Chapter 1 - Introduction

Question 1

Insurance companies can be grouped into three broad types, name them:

Answer 1

A COMPOSITE company

A LIFE company

A GENERAL INSURANCE company

Question 2

Define a COMPOSITE company:

Answer 2

A company which transact both long-term (life) and general business.

Question 3

Define a LIFE company

Answer 3

A life insurance or pensions company that can only transact long-term business.

Question 4

Define a GENERAL INSURANCE company

Answer 4

A company who are only able to transact general business.

Question 5

The UK insurance industry is the largest in ______ and fourth largest in the _________:

Answer 5

Europe and the world.

Question 6

The insurance market, like any other, includes SELLERS, BUYERS and MIDDLEMEN. Define each:

Answer 6

SELLERS are insurance companies and Lloyd’s

BUYERS can be any person, company or organisation wanting to purchase insurance.

MIDDLEMEN are insurance brokers and intermediaries.

Question 7

What is an Insurance broker?

Answer 7

• An individual or firm whose full time occupation is the selling of insurance.
• Have a high standard of expertise.
• Will place the interests of their client before all other considerations.

Question 8

What is the advantage of an insurance broker to the client?

Answer 8

They receive INDEPENDENT ADVICE on a wide range of insurance matters usually without a direct cost.

Question 9

What is the advantage of an insurance broker to the insurer?

Answer 9

• Negotiations are quicker and easier as they only need to discuss special requirements and intricate points with the broker.
• Saves time and money as the broker handle routine matters.

Question 10

What is an intermediary?

Answer 10

• An agent appointed by a party to seek the best cover, best price and recommend an insurance company and/or product.
• May be authorised to purchase on behalf of a client.
• Do not have an obligation to seek best terms as they may only deal with one insurer.