Chapter 7 - B Flashcards
What is one of the main reasons for buying insurance?
The security or ability to pay any claims in the future.
Regulation of insurers is important for ensuring this security.
Who is responsible for analyzing the relative security of various insurers in a brokerage?
Security committees or individuals within the broking organization.
What do rating agencies provide for insurers?
Grading for individual insurers and for Lloyd’s as a marketplace.
Name the four best-known rating agencies.
- A. M. Best
- Fitch
- Standard & Poors
- Moody’s
What factors do rating agencies consider when rating insurers?
- Financial position
- Management and operation of the business
- Comparison to peer group
True or False: A drop in grading for an insurer can lead to potential problems in acceptability to brokers.
True
When might a drop in rating not concern an insurer?
When all insurers have their ratings reduced simultaneously.
Why are brokers concerned about the ratings of insurers?
To avoid claims of negligence from clients if an insurer cannot pay future claims.
What is the role of a broker when choosing a leader insurer?
To apply professional knowledge and experience to decide which insurer to approach first.
What are the two important roles of a leader insurer?
- Set good terms and conditions for the client
- Be credible to other insurers
What must a broker explain to the client when reviewing quotations?
Differences between various options, such as variations in deductibles and coverage levels.
What is a slip lead in the context of the MRC?
The primary insurer leading the risk placement, typically one of the bureau leaders.
What is the expectation for leaders in the Lloyd’s market regarding underwriting profitability?
Leaders are expected to conduct pre-bind analysis on all risks.
What document is used to present a client’s risk in the London Market?
Market Reform Contract (MRC) or ‘slip’.
What is the broker’s responsibility regarding the presentation of risk?
To ensure full and frank disclosure of information by the client.
What technology are some syndicates in the London Market using for following lines?
Artificial intelligence and algorithms.
Fill in the blank: A broker must identify some _______ insurers after finding a leader.
following
What is the fundamental duty of a broker?
To their principal (the client), usually the insured.
Brokers must also consider their duty to the insurer if delegated authority is involved.
What happens under the Insurance Act 2015 regarding knowledge held by brokers?
It is deemed to be held by their client and should be considered for disclosure.
Brokers are encouraged to engage with clients about material information they possess.
What duty does an insurer owe to its investors?
To produce a return on their investment through sensible underwriting at the right price.
What is the Consumer Duty requirement introduced by the FCA?
Insurers must evidence positive steps to ensure clients have good outcomes from the insurance process.
This requirement applies to retail/consumer business.
What are the four outcomes regulators focus on under Consumer Duty?
- Product and service fit for purpose
- Price and value
- Consumer understanding
- Consumer support
What does the first outcome, ‘Product and service fit for purpose,’ entail?
Ensuring the product is properly designed, marketed, and considers customer vulnerabilities.
What factors are evaluated under the ‘Price and value’ outcome?
Value for money, large charges for changes or cancellations, and product complexity.
What does the ‘Consumer understanding’ outcome emphasize?
Communications must be clear and timely, providing all necessary information for good decision-making.
What does ‘Consumer support’ aim to ensure?
Customers benefit from the product, pursue financial objectives, and act in their own interests.
True or False: The Consumer Duty requirements are applicable to all types of insurance business.
False. They only relate to retail/consumer business.
Fill in the blank: An insurer’s responsibility includes ensuring products are _______ for the customer base.
[fit for purpose]
What are examples of poor consumer support?
- Inadequately resourced helplines
- Difficult navigation in phone systems or webchat
- Unclear websites
