Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

IF8 2022 > Chapter 6 - Underwriting > Flashcards

Chapter 6 - Underwriting Flashcards

1
Q

Once all the relevant material information needed to assess a risk has been gathered, the underwriter needs to calculate what?

A

An appropriate premium and consider any terms, limitations, conditions and/or exclusions to apply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What allows underwriters to assess accurately the level of premium to charge for most packaged commercial risks

A

Law of large numbers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Each member of the ‘common pool’ of policyholders is required to contribute what?

A

An equitable premium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is an equitable premium?

A

A fair premium based on the size and degree of risk that they introduce to the pool.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What does a homogenous risk mean?

A

A risk of a similar kind

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

The underwriting guidelines which have been developed by insurers for packaged policies reflect what three key points?

A

Type of business
Comparing the proposer to the average member of its group
Claims

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

When identifying the main risk factor for a care home, what might pose a higher risk than to an office?

A

They have to lift patients therefore the risk of injury to the employees is likely to be more frequent.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

When comparing a salon to other salons what does the underwriter need to consider?

A

What treatments the salon does and rate accordingly.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

When looking at claims statistics - what does the underwriter need to consider?

A

Patterns
Any large claim throwing off the pattern
Causes of claim
Geographical locations
Upcoming changes - ie global warming with floods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What does the underwriter need to consider in terms of the premium?

A

That is is attractive to policyholder
That is will cover certain other costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Insurers/Underwriters need to ensure that they collect enough premiums to cover what?

A

Adequate claims settling provision
Reserve
Reinsurance costs
The insurer’s operating expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What basis are packaged policies usually calculated on?

A

All-Inclusive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the main rating factor applicable to?

A

Contents sum insured

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

The main rating factor is a rate applicable to the contents sum insured, which includes the rate structure for cover automatically included in the packaged policy for what?

A

things like, theft money, glass liabilities that are automatically included in the policy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Is BI rated with liabs and contents?

A

Not usually, it often has a separate rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How does the rating work when an option to increase a standard sum insured or to included an option section of cover is added?

A

The rating structure will detail the additional charge to be included for these extras.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Office policies have very little variation in risk, what is the only variation to the contents rate?

A

The postcode

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Office policies are very uniform in there rating, what are other packaged policies?

A

Whilst there are similarities, there is not the same degree of uniformity of risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What factors of a shop policy would change the rate?

A

The location - crime rates
The type of shop - off-licence/green grocer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a main tool underwriters use to simplify the underwriting process for packaged commercial policies?

A

The use of standard policy terms.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

When looking at standard terms, what is typically done by the underwriters?

A

They define the risk they want
Automatically exclude elements of cover they don’t - eg heat work
They impose standard of loss control - eg minimum security

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What are the two types of policy exclusions?

A

Absolute exclusion, specific exclusion

23
Q

What is an absolute exclusion?

A

Events that will never form part of the cover provided by a packaged commercial policy.
eg. a PI exclusion as this would need to be picked up on a separate PI policy

24
Q

What is a specific exclusion?

A

Things which are excluded unless specified and the insurer chooses to included.
eg. heat work, height work over 5m ect

25
Q

What is different between a condition and an exclusion?

A

An exclusion is not cover
A condition ensures that all risks meet minimum underwriting standards. eg. - security condition

26
Q

What happens if an insured does not meet a condition?

A

Cover is not effective unless conditions are met.

27
Q

What is a premium from the insurers perspective?

A

The amount they charge to take on the risk agreed by them.

28
Q

What factor normally is used to set the premium base?

A

Contents sum insured

29
Q

When setting premium rates for shops and offices, the cost of legal advice helplines, is based on what?

A

A fixed charge by the service provider which is included in the premium.

30
Q

What formula is normally used to calculate premium?

A

premium base x premium rate = premium

31
Q

What is the premium base?

A

A suitable measure of risk.

Often the contents sum insured but could be things like turnover, wages, number of employees.

32
Q

What is the premium rate?

A

A figure that reflects the hazard associated with the risk.

More risky = higher premium rate.

Office is low risk
Climbing trees is high risk

33
Q

Who decides the premium base?

A

The proposer - eg - contents sum insured required

34
Q

Who decides the premium rate?

A

The insurer based on what should be charged to that risk.

35
Q

What are the two types of rates?

A

Rate per cent and rate per mille

36
Q

What is the rate per cent?

A

The price in £ for each £100 of sum insured. EG1.5% means £1.50 per £100 contents

37
Q

What is the rate per mille?

A

The price in £ for each £1000 of sum insured. EG1.5% means £1.50 per £1000 contents

38
Q

What is rate per mille usually used?

A

Where the premium base is for example the turnover

39
Q

What is adjustable and flat premiums?

A

An alternate method to setting a premium.

40
Q

What is an adjustable premium?

A

The insured submits estimates of wages/turnover - the policy premium is based on this.
At the end of the year the accurate figures are given and an AP or RP is charged/returned.

41
Q

Is adjustable premiums common on packaged policies?

A

No

42
Q

What is a flat premium?

A

Where there is no obvious exposure measures a flat rate is applied. For example adding PA.

43
Q

What is IPT applicable to?

A

General Insurance Premiums

44
Q

What are the two IPT rates?

A

12% standard
20% for travel, some vehicle and electrical appliances

45
Q

What insurances are typically except from IPT?

A

Long term insurance
Reinsurance
Ships/aircraft/goods in transit internationally
Risks located outside the UK

46
Q

How often must insurance account to HM Revenue and Customs for the tax that is due?

A

Quarterly

47
Q

What schemes allow intermediaries to underwrite risks within certain parameters?

A

Delegated authority schemes

48
Q

What is the advantage of DA underwriting schemes for the managing agent?

A

Reach more policyholder
Increase expertise in that sector and reputation

49
Q

What is the advantage of DA underwriting schemes for the policy holder?

A

Increased choice
Drives competition and therefore innovation

50
Q

What is the disadvantage of DA underwriting schemes for the managing agent?

A

If they are not managing it effectively it might not comply with contractual or regulatory reequipments.
This out create poor u/w results.
Less u/w control for insurer.
Insurer could take on more than it intended.
It could create conflicts of interests.

51
Q

A Lloyds broker may use a “lineslip” arrangement - what is that?

A

Allows the managing agent to delegate its authority to another managing agent or authorized insurance company.

52
Q

What are the two types of laneslips?

A

Bulking lineslip
Non-bulking lineslip

53
Q

What is a bulking lineslip?

A

When the premiums for many risks are combined for presentation and settlement to underwriters.

54
Q

What is a non-bulking lineslip?

A

When each individual risk has to be presented separately.

IF8 2022 (16 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions