chap 5 - negotiating and placing a risk Flashcards
per marine insurance act, brokers must disclose any material facts on following basis;
- every fact known to them including any fact that would have been communicated to them in the course of their business
- every material fact that the insured is bound to disclose unless it comes to insured attention too late-
* consumer ins act requires customer not to misrepresent on the basis of reasonableness- insurer can only remedy if reckless, delib or carefless
guidelines on MF’s
if in doubt disclose
rare for disclosure to prej client but non disc will
do not remove claims exp
if a sig claim has occured it must be declared irrespective or market practice eg prop claims only report lasr 4 years losses
make convincing argument claim willl not re-occur eg risk management now in place following bad claim
uw info - proposal forms- for certain risks - standardised mjority of medium sized and smaller risks eg
broker provides advice on completing
broker must never sign the proposal even if requested by client
if proposal has brokers name on it, broker must make it clear that the contract is between the client and insurer not broker
- small package risks
- personal lines such as motor household and craft
- fidelity guarantee or crime
- pi and e&o
- d&o and employment practices liab
other means of collecting info
- insurers questionaires (eg diving)
- brokers questionaires- problems with these - lose touch with subsidiaries, incomplete forms, questionaires cant cover every eventuality- recommend getting client to complete and taking them through their answers face to face
- survey reports- problems (not all insurers will accept brokers surveys) ins standards of info can change eg in a hard market, diff requirements of insurers
- loss experience including deliberately uninsured and intentionally insured
insured losses
uninsured losses
- always retain prev years claims exp
- check claims listings for duplications
- agree a claims cut of date so that any new claim wouldnt affect renewal
- seek review of large losses
- ensure factors that have an impact of losse are identified eg change in working practices
uninsured losses
- reducing a self insured retention
- taking out a new class of ins
presenting a risk to insurers and negotiating terms
- cover required, class of business, si, limit of indemnity, , wording
- all material uw info
specification of cover
uw info - the better the info the better the terms
principles of good submissions - ask uws what they want to know
- using agreed woring
- specifying all clauses in full
- seperating clauses and negotiating the wording (integral part of broker placing_)
- options - analyse claims data if high incident of claims
get uws onside;
1. demonstatr broker has sound grasp of class of risk and client
2.explain positively the key features of the risk
3. present all material info
4, ensure info is ackowledged by insurers
principles of good submissioms... 1. table of contents, numbers 2, who prepared the submission 3. executive summary covering 1. the risk itself 2 the cover being requested, take care when presenting claims/loss info 4. apendices 5. decide if submit info by cd rom 6. arrange access to a 'virtual data' room if a large client or complex risks 7. action - ask uw to initial every page
market reform contract mrc- standard london market slip - 6 sections
- risk details
- information
- security details
- subscription agreement
- fiscal and regulatory
- broker remunerations and deductions
guidelines - monetary amounts should be clear eg state GBP, no ambiguos terms, all terms clearly stated, any subjectivities used expressed as unambigous conditions, all requirements in contract certainty code should be met
undersubscribed risks &b over subscribed risks
subjectivities in line with contract certainty
confirming terms to clients
- if not all insurance required is subscribed and there is no other placing options the uninsured element is the insured risk- broker must keep the client informed ans aware of the implications
over-subscribed- broker must sign down the lines each insurers proprtion and advise them of final participation promptly
subjectiviries must be clear on;
- who needs to do what, by when and to what standard
- the terms and cover that will apply until it is done
- the consequences if it is not done
confirming terms to clients
brokers job to explain differences in terms - clients job = final choice of carrier
presenting and explaining terms to clients
- convey terms clear and accurately
- ensure client understands important aspects of cover and t&cs
- ensure client understands where cover does not match their requirements
- provide a record of the advice to the client
- bring special payment terms to clients att
brokers must also give guidance on
- material facts
- average and the importance of updating the si
- how declaration clauses work and additional premiums being generated after expiry of policy
- indemnity periods under bi and how they affect the si
- warranties and policy conditions eg on sprinklers
post placemenr activity
insreuctions to insurer
cover notes
policy docs -contract certainty
confirm insurers agreement - make written record of call, send written confirmation of agreement asap
market practice to issue EOC - evidence of cover- this is the slip less the subscription market proportion, with a covering letter signed by 2 directors
insurance registers, summaries and manuals (for uk risks with exception of commercial) most brokers prepare these- they explain in plain english the insurance programme
contact names, claims procedures, advice of clients obligations of MF’s- not the same as a polic summary
the scope of cover is important as clients may rely on it eg
1. period of cover and insurer
2. any warranties or conditions precedent to liab
3. clauses described in full
4. basis of rating
5. explicit on credit and special payment terms
mid term admin - diary systems supervision peer review filing systems email
a clients file must be available to fca within 48 hours of request
file must be complete
peer review procedures
email - risks in using email
