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IF 2 > Chaper 9 Underwriting and premium payment > Flashcards

Chaper 9 Underwriting and premium payment Flashcards

1
Q

The process of acquiring information/providing a quotation in response to the insurance enquiry and the subsequent negotiations leading to the final issue of policy documentation is under whose jurisdiction

A

Its under the FCA and its rules are contained in the ICOBS Insurance Conduct of Business Source book

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2
Q

Along the whole insurance process, there is a requirement for Contract certainty, which is defined as

A

The complete and final agreement of all terms between the insured and insurer by the time they enter into the contract, with contract documentation provided promptly thereafter

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3
Q

What impact have the ICOBS and Contract Certainty have had on insurance

A

They have had an impact on the provision of information, the process and on timing

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4
Q

What factors cause the insurance process to differ

A

The process will differ according to

  • Nature of the Contract
  • Whether an intermediary is involved
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5
Q

Which is a more complex procedure

A

When the intermediary is involved the procedure is complex

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6
Q

What is the difference in procedure when an intermediary is not involved and when they are involved

A

Similar rules will apply to the insurer in relation to the provision of advice exception would be those that relate to aspects of agency/provision of independent advice

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7
Q

What are the categories of intermediaries in the insurance market place

A
  1. Appointed Representatives
  2. Introducer Appointed Representatives
  3. Wholesale Broker.Intermediary
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8
Q

Who is an Wholesale Broker/Intermediary

A

This term is not defined by regulators but is used to describe an authorized person used to access a particular market usually Lloyd’s or the London market. A supply chain is created effectively

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9
Q

Do wholesale intermediary have regulatory responsibility for dealing with the customers with client facing intermediary

A

No, regulatory responsibilities do not pass along this chain

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10
Q

Intermediaries that are FCA authorized person carry on their business under which agreement

A

Under the terms of business agreements (TOBA)

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11
Q

There are two principle types of TOBA which are

A
  1. TOBA entered with clients

2. TOBA individually entered into with insurers and if the intermediary is a Lloyd’s broker with Lloyd’s syndicates

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12
Q

TOBA entered with insurers/Lloyd syndicate include which details

A
  1. Determinde the nature of the relationship
  2. Authority levels
  3. Financial aspects
  4. The risk transfer arrangements between intermediary and the insurer
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13
Q

What does granting of risk transfer for TOBA with insurers mean

A

This means the acceptance by the insurer/underwriter that once monies is collected by the intermediary it’s treated as if it’s been paid to the insurer

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14
Q

Who in an intermediary maintains documents of risk transfer between intermediary and insurer

A

Compliance officer

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15
Q

TOBA between intermediary and client will consist of

A
  1. identify the service to be provided by the intermediary
  2. terms of credit if any
  3. may incorporate a service-level agreement
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16
Q

What is a service level agreement (SLA)

A

this is a kind of a client charter, explaining the standards to which intermediary will operate

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17
Q

What will be in a Service Level Agreement

A

response times for enquirers/complaints/claim notification

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18
Q

What convenience does service level agreement have

A

It is a convinient way of conveying all the required information to clients both in areas of FCA compliance and other client/intermediary response

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19
Q

Are the TOBA used for consumers and commercial consumers different

A

A different TOBA is used for Consumers(personal customers) than that used for commercial customers so as to meet regulatory requirements

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20
Q

How does the TOBA for consumer differ from that TOBA of commercial consumer

A

For TOBA with consumer clients, the client benefits from greater protection provided by wider ranging rules, where by one with commercial consumer they are entitled to more limited range of rules

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21
Q

If the status of the person is unclear, what type of customer will the insurer/intermediary assume

A

They will assume its a consumer client

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22
Q

If the perosn is acting in the capacity of both consumer and commercial customer what type of customer will the insurer/intermediary assume

A

They will assume they are commercial client

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23
Q

What is an intial disclosure document

A

This is a document that has details of certain information about the intermediary and its services

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24
Q

What happened to the initial disclosure document

A

It was provided in the handbook until 27/03/2017 when it was withdrawn and abolished

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25
Q

After Abolishment of initial disclosure document how is information about the firm disclosed

A

Information can now appear in such documents with headings like client agreement or terms of business and status disclosure letter

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26
Q

What information is required to be disclosed about the intermediary

A

1.Name and address of the company
2.The fact that it’s included in the Financial Services Register
3.Ownership
whether it owns more than 10% of an insurer or an insurer owns more than 10% of it
4.Who to write to if the customer has a complaint
5.Does it give advice based on a fair analysis of the market?
Is it under an exclusive contractual obligation to one or more insurers to place the business with them
Does it give a more limited advice than fair market analysis

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27
Q

What must an intermediary consider when making a claim that it provides advice on the basis of a fair market analysis

A

They must consider a sufficiently large number of contracts of insurance before making any recommendation

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28
Q

The assessment of fair market analysis must be made upon which factors

A

They must be made upon professional criteria and reflect an adequate knowledge of insurance policies in the relevant sector of the market

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29
Q

How must intermediary provide information to client

A

Intermediary must provide information on paper or durable medium, clearly, accurately and in the language of the state of the commitment

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30
Q

When can a client receive information orally

A

Unless the client has requested the information orally or immediate cover is necessary, however the paper version must be sent immediately after the conclusion of the contract

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31
Q

Who governs distance communication of the intermediary to the consumer

A

The Distance Marketing Directive and the FCA has separate set of rules

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32
Q

Where does the FCA separate rules of distance communication and distance marketing directive apply to

A

The rules apply only to organised distance sales or service-provision scheme. Also where sales are made exclusively under an organised scheme and where this is the only permitted means of communication

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33
Q

Provided the client’s explicit consent has been provided, what is the minimum restricted information that can be given to the client

A
  1. the identity of the person and their link to the firm
  2. a description of the main characteristics of the financial services
  3. the total price including all the taxes to paid through the firm
  4. notice of the possibility of other taxes or costs that may exist
  5. existence/absence of a right to cancel, its duration/condition for excising it and any payments to be made for exercising it
  6. the other information is available on request and its nature
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34
Q

Who must establish the demand and the need of the client

A

The intermediary must establish this before providing any recommendation

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35
Q

Its straightforward to develop demand and need form for consumers however for commercial customer its more complex, what have intermediaries developed

A

Intermediaries have developed their own demand and need analysis form, often in a form of a checklist

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36
Q

How does intermediary own developed demand and need analysis form assist them

A

It assist them to facilitate the process of establishing sufficient information to enable quotations to be obtained and advice to be provided

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37
Q

When recommending regarding the sale or cancellation of a policy, what must an intermediary ensure

A

They must ensure the suitability of the advice provided for the client’s demand and needs at the time

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38
Q

For pure protection policies what specific guideline has the FCA stated

A

It’s stated that the intermediary must establish the customer’s demands and needs by obtaining further relevant information from the customer, including details of existing insurance cover

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39
Q

If a client is requesting other cover apart from pure protection policies,what must suitability take into account

A

Suitability must take into account the level of cover and cost,relevant exclusions, excesses, limitations and conditions. and inform the customer of any demand and needs that are not met

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40
Q

What’s the other additional requirement for protection polices

A

The customer should only buy a policy under which they are eligible to claim benefit. This being prompted by many consumer complaints especially on payment protection indemnity contracts

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41
Q

When must an intermediary provide client with a statement of the clients’ demands and needs

A

They must provide it before the conclusion of a contract, and where a personal recommendation has been made intermediary must explain the reason for the recommendation

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42
Q

how does the amount of information in the statement vary

A

It varies significantly from policy to policy, the intention should always be clear and concise. The complex the policy the greater the level of explanation than a relatively straightforward, small, personal insurance policy

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43
Q

For policies personally recommended from the intermediary, how is the statement of demands and needs treated

A
  1. the statement can be included within product document stating who it is appropriate for
  2. a record of their demands and needs as discussed
  3. key features document, describing the product’s key features
  4. the statement can be included in the proposal form
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44
Q

Is commission disclosure mandatory

A

The FCA doesn’t currently require mandatory disclosure of commission as part of quotation presentation

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45
Q

Are fees by the intermediary required to be disclosed

A

Separate fees to be charged by the intermediary either instead of commission or in addition to commission must be stated

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46
Q

If a commercial customer specifically regards information on commission,whats shall an intermediary do

A

Intermediary must disclose the commission in writing or other durable medium of the total remuneration

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47
Q

When an intermediary is disclosing commission, FCA rules makes it clear that it should include

A

Intermediary
must include any financial benefit that it receives from insurers from encouraging greater placing of business(volume overrides), profit share arrangements(associated with delegated authority schemes and financial benefit intermediary receives from premium financing arrangement

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48
Q

The commission disclosure rule is in addition to which general law

A

The general law on the fiduciary obligation of an agent in that it applies whether or not an intermediary is an agent of the commercial customer

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49
Q

Insurance Distribution Directive 2016/97/EC(IDD) was a replacement of which directive

A

The IDD revised and replaced the Insurance Mediation Directive 2002/92/EC (IMD)

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50
Q

What is the aim of the Insurance Distribution Directive (IDD)

A

The aim is

  • to make it easier for firms to trade across borders
  • strengthen policyholder protection
  • provide a level playing field
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51
Q

How does the IDD provide consumer protection in insurance

A

The scope of regulation is increased to include all firms that sell/advise on/conclude insurance contracts and those who assist in administering and performing them including those who introduce insurance and those that shortlist as part of the selection process(aggregators)

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52
Q

What are the key provision of the IDD(read book chp 9 pg 153)

A
  • Professionalism- complete at least 15 hrs of professional training or development per year
  • Commission Disclosure
  • Harmonization- IDD is a minimum harmonization directive
  • New product governance requirement- in line with the FCA’s
  • New category of insurance settler known as the Ancillary Insurance Intermediaries
  • New duties apply to insurance companies selling products through companies not authorized by the FCA
  • Requirement for all General insurance firms in retail and small corporate market to provide customers with insurance product information documents
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53
Q

Harmonization as a key provision of IDD what does it allow

A

The IDD harmonization allows Member states to set stricter requirement (gold plate) if they deem this necessary

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54
Q

What do Ancillary Insurance Intermediaries include

A

This includes connected travel insurance providers that don’t sell/introduce insurance as their main b’ness, but still do so, thus subject to the selling rules

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55
Q

The FCA has specific rules relating on protection contracts, what do these rules impose

A

These rules impose strict requirement on those offering such contracts to ensure the product is suitable for the customer where a recommendation is being made or to ensure that they fully understand what is on offer and the fact that the choice is theirs to make where no recommendation is being made by the intermediary

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56
Q

What are the two categories that protection polices fall into

A

Pure Protection and payment protection

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57
Q

What is Pure Protection polices

A

These are insurance contracts in which benefits are payable only on death/in respect of incapacity due to injury,sickness or infirmity

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58
Q

What do Pure Protection polices include

A

They include certain life policies, that don’t have a saving element and critical illness polices

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59
Q

What is Payment Protection polices

A

These are insurance contract where the benefits are designed to protect a policyholder’s ability to continue to make payments they owe to third parties

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60
Q

What are Electronic Data Interchange (EDI)

A

These are systems whose function is to obtain quotation for prospective policyholders

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61
Q

Electronic Data Interchange (EDI) is most common in which type of policies

A

Motor policy and household policy

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62
Q

What is the objective for EDI in the intermediary viewpoint

A

There is to input data only once but to then receive the benefit of a range of quotations from the insurance market

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63
Q

On what basis does the electronic data interchange present the premiums requested

A

It will display say top five insurers, on basis of the lowest premium quoted. If the quotation is acceptable then documentation in the form of a cover note or certificate of insurance can be issued using the same EDI system

64
Q

For EDI system which type of premium will be quoted and accepted

A

The EDI system will indicate to intermediary whether the premium is Guaranteed or Provisional, and the guaranteed premium would be quoted and capable of acceptance

65
Q

How long does the quotation remain open/valid

A

it remains open for a set number of days or 30 days, if stated in the quotation

66
Q

Is cover effective when the quotation is open

A

unless the quotation states otherwise, during the time cover is not effective. Thus insurer is not on risk, proposer is not covered

67
Q

If the proposer accepts the quotation within the specified time scale, what is insurer to do

A

The insurer is legally bound t honor the quotation

68
Q

|f they accept and no period is set, what shall they do

A

The offer will remain open for a reasonable time under rules of a valid contracts. The insurer can withdraw from the quotation at any time prior to the proposer acceptance but will be bound by the term of the offer if the proposer indicates acceptance and agrees to pay the premium

69
Q

If there is material changes to the risk between the time of the quotation and its acceptance by the proposer, what must the insurer do

A

The insurer is not bound to maintain the quotation

70
Q

If at the end of the set period, the proposer has not taken up the quotation then what’s the next move

A

The quotation is no longer valid and the insurer is not bound to honor it (but may choose to)

71
Q

FCA rules are complex in the area of responsibilities for production of information and timing because

A

This is because there are three EU Directives that overlap or require slightly different information

72
Q

The variations in timing depends on

A

It depends on whether the sale/advice is face to face, by telephone or other means, also depends whether the proposer/client is a commercial customer/consumer

73
Q

How do insurers generally provide information to consumers

A

They provide information by means of a key features document

74
Q

Key feature is a generic document compulsory for what types of insurance contracts

A

It’s compulsory for all pure protection and payment indemnity contract

75
Q

Key feature document is provided as part of what process

A

It’s provided as part of the quotation process

76
Q

What must Firms offer to a consumer upon inception or renewal of specified contract

A

They must offer what the FCA refers to as cancellation rights

77
Q

What is cancellation

A

This refers to the initial period of cover during which contract may be voided at the option of the policyholder

78
Q

Cancellation should not be compared to

A

It should not be compared to mid term cancellation, which an insurer may choose to offer its policyholders. Cancellation is a type of cooling off period

79
Q

Cancellation also cooling of period is allowed for

A

It’s a cooling off period allowed for consumers only and the insurer is entitled to make some charge for the period of cover

80
Q

Cancellation rights don’t apply to the following contracts

A
  1. Travel and baggage insurance /similar short term insurance policy of less than one months duration.
  2. General Insurance contract, where the performance has been fully completed by both parties at the consumer’s express request
  3. A pure protection contract of 6 months or less which is not a distant contract
  4. Pure protection effected by trustees of an occupational pension scheme/an employer/partnership to secure benefits for the employees or partners in the partnership
  5. A general insurance contract which is neither a distance contract nor a payment protection contract sold by an intermediary who is an unauthorized person
  6. A connected contract /breakdown and baggage policies, unless a distance contract
81
Q

Where a right to exist the following rules apply

A
  1. Duration for cancellation period for general insurance is 14 days and protection contracts is 30 Days
  2. Consumer is required to pay in
    • general insurance contract insurers are entitled to charge pro rata sum for the period of cover granted,(no penalty charges), it may be justifiable commission or fees but no element of profit
      - For Pure protection and payment protection no charges may be made, unless claim has been made during the cooling-off period
82
Q

What is the intermediary required to do with the right to cancel notice

A

They are required to ensure the presence of the notice is drawn to the consumer’s attention

83
Q

How can a consumer notify intermediary/insurer of them exercising their right to cancel within the deadline

A

The deadline will be deemed to have been met if the notification is on paper or other durable medium, dispatched before deadline expires

84
Q

Before the contract concludes the intermediary must provide a commercial client, with the following information

A
  1. Appropriate information in good time, so as to enable the commercial client to make an informed decision about the contract being proposed
  2. the law applicable to the policy
  3. arrangement for handling complaints
  4. the address of head office/where appropriate, the branch of the insurer providing cover
85
Q

What does appropriate information mean and what must intermediary take into account

A

The meaning may vary according to the commercial client knowledge,experience and ability. The intermediary should take account of the main benefits
,exclusions,limitations and conditions of a policy

86
Q

What must an intermediary consider in determining what is in “good time”

A

They must consider the importance of the information in helping the customer make a decision as to the suitability of the contract for them and when that information would be most useful

87
Q

When should an intermediary provide a commercial client with policy document

A

They should provide policy document promptly after the conclusion of the general insurance contract. Contract certainty requirement defines it as within 30 days of commencement

88
Q

Group policies are policies provided for whom

A

These policies provide for persons other than commercial client who concludes the general insurance contract to become policyholder. Schemes fall into these group policies

89
Q

For such group policies risks what are intermediary required to provide

A

Intermediary must provide appropriate information to their customer advise them they should pass it on to each policyholder

90
Q

Proposal forms are used for which type of insurances commonly

A
  • personal insurances

- majority of small and medium-sized commercial risks

91
Q

Are proposal forms used for large and complex risks

A

Proposal forms are often inappropriate because of the amount of information required. Thus surveys and presentations are more appropriate

92
Q

On what basis do most intermediaries provide detailed or complex risk details

A

On the basis of Errors and Omissions Expected (E and OE)

93
Q

Printed proposal forms contains a declaration form that states

A

The declaration must be signed by proposer states that the information supplied by the proposer is true and correct to the best of the proposer’s knowledge and belief

94
Q

Printed proposal forms contains a warning or important note that states

A

The warning/important note concerns the information that should be disclosed and points out the dangers if material circumstances are not disclosed, and of the proposer is in any doubt as to whether facts are material, they should be disclosed

95
Q

Insurers have amended the wordings of key documents to comply with what terms

A

To comply with the terms and new terminology of the Insurance Act 2015, proposers are advised that they have a duty to make fair presentation of the risk before renewal/inception and alteration to the policy

96
Q

For proposers to comply with duty of fair presentation they must also have conducted reasonable searches for all relevant information held

A
  • within the b’ness(including held by their senior management and anyone responsible for their insurance
  • by any other person like their broker/agent/intermediary/person for whom cover is provided by the insurance
97
Q

whilst underwriter is calculating premium, risk is measured in terms of

A

It is measured in terms of frequency of loss and severity of loss. When combined the underwriter decides on the appropriate level of loading/ discounting of the rate

98
Q

What did the ruling of the European Court of Justice state

A

Insurers cannot take account of gender of subject the subject of insurance in deciding what premium to charge or what benefits to provide.

99
Q

The Gender Directive of the ruling of the European Court of Justice applies to which insurance contract

A

It applies to Motor/Life/ purchases of annuities/claims against critical illness/income protection/health insurance.Applies to policies considered to be new contract from 21/12/2012

100
Q

When do insurers find pricing easiest

A

Insurers find pricing easiest when dealing with large number of exposures to risks,whether houses/factories,cars e.t.c

101
Q

The operation of law or large numbers enables insurers

A

It enables insurers to determine a more accurate premium chargeable to the insured than would be case if their experiences were limited to few risks

102
Q

Which body of underwriters specializes in calculating premium of one-off events, where premium can’t so easily be based on past experiences

A

Lloyd’s underwriters

103
Q

How do premium arrive

A

They arrive at by applying a premium rate to a premium base

104
Q

What is a premium rate

A

is intended to reflect the hazards associated with particular insured

105
Q

What is a premium base

A

This is the measure of exposure

106
Q

Premium rate is set by

A

It is set by the insurer, the greater the risk to the insurer, the higher the rate and vice versa. It is applied to the premiumbase

107
Q

The rate of the premium rate could be in

A

It could be in per cent or rate per mile

108
Q

Sum insured is a suitable premium base for many property insurances, but not appropriate for which insurance

A

Liability Insurance

109
Q

For employer’s liability what is the suitable premium base

A

The wage roll of the insured is used, and often broken down into different categories of work undertaken

110
Q

For product liability what is the suitable premium base

A

It’s often rated on turnover

111
Q

For professional indemnity what is the suitable premium base

A

It is rated on the fees earned

112
Q

When is adjustable premium used

A

This is used when the premium base is not a factual figure at the start of the. And an estimate of what the premium base might be is provided

113
Q

When is adjustable premium commonly used

A

It’s used with product liability premium is related to turnover and employer’s liability, insured makes an estimate of the total wage bill for the coming year and rate is applied to the estimated figure.At the end of the year, insured will submit declaration showing the actual figure, the premium is then adjusted up or down depending on whether the wages increased or decreased

114
Q

Why is there a growing trend for insurers to quote a minimum and deposit premium

A

This type of quotation fixes the lower end of the premium range and effectively means that any year end adjustment will either be nill or additional premium

115
Q

Flat rate premium is common with which insurance contract

A

Motor Insurance and Public Liability insurance risk for manufacturing concern

116
Q

When will the insurer use flat rate for Public liability risks

A

If there is no work carried out away the insured’s premises and very limited access to the insured’s premises by third parties, thus insurers will find it inappropriate to rate such risks on turnover basis, when it doesn’t vary in direct proportion to the exposure

117
Q

What is a policy issued for

A

It is issued so that both the insured and insurer are clear as to the terms agreed between them.

118
Q

What are the contents in a policy

A
  • All the details of cover
  • period of the cover
  • exceptions,
  • conditions
  • premium
  • other relevant information
119
Q

Is the policy the contract of insurance

A

No, it is not , it is the evidence of the contract

120
Q

When does the contract of insurance come into effect

A

It comes into effect once the insurer has accepted the insurance proposal, terms have been agreed and the policyholder has paid or agreed to pay the premium

121
Q

What does the absence or loss of the policy mean

A

It doesn’t mean the contract is invalid but the policy is useful as proof in the event of a dispute over the terms agreed

122
Q

Contract certanity gives insurers until how many days to issue policy

A

No later than 30 days after commencement of cover

123
Q

What are the three policy documentation

A

1-Policies

  1. Cover Notes
  2. Certificates of Insurance
124
Q

When its not appropriate to issue a policy straight away for a number of reasons, what do insurers do

A

As there us still a need to provide evidence that cover is in force, insurers will issue cover note

125
Q

What is a Cover note

A

Prepared by the insurer(intermediary), to be given to the insured,its a document issued as evidence that insurance has been granted, pending the issue of a policy document or endorsement

126
Q

In what form can a cover note be in

A

It may be the completion of a printed form or merely a letter confirming cover

127
Q

What is stated in c a cover note

A

Simply states the insurance is in force and provides brief details of the cover

128
Q

What happens when policy or certificate is issued

A

Cover note is temporary and is super ceded when policy is issued

129
Q

What are the characteristics of a cover note

A

-the commencement date
-statement that the policy follows the normal terms and condition of the insurer for that class of insurance
-any special terms that apply
risk specific information that identifies the property/liability that is covered
-period that the cover note lasts

130
Q

Which class of insurance most commonly uses covernotes

A

In the field of Motor insurance where there is a legal requirement to have a minimum level of insurance and certificate of insurance

131
Q

What has led to the reduction in the need of cover note

A

The advent of telephone and intermediaries and the use of electronic data interchange(EDI)

132
Q

When is the certificate of insurance needed

A

Where insurance is compulsory by law, the law also requires certificate of insurance to prove that the policy is in force

133
Q

Why is the certificate of insurance needed

A

Certificate of insurance is evidence that a contract of insurance exists that complies with the appropriate statutory requirement

134
Q

For motor insurance which document does the police use

A

Certificate of insurance is provided to the police for inspection, instead of full policy wording. And shall be carried by the motorist

135
Q

For motor, police have access to what database for details of insurance cover of any vehicle

A

They have real time access to Motor Insurance database,

136
Q

For Motor insurance certificate must include the following information

A
  1. Registration # of vehicle
  2. name of policyholder
  3. date of commencement of cover
  4. Expiry date
  5. person or classes of person entitled to drive
  6. limitations as to use
  7. confirmation that cover complies with UK statutory requirements
137
Q

For Employer Liability insurance certificate must include the following information

A
  • policyholder name
  • commencement date
  • expiry date
  • confirmation that cover complies with UK statutory requirement
  • minimum amount of cover not less than 5 million pounds
138
Q

When does cover attach

A

It attaches as soon as the insurer accepts proposal and the insurer has paid the premium of the contract or it is implied that the proposer promises to pay

139
Q

What are the different methods of collecting premiums

A
  1. Credit facilities
  2. Installment facilities
  3. Third party premium financing
140
Q

Who often offers credit intermediary offers this facility in order to obtain customer loyalty

A

-Intermediary

141
Q

For Credit facilities what do intermediaries do in exchange for the payments to be paid on credit

A

intermediaries charge a fee

142
Q

How can intermediaries arrange credit card payments from insured

A

hey can have an arrangement with a finance house or arrange credit “in house”

143
Q

Which Regulation regulates credit card payment

A

With effect from 13/01/2018 , the Payment Services Regulation 2017 were amended to enable the requirements of the Second EU payment Service Directive to be enriched into the UK law

144
Q

The Amended Payment Service Regulation 2017 bans

A

It bans b’ness from charging retail customers a debit/credit fee charge or surcharge in addition to the advertised price of a transaction

145
Q

Who provides payment of premium by installment and to whom

A

-Most insurers provide facilities for payments by installments, and its usually offered to personal general insurance clients

146
Q

If the premiums are not recovered in full at inception, what do the insurers do

A

The usual charge reduced interest in these premiums, thus charge a fee to reflect the loss of interest and administration cost of collecting more than one payment

147
Q

If insurers offer installment facilities without any apparent cost, how do they deal with this incurred cost

A

The insurer’s premium rate will take this extra cost into account

148
Q

How may installment be paid

A

Direct debit/Standing order/ cheque/Cash at agreed intervals. Direct debit is preferred by insurers

149
Q

How does Third Party premium financing work

A

Insurance intermediaries are offered this type of financing facilities by specialist finance companies, where by these companies automatically provide premium financing at guaranteed rates of interest for the intermediary’s client

150
Q

How does the payment process of premium financing work

A

There is a minimum premium level, which usually involves the payment of deposit and subsequent repayment over a couple of months

151
Q

Does the intermediary carry a credit risk for premium financing?

A

The intermediary doesn’t carry credit risk and may be an additional source of earning for intermediary for setting up arrangement

152
Q

To whom does insurance premium tax apply to

A

It applies to Most General Insurances where the insured risk is located in the UK

153
Q

IPT is payable by whom

A

IPT is payable by the insured, although the insurer is responsible for collecting and accounting to the HM Revenue & Customs

154
Q

There are two methods of calculating IPT, one way is favored more which is

A

Calculating Tax as a percentage of written premium, from insured’s POV has the benefit of clarity

155
Q

What is the standard IPT rate for all types of policies?

A

12% except for travel insurance, some vehicles and domestic/electrical appliances where rate is 20%

156
Q

Which insurance contract does IPT not apply?

A

Reinsurance contracts/certain marine policies/engineering inspections but engineering inspection contracts are subject to value Added Tax at standard rate

IF 2 (13 decks)

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