chap 6 - insurers Flashcards
insurer guidance - example of what is given to brokers
working with the rules
when a broker wants to use an unclassified market
when the client wants to use an unclassified market
when the insurers status changes
classified - insurer may be used on an unrestricted basis for the classes it wishes to write
classified but restricted- insurer can only be used in a restricted fashion, which may be related to;
- geography - type of business - any sanctions policies in the area in which you are producing business - requirement that insurer can only be used on express instructions from the client
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working with the rules
client - unclassified - get written confirmation from client that they are instructing you to place them with that insurer
carefully monitor the financial markets for rating changes etc, anything to minimise having to change insurer as its a nightmare
business at lloyds transacted in 3 ways
subscription market eg- for the majority of risks, the risk is shared amongst participating uw’s who follow the terms set by the lead uw. the first original uw becomes the leader even if an uw later down the line takes a bigger %- bound when uws initials on slip
- traditional - face to face broking in lloyds room
- use of delegated authorities in uk, usa
- business that lloyds syndicates have set up outside of lloyds
business done in the room at lloyds and within the london market is done on a slip and mrc
london market reform - improve competiveness of london - look up marketreform,co.uk
broker networks 2 groups- formal alliances and commercial enterprises
- formal alliances -they come together for ‘mutual support’ but they remain independent entities
- comm enterprises formed to provide specific services to smaller brokering firms to enable them to compete more efficiently
these networks have risen from the rise in consolodators
managing general agents- schemes negotiated exclusively by brokers or specialist agencies.its a corporate entity that has been given delegated auth from an insurer but acts as if it is the insurer. they can be independently owned or owned by a broker or insurer allows insurer to hopefully get access to a profitable scheme of revenue
lineslip is the namec given to a scheme or facility placed by lloyds
delegated authorities are;
delegated authorities;
authority to uw risks on the behalf of insurers
the authority that they bind with has to be strict; 1. what risks can be covered and what risks cannot. 2. rates. 3 limits. 4 cover and wording.
guidelines concerning claims agreements.
rating structures for risks are part of the authority
these facility have been the sources of problems for uws and many insurers wont give away the pen
popular in lloyds as binders offer a sig source of income some claims auth may be included in the da
delegated auth are a major source of brokers e &o claims
choosing an insurer most brokers base on financial security..
e & o cover is usually restricted to binders that are specific on rates, cover and wording etc
- credit facility
- sales and literature
- reputation
- brokerage
financial sec- licensed by fca, rated by am best etc, changes in insurers uw processes, speed of settlement of claims / return prems
many companies that failed were actually reasonably rated. signs insurer in trouble
- rapid expansion- excellent results despite negative trends of market
- unreasonable stance on large claims
- constant pressure on broker to increase volumes
- overbearing and dominant cheif
credit facilities
prem finance now rare
bermuda requires full payment
payment terms can be 90, 60, 30 days
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the broker should not let the rate of brokerage influence their decision on insurer choice
surveys of insurer service
benchmarking data - america biba - own membership surveys trade magazines/press airmic - behaviour of brokers and insurers own staff surveys- aon willis marsh
undertking a fair analysis of the market - the broker needs to;
fair analysis and panels…
- identify insurers for that class of business
- refine the list based on ‘demands and needs’ to produce a short list
- refine list by using specialist broking knowledge and expertise, identify a min of 5 insurers to approach for terms if - must review and keep upto date eg if other insurers have new product offerings
criteria in assessing insurers for a specific risk
1. quality of service 2, innovation 3. tech advise 4. survey and risk control 5. breadth of cover 6 capacity 7 claims 8 prem finance 9 flexibility 10 price 11 geographical spread 12 continuity
levels of service to look for when considering an insurer are;
brokers aim to obtain widest cover available
wrc- hard market- t&c’s tightened, liability asbesto clauses- prevention of acc losses- brokers have to review wordings and find the best for client - would also want to avoid premium implications as a result of additional cover/ add prem if the original policy was not enough to meet the needs
1 fast quotes 2 efficient system of documentation 3 responsiveness to broker and client needs 4 competent survey system 5 efficient accounting 6 suggestions for improvement of cover 7 prompt notification of changes in market practice 8 timely payment of claims 9 goof web system- quotes/doc production
some insurers have deeper specialist knowledge eg
matching an insurer to the programme design
leaders- brokers skill is in selecting the best leader for the programme- in order for others to ‘follow’
to consider primary and excess layers..
1. media risks, libel 2 el for engineering risks 3. public finance initiative (pfi) contracts 4. asbestos removal contractors 5 construction
prog design - prim layers and excess layers - some will use capacity on a primary level others such as bermuda companies will do so on an umberella basis or excess layers- judgement of broker required should it all be in one line or spread between the primary and more excess layers?
diversity why should a broker deal with diverse markets\?
- reduce exposure to sudden change in uw philosophy
- reduce exposure to insurer insolvency
- provide widest knowledge of what is available
- ensure competitive terms are obtained
- ensure availability of capacity
- ensure ability to deal with unusual risks
impact of insurer failure
chester street
independent
chester street 1989 - claims for asbestos outstripped reserves hugely- liabilities of 1 billion- until 2020 to find out the real conclusion. fscs paid 40m in compensation to el claims for chester (commercial customers only compensated if insurance was compulsory)
independent - 4 main areas that needed addressed when went to liquidation quoted new business existing policies unpaid claims os prems
fscs had to clarify areas- definition of private consumer -gray areas- sole traders and private tenants under block schemes arranged by the landlord
payment on prems - el pl - motor before claim was paid
certain extensions to el policies - including non employees eg students (as the el cover was not compulsory for them)
brokers suffered loss of income many clients refused to pay the brokerage on replacement policies
