Chapter 5 Flashcards
What are ‘fixed costs’ to an insurer?
Costs that have to be paid irrespective of the number of policies sold. For example, building rent, staffing costs, IT equipment etc.
What are ‘variable costs’ to an insurer?
Costs that can vary depending on the complexity of what is being dealt with. For example, administration tasks and the cost of dealing with individual claims. The main variable cost is that of agent commission
What is used to calculate the ‘combined operating ratio’?
Claims costs, plus commission, plus fixed and variable expenses
Under the Insurance Act 2015, what will happen if there is a breach of warranty?
The insurers liability will be suspended (rather than terminated) until the breach is remedied
What are the three parts of a telematics unit?
- A GPS unit which captures where and then the car is driven
- A high frequency motion sensor which captures how the car is driven and;
- A SIM card used to transmit the data to a central data collection site
What does the term ‘lifestyle underwriting’ mean?
Where rating is conducted on each facet of the proposer’s risk, including their perceived risk.
What are the main features that differentiate vehicles for the purpose of rating?
- Cost of repairs
- Value
- Performance
- Level of security
For which type of vehicles would you typically expect a specialist ‘agreed value’ policy?
Classic or Cherished vehicles
What is Class 2 or Class B use of a motor vehicle?
Similar to Class 1 but will also allow other named drivers to use the vehicle for business. Typically, this would suit a small business owned by the policyholder where the vehicle may be driven by different employees.
What is Class 3 or Class C use of a motor vehicle?
Where a particular occupation or business requires the widest possible use. Commercial travelling and motor trade will no longer be excluded.
Some occupations this would suit are Company representatives, self-employed commercial travelers and mobile mechanics
How is the size of a goods vehicle assessed by an underwriter?
By their carrying capacity or plated weight
What are the 5 factors used when rating a goods-carrying vehicle/
- Use
- Drivers
- District
- Type/Size (plus trailers)
- Policy Cover
Why would an insurer want to know whether a policyholder/company is vat registered?
The policyholder will be able to recover the VAT element of any repaid cost and the insurer will not be liable for this amount
What will be used to rate the district on commercial vehicle policies?
The overnight garaging postcode, rather than the postcode of the policyholder
Over what weight of vehicle do you need an operator’s licence, issued by the traffic commissioner?
2 tonnes or more which is 3.5 tonnes plated weight
What is the minimum level of cover for third party property damage on a commercial vehicle policy?
£1.2m. This can be increased upon request for an additional premium
What are some examples of good risk management on a commercial risk?
- Driver training
- Regular licence checks
- Vehicle checks
- Vehicle maintenance regime
What are the three different categories of fleet?
Small, medium and large
How can underwriters deal with claims on a fleet risk where one incident may badly distort the figure?
The full value of the claim may be included, the claim may be ‘smoothed’, i.e. a
proportion of the cost (e.g. 25%) or a maximum amount (e.g. £100,000) may be included, or
the loss may be excluded altogether from the calculation
What is another term for ‘on-demand’ insurance?
Usage-based insurance
