chapter 6 Flashcards
What are the three main purposes of the Motor Insurers’ Bureau (MIB)?
Compensate victims of uninsured drivers.
Compensate victims of untraced drivers.
Guarantee the existence of insurance for UK vehicles abroad.
What is an excess in insurance?
The first amount of each claim that the insured must pay out-of-pocket before the insurer makes a payment.
What is the difference between a compulsory and voluntary excess?
Compulsory excess: Applied by the insurer as a term of the policy (e.g., higher risks like young drivers).
Voluntary excess: Chosen by the policyholder to reduce the premium.
What is a deductible in insurance?
A large excess, typically used in commercial policies, where the insured self-insures for smaller claims.
What is the difference between a franchise and a deductible/excess?
Franchise: If a claim exceeds the franchise amount, the claim is paid in full.
Deductible/Excess: Only the amount above the deductible or excess is paid by the insurer.
What is Article 75?
An agreement where insurers cover claims even when a policy has been voided due to misrepresentation or non-disclosure, ensuring victims receive compensation.
What is the purpose of the Uninsured Drivers’ Agreement?
To compensate victims of motor accidents caused by identified uninsured motorists for both property damage (up to £1,200,000) and personal injury (unlimited).
What are the limitations of the Uninsured Drivers’ Agreement?
No subrogation claims can be made against the MIB.
The MIB will not cover repairs for an uninsured victim’s vehicle.
No compensation for passengers who knew the vehicle was stolen or uninsured.
How does the Untraced Drivers’ Agreement work?
Victims of accidents caused by unidentified drivers can submit claims to the MIB, which will investigate and decide whether to offer compensation.
What is contribution in insurance?
When more than one policy covers the same loss, insurers contribute proportionately to settle the claim, based on rules set out in agreements like the ABI Personal Effects Contribution Agreement.
What is a Bi-lateral Agreement between insurers?
Agreements between insurers to handle claims more efficiently, often using systems like a subrogation portal to process claims quickly and without manual intervention.
What happens when a property is underinsured?
The insured becomes their own insurer for the underinsured portion, and the insurer only pays a proportion of the claim based on the ratio of the sum insured to the actual value of the property.
What is the formula used to calculate a claim when property is underinsured?
sum insured / value of goods at risk × loss
What is the ABI Personal Effects Contribution Agreement designed to prevent?
Adverse publicity from insurers referring claimants to other insurers.
Time-consuming handling of small contributions.
Establish rules for contribution among participating insurers.
When does the ABI Personal Effects Contribution Agreement require contribution between insurers?
Contribution is required in all circumstances except:
Motor accidents and thefts: No contribution.
Specified items: Generally no contribution.
What is a deductible commonly used for?
Deductibles are often used by large commercial entities to self-insure for smaller claims while relying on insurers for more significant claims.
What are the main purposes of market agreements between insurers?
To reduce the cost of dealing with claims.
To speed up repair and claims settlement.
To promote good relations between insurers.
What types of insurance policies are subject to contribution under the ABI Personal Effects Contribution Agreement?
Household, all risks, motor, travel, and other defined personal insurances.
In what scenario might the MIB reject a claim from a passenger under the Uninsured Drivers’ Agreement?
If the passenger knew the vehicle was stolen or was being driven without insurance.
What is a franchise in insurance, and how does it differ from an excess?
A franchise is a threshold. If a claim exceeds this threshold, the insurer pays the full claim. If it doesn’t, the insurer pays nothing. Unlike an excess, the full amount is paid once the franchise is exceeded.
What are the main limitations of the Uninsured Drivers’ Agreement?
Subrogation claims cannot be pursued against the MIB.
Claims for uninsured victims’ vehicles won’t be considered.
Claims from passengers who knew the vehicle was stolen or uninsured are excluded.
What is the purpose of Article 75 of the MIB’s Articles of Association?
Article 75 requires insurers to handle certain claims even if they have voided the policy due to misrepresentation or non-disclosure, ensuring compensation for victims.
hat are the statutory obligations of insurers under the Road Traffic Act 1988?
Insurers must meet certain obligations, including compensating third parties injured by insured vehicles, even if the policy is void due to misrepresentation or non-disclosure.
The payment of money, paying for repairs and replacement are all types of:
settlement options.
If a policyholder with a comprehensive motor policy makes a claim for damage, the insurer will typically:
authorise payment for a garage to repair the vehicle.
If a major haulage contractor wished to limit its cover to large claims and be its own insurer for small claims, what action may it take?
Arrange for a deductible on its policy.
How much is the excess, if any, that is applied by the Motor Insurers’ Bureau for property damage caused by unidentified third parties?
£400
How is the value of any salvage determined when the insured wants to retain it?
By agreement between the insurer and the insured.
Under the terms of a policy, when is an insurer able to commence subrogation rights against a negligent third party?
As soon as the claim is paid
How does factor or flag reserving operate when reserving on individual policies?
It applies a standard monetary reserve to each claim of a certain type.
Under the ABI Personal Effects Contribution Agreement, how is the no-claims discount under a non-motor policy usually treated?
It will usually be unaffected where a payment is made to another insurer under the agreement terms.
One of the methods used to project claims is known as the:
Loss Development Factor.
What type of insurance policy would usually have a time franchise?
Personal accident.
With the uninsured drivers’ agreement, the Motor Insurers’ Bureau will compensate victims where certain conditions are met. What is NOT one of these conditions?
Damages for third party personal injury must be limited to £500,000.
