Chapter 3 Flashcards
expense ratio
cost of aquiring + uw& service / net premiums
Pre-inception moral hazard
poor training
poor maintenance
Post-inception moral hazard
delays in premium payement
poor attitude to recommendations to risk improvement
Post loss moral hazard
delays in notifcation
lack of readiness to help insurer value loss
exaggerating claims
operative clause
details the type of event insured against -> cover derived from this clause is from uw policy
Exemptions / exclusion clause
General exclusion apply to whole policy
specific exclusion apply to certain parts of policy
Conditions clause
Expresses the OH rights and obligations which they have to contractually oblige by
The schedule
describes subject matter of insurance and sums insured / limits
Risk surveyors purposes
- describe, classify and assess the risk to give uw sound rationale
- how risk can be improved
Risk improvement categories
Requirements - necessary to carry out for risk to be acceptable
Reccomendations - optional
Distribution Channels
Intermediaries
Direct sales
Price comparison websites
Intermediaries
Commercial lines and personal mainly done through intermediary
Delegated authority
Insurer may put uw in broking house to make uw function and set uw guidelines -> uw can have pressure to accept out of appetite business
Personal lines and distribution
may be indpt brokers or tied to company, sometimes insurers agents through media and adverts
Can be done cheaply and easily through use of computers for instant quote and bind
Use variety of channels
Direct sales / price comparison website (aggregators)
Used to be phone calls now on internet
Limited to personal lines
commoditisation
Product becomes less differentiated so buyers care less about who they biy it from
Impact on pricing model by choice of distro
through expenses, commission, rates and retention of business
Premiums for direct and intermediary business may vary.
Direct side will have less referral and offer the greatest amount of premium flexibility. Allow to change model on short notice
Direct uw incurs higher acquisition costs of handling queries normally handled by broker
DUA
Can be restricted to do specific things only
Binders:
greater flexibility for intermediary within limits. Policy wordings are often neogtiated to fit specific client AKA Schemes
Coverholder
Binding agreement set out -> insurer = risk carrier
coverholder may handle claims and settle
How CH benefits intermediaries
lower cost placing business
offer quick turnoarounds -> immediate cover
access to unique product
remove from open market where they compete directly
enhanced level of commission
gain profits
MGA
Holds pen and does all activities of insurer, but does not provide funding for claims
Auditts of CH
Adherence to terms of binding authority
financial scope of ch
compliance with legal and reg
other material development
Problems with DUA
Selection of broker/partner
Conflict of interest -> authority clearly expressed, with seperation of duties
poor perfomance
ambiguous terms
regs aspect and RI
Routes into expanding into other territories
Appointing local agents
Joint venture with another insurer
Acquiring local insurer
Foreign subsidiary -> local branchC
Consideration for other territoties
Local legislation
State insuer needs to cover some risks
local taxes
exchange rates
specific documentation
specific cover
Global risks
Financial
Political
Cultural
Fraud
ABI, IFB in 2020 96k fraud claims = 1.1bn
Classes of fraud - Fraud Act 2006
False representation
failing to disclose info
abuse of position
Pre-meditated fraud
Getting out insurance then egineering an evevnt e.g oney laundering
claims fraud detection
Expert staff
invetigative interviewing - behaviour
covert surveillence
photo and mapping
forensic claim
Anti - fraud bodies
Insurance Fraud Investigators Group (IFIG) membership: Not for profit org
insurers
investigators
loss adjustors
lawyers
IFB insurance fraud bureau:
Insurance Fraud Enforcement Dept:
motor fraud
commercial / public liability fraud
emerging fraud risk
Opportunistic fraud
All types of insurance
Commercial liability fraud
Exaggerated personal injury claims to faking injuries
Illegal intermediaries / ghost brokers
Taking advantage of people who don’t understand anythingP
Pro enablers
Know that claim they’re submitting if fraud
Anti-fraud databases
CUE (Claims, UW exchange): Detials held 6 yrs
- Motor
- Home
- Personal injury
- Travel (2017)
Motor (MIAFTR):
- multiple different policies for 1 car
- ficticous theft
IFR: set up by member of ABI:
- SHare info of fraud
