Chapter 2

Question 1

In a quotation what are subjectivities?

Answer 1

Terms and Conditions

Question 2

What documents should be included in a quote? (And what additional document can be requested.)

Answer 2

A letter, a document outlining the risk, a statement of fact and policy wording (upon request).

Question 3

Is cover effective when a quote is issued?

Answer 3

No - not until it has been accepted.

Question 4

Will a timeframe to accept be provided with a quote and what happens if a client accepts the client after the valid time period has passed?

Answer 4

Usually yes - a period of around 30 days is common. No they don’t as the risk characteristics may have changed.

Question 5

What happens if no time scale for acceptance is in the quotation?

Answer 5

The quote remains open for a “reasonable time.”

Question 6

What is a proposal form?

Answer 6

A common method for insured to gather information about the risk. It is essentially a questionnaire.

Question 7

What is a declaration in proposal form and who does it apply to?

Answer 7

It’s usually a signed statement what states that the information supplied is true and correct and it applies to non-consumers.

Question 8

Does the Customer Insurance Act 2012 apply to policies bought on the internet?

Answer 8

Yes - insurers should still have a general acceptance statement and clearly draw the customer’s attention to them

Question 9

What often happens when, in an online survey, a question set raises a flag?

Answer 9

The quote will usually decline - often without the option to speak to an insurer.

Question 10

What is 1 main advantage of obtaining insurance via the internet?

Answer 10

It is quick!

Question 11

What are software houses and how can they help brokers get quotes?

Answer 11

Software houses are platforms like Acturis and it can allow brokers to get multiple quotes at once from different insurers by inputting the risk information once.

Question 12

What are aggregators?

Answer 12

Platforms and comparison websites like Compare the Market.

Question 13

What are market presentations and who do they apply to?

Answer 13

They are other methods of presenting risks to insurers and are often used by large and complex commercial risks.

Question 14

What 2 types of questions are on proposal forms?

Answer 14

General questions and specific questions.

Question 15

What is an example of a general question on a proposal form?

Answer 15

The proposers name, address and occupation etc…

Question 16

What is an example of a specific question in a proposal form?

Answer 16

A question that is risk specific for the type of insurance the insured is applying for e.g., the business description, the proposers age, the sums insured.

Question 17

How does having a lot of similar exposures help insurers calculate the premium?

Answer 17

They can use the law of large numbers to help calculate a premium.

Question 18

How are premiums usually arrived at? (Formula)

Answer 18

Applying a premium rate to a premium base. With the rate reflecting the hazard associated with the insured.

Sum insured x rate = premium

Question 19

Why are loadings and discounts typically applied?

Answer 19

To reflect inherent risk features

Question 20

How do EL policies typically calculate a rate? (As there is no sums insured)

Answer 20

Wageroll

Question 21

How do PL policies typically calculate rate? (As there is no sum insured)

Answer 21

The turnover of the business

Question 22

How do PI policies typically calculate rate (as there is no sum insured)

Answer 22

Fees charged

Question 23

What is an adjustable premium?

Answer 23

A estimate is given and the insurer will calculate a premium based on this estimate and charge a deposit premium. A declaration of the actual figures is given at the end of the year and the insurers will charge an additional fee or give back a RP based on the actual figures.

Question 24

What is a flat premium? And give an example of a type of insurance that might have a flat premium.

Answer 24

A premium is arrived at by consulting a rating table - which takes into account the hazard and charges a set annual fee. Motor insurance.

Question 25

What is a policy?

Answer 25

Evidence of the contract and not the contract itself. It often includes a summary of date of cover and items insured.

Question 26

Can you have an effective contract without a policy?

Answer 26

Yes. For example, once the insured had accepted the offer but payment hasn’t been transferred yet.

Question 27

What is a cover note and is it a permanent document?

Answer 27

It is evidence the insurance has been granted but is only temporary and is superseded once the policy docs are issued.

Question 28

What information does a cover note contain?

Answer 28

Commencement date, risk-specific information, any special terms, and expiry date.

Question 29

What is the legal significance of a cover note in motor insurance?

Answer 29

In motor insurance, legally, you must have a minimum level of insurance and cover notes act as proof that this cover is in force.

Question 30

Why are cover notes still important despite technological advancements?

Answer 30

Delays in information being uploaded to the Motor Insurance Database (MID)

Insurers typically upload data once a day, which can lead to temporary gaps in coverage evidence.

Question 31

What is a certificate of insurance?

Answer 31

Evidence that a policy is in force and complies with the law

It is issued by the insurer in the name of the policyholder.

Question 32

What information must a certificate of insurance contain according to the Road Traffic Act 1988?

Answer 32

Registration mark, name of policyholder, date of commencement, expiry date, persons entitled to drive, limitations of use, and confirmation of compliance with UK law

It does not indicate the scope of the policy cover.

Question 33

Is employers’ liability insurance compulsory?

Answer 33

Yes, for those who employee people

Question 34

What information is required on an employers’ liability insurance certificate?

Answer 34

Name of policyholder, date of commencement, expiry date, name of insurer, and authorized signature, level of cover required by law, statement by the insurer declaring it satisfied legal requirements.

Typically, the signature is a facsimile of the chief executive.

Question 35

Fill in the blank: according to the road traffic act of 1988, A cover note must not be _______.

Answer 35

backdated

Backdating is illegal under the Road Traffic Act 1988.

Question 36

Do employers have to display their EL certificates?

Answer 36

Not anymore. They used to. Now they don’t have to, as long as an electronic copy is accessible for all employees.

Question 37

What is contract certainty?

Answer 37

The complete and final agreement of all terms between the instead and insurer with documentation provided promptly thereafter.

Question 38

How can insureds pay premiums?

Answer 38

• a single upfront payment
• by credit
• monthly instalments

Question 39

What is a credit payment option and can any broker offer it?

Answer 39

It’s where payment is made by credit card and a fee is usually charged.

No it’s regulated by the FCA.

Question 40

What happens if the insured doesn’t pay.

Answer 40

The cover is not renewed and lapses

Question 41

What is the standard rate of IPT?

Answer 41

12%

Question 42

Give examples of 2 policies where IPT is charged at a higher rate.

Answer 42

Travel and Engineering Inspection

Question 43

What insurance policies don’t have to pay tax?

Answer 43

Life assurance, reinsurance and certain marine policies

Question 44

Can risks outside the UK be taxed?

Answer 44

Not by UK government - but they maybe subject to similar taxes imposed by other countries