation
Why does the GDPR restrict transfer of personal data
To ensure that the level of protection of individuals afforded by the GDPR is not undermined
Why do insurers ask for financial details while assessing application for Permanent Health insurance
This is done so as to ensure benefits are not excessive
One of the new provisions introduced by the GDPR is
Including online identifiers within the definition of personal data
Questions in the proposal form with the help of CIDRA have become
The questions have become far more specific and detailed
Under the CIDRA consumers answer their proposal forms
The consumers must only answer fully and accurately, qns asked by the insurer
under the Insurance ACT 2015 commercial customers are required to
They are required to give a fair presentation of their risk, after conducting a reasonable search of their business and signposted information for an insurer
Injury rate of which employees is more frequent and severe
Injury of employees in wood working industry than those in office
Frequency and severity of fire incidents is more common in
It it more common in schools and colleges mainly arson related than that in hardware shops
Which type of roofing will affect additional premium under personal household insurance for house or building
Thatch roofed house
For All Risk insurance for wider cover, what is essentially required
A deeper consideration of premium and terms
For what material has food industry faced a significant increase in premium
- Polystyrene
How does a firm producing seasonal features get effected if goods get damage under BI insurance
The insured may be dependent upon key times of the year and the damage at these times could have a significant impact on the business
