Chapter 2 - The insurance market Flashcards
What groups of people is the insurance market made from?
Buyers, intermediaries, aggregators ,insurers ,re-insurers
What divisions do buyers come under?
Private, Partnership, companies, public bodies, associations and clubs
What is a partnership?
This is when several buyers come under one legal existence.
What are the divisions of insurers?
Propriety, Societas Europeas, Mutual, Captives, Protected Cells and Lloyd’s
What is a propriety company?
This company is owned by the shareholders
What is a Societas Europeas?
This company can register in any member state of the EU and transfer to other member states without needing the liquidate the company.
What is the difference between a Mutual company and a mutual indemnity company?
A mutual company is owned by the policyholders and mutual indemnity while still owned by policyholders have their origins in being a self-managed pool.
Where is mutual indemnity associations usually found?
In marine insurance where protection and indemnity associations insure certain aspects of marine hull liability
What is a captive insurance company?
This is a tax efficient method of transferring risk and only offer insurance to the parent company not the general public.
What is a protected cell company?
This company is similar to the captive company but differ in that each company is it’s own separate entity that have their own board of directors but still owned by the parent company.
What are the 2 different insurer designed functions?
Composite and Specialist
What is a composite insurer?
These accept several types of business.
What is a specialist insurer?
These only accept one class of business
What is Lloyd’s?
Lloyd’s is an institution not an insurer and provides facilities for brokers to place risks within it’s own market.
What are the 3 different groups at Lloyd’s?
Syndicates, Managing agents and member agents
What is a syndicate?
A group of private individuals who provide financial backing for risks.
What is a managing agent?
A member agent is employed by syndicates to employ underwriters who accepts risks on behalf of the syndicate.
What is a member agent?
Advise clients on the advantages and disadvantages of investing in the Lloyd’s market, syndicate selection and performance, reserve requirements and compliance issues.
Who are the firms approved by in Lloyd’s?
The FCA and PRA
What is the Proposal form called at Lloyd’s?
A ‘Slip’
What is the process called of and underwriter signing a slip?
‘Scratching the slip’
What is the process of preparing and signing the slip called?
‘Xchanging’ and is done centrally at Lloyd’s.
what is the percentage called that a broker receives for his services?
Commission also known as a ‘Brokerage’
What restriction was removed by the Legislative reform (Lloyd’s) Order 2008?
The restriction allowing only Lloyd’s brokers to place business at Lloyd’s.
What is contract certainty?
The complete and final agreement of terms (including signed down lines) between the insured and the insurer before inception.
What does it refer to when a broker places more than 100% of a slip and proportionally reducing Lloyd’s syndicates or the insurers share?
Signing down the line.
What is an intermediary?
Known as an agent authorized by one party the ‘principle’ to bring that principle into a contractual relationship with another, termed the third party.
What do the FCA require all ‘persons’ to be that carry out insurance mediation activities?
They must either be authorized by the FCA or Exempt.
What does it mean by Exempt?
To be exempt you must adopt a status of ‘Appointed representative’ or introducer appointed representative , be a member of a professional body that has equivalent rules to the FCA.
What is an Authorized persons?
An individual or firm which is authorized by the FCA to engage in regulated activities.
What is an Appointed representative?
An individual or company that is appointed by an authorized persons (the principle) under the terms of a contract. They may be acting for an insurer or intermediary that is regulated by the FCA and PRA.
Who is responsible for making sure that an appointed representative follows all the FCA Rules?
The Authorized persons.
What is an introducer appointed representative?
This persons are only authorized to distribute ‘non-real time financial promotions’ such as brochures.
Who is responsible for the Introducer appointed representative?
The authorized persons.
Who are Lloyd’s insurance brokers? and who are the regulated by?
These are brokers that have proved their knowledge and expertise to the council of Lloyd’s they are regulated by the FCA.
What are some of the services provided by intermediaries?
Negotiating, advising clients and reviewing client needs.
What further services can be provided under the Terms of Business Agreement with the Client?
Risk management advice, assisting with presentation of claims, assisting with recovery of uninsured losses.
What way has the insurance market consolidated?
Through broker networks
What are consolidators?
Companies that grow through the formal acquisition of others within the insurance market.
What are the different types of distribution channels?
Direct and indirect.
What is a direct distribution channel?
Employees of the insurer sell the insurance products/ direct mailing techniques / selling through a website,
What is a indirect distribution channel?
Intermediaries paid by the insurer to promote their products on the insurers behalf.
What are some features of direct marketing channels?
Reduced costs for sales staff, greater sense of ease for the buyer
What are some disadvantages of direct marketing?
No independent advice
What are the features of indirect?
Incentive for the intermediary to sell their products through commission, independent advice for buyers,Less cost of advertisement such as TV commericals
What is delegated authority?
Where an insurer gives a intermediary the authorization to issue cover notes and make changes to current policies on the insurers behalf.
What is an Aggregator?
A website that allows buyers to compare quotes cooperating insurance brokers and companies.
What is re-insurance and what is it’s purpose?
Re-insurance is a risk transfer mechanism for insurers to be able to insure risks that may be too large and the insurer is poised to lose financial in the even of a claim.
What are the benefits of Re-insurance?
Improved customer care, allows business expansion, protects business portfolios, allows the insurer to show shareholders stability within the company.
What is the insurer know as when re-insuring?
Cedant or Ceding office
What are the different types of re-insurers?
Specialist , Syndicates, insurance companies that act as re-insurers.
What is it called when a re-insurer, re-insures a peril?
Retro-ceding and the risk transfer called retrocession
What are the 2 main reinsurance centers?
Lloyd’s and International Underwriters Association
What is the role of the Underwriter?
To manage to pool as effectively and profitably as possible
What is the role of claims personnel?
deal with all claims quickly and fairly and also differentiate between real and fraudulent claims
What is a Loss Adjuster?
A person hired by the insurer to assess the policy wording and investigate claims.
What is a loss Assessor?
A person hired by the insured to prepare and negotiate claims on their behalf.
What is an Actuary?
A person who applies statistical and probability theories to problems of insurance.
What is a risk manager?
A person who creates effective control methods of companies to control the various risks that effect businesses.
What is a compliance officer?
A person that makes sure companies abide by the rules set out by the FCA and PRA
What is an internal auditor?
A person(s) that monitor and evaluate how well risks are being managed.
Who are the ABI?
Association of British Insurers
Who are the IUA?
International Underwriters Association
Who are BIBA?
British Insurance Brokers Association
Who are LMRC?
London market regional commitee
Who are LIIBA?
London international insurance brokers Association
Who are LMA?
London Market Association
Who are MIB?
Motor Insurance Bureau
Who are UKIC?
UK Information Centre
When can property damage be claimed under the untraced drivers agreement?
When the vehicle is identified but the driver is untraced
