Chapter 2

Question 1

What is Capital and Working Capital

Answer 1

Capital is when money is raised by savings, issue of shares etc.

Working Capital is used for acquisition and running costs

Question 2

In order for a company to be viable it must what?

Answer 2

Be able to match their liabilities with their assets

Question 3

What is the MCR?

Answer 3

Minimum Capital Requirement - is the higher of two amounts

A base capital requirement and an amount that has to be calculated from the volume and type of business. This is the general insurance capital requirement (GICR).

Question 4

What is the ICA

Answer 4

Individual capital assessment.

Question 5

What’s the purpose of The Solvency 2 and Insurance (Amendment, etc.) (EU exit) Regulations 2019

Answer 5

Ensures that existing EU Law on Solvency II continues to work effectively now the UK has left the EU

Question 6

Why is contract certainty required

Answer 6

UW’s will not know their exposure, claims reserving & pricing is less accurate, unable to alocate capital correctly.

Brokers, liability for error & omissions

Policyholder - wont be certain of their coverage

Question 7

Contract certainty definition

Answer 7

Contract certainty is achieved by the complete and final agreement of all terms
between the insured and insurer by the time that they enter into the contract, with
contract documentation provided promptly thereafter.

Question 8

Contract certainty Part A

Answer 8

Must ensure that all terms are clear and unambiguous by the time the offer is made or accepted. All terms must be clearly expressed, including any conditions or subjectivities

Question 9

Contract certainty Part B

Answer 9

Documentation issued within;
7 days for consumer
30 days for all others

Question 10

Contract certainty Part G

Answer 10

Insurer and Broker must resolve any issues around the achievement of the contract certainty principles as soon as practicable and without undue delay

Question 11

Consumer rights act 2015 did what?

Answer 11

aimed to reform and simplify UK consumer law and make it easier for consumers to understand their rights and the remedies available to them if things go wrong.

Question 12

Contract terms must be what?

Answer 12

Transparent (expressed in plain intelligible language)

Prominent (Brought to the consumers attention)

Question 13

An underwriter must ensure that any data held is:

Answer 13

1. Relevant
2. Accurate
3. Disclosed only to the those authorised to have it

Question 14

Who does GDPR apply to?

Answer 14

Data Controllers and Processors

Question 15

What is Sensitive Personal Data

Answer 15

• race;
• ethnic origin;
• politics;
• religion;
• trade union membership;
• genetics;
• biometrics (where used for ID purposes);
• health;
• sex life; or
• sexual orientation.

Question 16

What is Lawful Processing?

Answer 16

1. Consent
2. Contract
   3.Legal Obligation
3. Vital Interests
4. Public Task
5. Legitimate interests

Question 17

UK GDPR Rights

Answer 17

Right to:
Be informed
Access
Rectification
Erasure
Restrict Processing
Portability
Object
relation to automated decision making and profiling

Question 18

Article 75 of the MIB’s Memorandum and Articles of
Association - what is it

Answer 18

insurers are required to accept liability in circumstances where they would not be
liable under the RTA, including where:

• the insurance has been obtained by fraud, misrepresentation or non-disclosure of
  material facts;
• cover has been backdated; and
• the use of the vehicle is not covered by the policy

Question 19

Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA)

Answer 19

Consumer’s duty to take reasonable care not to make a misrepresentation. The implication for underwriters is that they must ask specific questions about those material facts if they are to rely on non-disclosure as a reason to repudiate a claim and/or avoid a policy.

Honest and Reasonable - must pay the claim

Careless - Insurer can apply terms of what they would have done if accurate answer given - refund premium if cancelling contract

Reckless/Deliberate - policy is void & decline all claims & keep premium

Question 20

Warranties - do they cancel a policy if breached

Answer 20

No - they only suspend a policy until the breach is remedied.

Question 21

Equality Act protects what characteristics?

Answer 21

• age;
• disability;
• gender reassignment;
• pregnancy and maternity;
• marriage and civil partnership;
• sex or sexual orientation;
• race, religion or belief.

Question 22

Hard Market

Answer 22

At the top of the cycle, the so-called ‘hard market’, prudent insurers will build up reserves from profit in the certain knowledge that their markets will decline at some point. Careful preparation will fund losses at the bottom of the cycle, thereby ensuring survival.