Chapter 2 - Underwriting Procedure Flashcards
Quotations
With personal line insurance, an insurer must draw specific attention to any significant limitations and exclusions that apply to its contracts.
Terms and conditions are referred to as subjectivities.
A quotation pack will include a covering letter, a document outlining the risk to be insured and a statement of fact.
Proposal Forms and Declaration - Consumers
Traditionally the proposal form has been the most common mechanism an UW receives information.
It contains a declaration that the information supplied by the proposer is true and correct to the best of their knowledge and belief, must be signed.
Proposal Forms and Declaration - Telephone Quotations and Use of the Internet
Material information is gained by asking questions that would feature on a proposal form during a phone call.
CIDRA 2012 and Consumer Rights Act 2015 deal with assumptive statements and tick boxes for e-trade and internet quotes. It state insurers cannot assume positive answers to questions, but rather must clearly draw a consumer’s attention to them, explain the consequences of providing false information, and capture the response the consumer provides.
Proposal Forms and Declarations - Large Commercial Risks
Proposal forms are often insufficient for large and complex risks. Is also true for SME commercial risks which have more complex cover requirements.
For SME, presentations will be revised alongside online question sets and questionnaires.
For large and complex commercial risks, presentations are supplemented with insurer surveys, questionnaires and face-to-face meetings.
General Questions in Proposal Forms
• Proposer’s name
• Proposer’s correspondence address
• Proposer’s occupation
• Period of insurance
• Past insurance history
Specific Questions in Proposal Forms
• Proposer’s risk address
• Proposer’s age
• Description of the subject matter to be insured
• Business details
• Sum insured or limit of liability
Premium Calculation
Law of large numbers enables an insurer to determine a more accurate premium chargeable than if its experience were limited to a few risks.
Premiums are usually arrived at by applying a premium rate to a premium base. Rate is a figure set by the insurer, higher the risk the higher the rate, and vice versa. Rate could be rate per cent or rate per mille.
Adjustable Premiums
Sometimes the exposure measure is unknown at the start of the period of insurance and only an estimate can be used. At the end of the year the insured submits a declaration showing the known value and the premium is adjusted.
Initial premium is known as a deposit premium.
Flat Premium
Factors that influence the premium are revealed in the proposal form. Often held in a computer programme which automatically calculates the premium.
Policies
Policy is effectively evidence of the contract and not the contract of insurance itself.
Contract of insurance comes into effect once the insurer has as accepted the insurance proposal, terms have been agreed and the premium has been paid or has been agreed to be paid. So the contract would exist without a policy document.
Cover Notes
Is essentially a document issued as evidence that insurance has been granted , pending the issue of a policy or policy amendment document.
It simply states that insurance is in force and provides brief details of the cover given.
Certificate of Motor Insurance
RTA 1988 states the following information must be contained in the certificate:
• Registration mark of vehicle
• Name of policyholder
• Date of commencement of cover
• Expiry date
• Person or classes of persons entitled to drive
• Limitations as to use
• Confirmation that cover complies with UK statutory requirements
Certificate of Employers’ Liability Insurance
Certificate needs the following information:
• Name of policyholder
• Date of commencement of cover
• Expiry date
• Name of insurer
• Authorised signature on behalf of insurer
• Level of cover
• A statement by the insurer declaring that the policy satisfies the relevant legal requirements
Contract Certainty
ABI states Contact 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.
Insurers are called upon at short notice to provide cover business customers. Due to the short notice there may be uncertainty which may lead to disputes over what was agreed when the protection started.
To help avoid disputes the insurance industry has produced a code of good practice to help provide contract certainty before inception of the policy. It is not compulsory but most abide by it.
The code sees to it that a form of contract agreed when protection starts. There may be a need to agree changes to the exact terms of the contract when both parties have full knowledge. However, terms to be agreed or similar references should not be used.
Methods of Collecting Premiums
• Single upfront payment (by cash, cheque or credit card)
• By credit
• In monthly instalments by direct debit
