Chapter 2: Underwriting Procedures Flashcards
Define ‘new business declarations’
Define ‘statement of fact’
Define ‘quotations’
Information regarding the price, limits, and exclusions that apply to an offer from an insurance company
Define ‘subjectivity’
The terms and conditions of a quotation
What is best practice regarding quotations?
They are clear on their terms, and the info the quote is based on is clear to the customers.
Define ‘proposal forms’
Traditionally the most common mechanism to receive information regarding the risk to be insured.
Is a proposal form necessary for a quotation?
No, but if a quotation is provided without a proposal form, it will normally be subject to the proposer completing one
What is a declaration in a proposal form?
Mainly uses by consumers, it states the information the proposer has given is true and correct to the best of their knowledge.
How are telephone based proposals made?
The questions are asked by the telephone handler? The answers are captured? And then repeated back.
What type of commercial insurances are suitable to be bought on the internet or over the phone?
Compulsory insurances or insurances part of fixed packages where cover is up to a limit.
What tools are used to supplement questionnaires and proposal forms for small and medium sized commercial risks?
Presentations
What tools are used to supplement questionnaires and proposal forms for large commercial risks?
Presentations, insurer surveys, face to face meetings, and proposal forms.
What should subjectivities NOT be used as?
Ways of obtaining information the insurer should be asking for upfront.
What are aggregators?
Websites that pull together multiple quotes for the same risk, rather than having to go to a different portal for each quote.
Define ‘premium payment’
The amount paid to an insurer by the insured in consideration of the insurer agreeing to cover the risk.
What does the law of large numbers help insurers find?
The most accurate premium to charge, as similar risks should pay a similar premium.
What is the most basic formula for how premiums are calculated?
Premium = sum insured x rate
How is premium base calculated?
It is a measure of the exposure.
How is premium rate calculated?
Reflects the hazard associated with the insured.
Define ‘rate per cent’
The price in pounds for each hundred pounds of exposure
Define ‘rate per mille’
The price in pounds for each thousand pounds of exposure.
What are rate per cent and rate per mille applied to?
The value of the insured, NOT the limit of liability.
What are adjustable premiums?
Where premium is adjusted based on exposure- this waives the Consumer Rights Act 2015’s prohibition of setting a price after the contract starts.
What are examples of where flat premium may be used?
For motor insurance or for rating one off events.
