Chapter 7 long ting

Question 1

A broker will require an excellent understanding of…

Answer 1

1) The business and markets
2) The clients exposures, loss experience and loss profile
3) The clients ability and appetite with the markets expectation of self insurance
4) How the client values services
5) The organisation and management style

Question 2

A deductible is a

Answer 2

Large excess.

Question 3

What is an alternative way for the deductible to operate?

Answer 3

The policy limit sits on top of the deductible

Question 4

A franchise is an alternative to a deducitible and involves…

Answer 4

A value being a set amount.

If a claim is under this amount the insured pays and if it is over the amount the insurer pays.

Question 5

The objectives of a retention are..

Answer 5

1) Allows insurers to keep an arms length
2) Avoid pound swapping
3) Encourages good risk management by the insured

Question 6

Data and claims analysis is used to..

Answer 6

Support programme design by

1) Ensuring correct limits
2) Correct level of deductible is selected
3) Evaluation of self insured options

Question 7

Deductible analysis is used to see..

Answer 7

How claims would have been allocated between parties previously

Question 8

Claims triangulation is a..

Answer 8

Tool that demonstrates claims reporting and incurred losses

Question 9

Claims triangulation is used to..

Answer 9

1) Forecast claims experiance
2) Compare data at specific points
3) Will assist in establishing or improving or deteoriating claims

Question 10

Brokers may also use projected…

Answer 10

and historic exposure data. such as a payroll for employers liability or turnover regarding public liabs

Question 11

When analysing claims brokers must…

Answer 11

1) Apply adjustments for inflation before any deductible analysis

Question 12

Personal and small commercial risks are…

Answer 12

Packaged together.

Question 13

Large commercial risks…

Answer 13

1) Property programme on an all risks basis

2) Combine risks e.g EL with other liability risks

Question 14

There is an option to place all clients separate insurances with one insurer this is called

Answer 14

Account underwriting

Question 15

What needs to be considered iro deductibles?

Answer 15

1) Are there separate deductibles for each section or one deductible across the whole package.

This is tricky as it could mix long tail and short tail business.

Question 16

Policies that are longer than 12 months tend to contribute to…

Answer 16

continuity and premium stability.

Question 17

Long term agreements =

Answer 17

1) Locked in rates with a typical 5% credit for 3 years and a 10% credit for 5 years

Question 18

Multi year policies =

Answer 18

1) 3/5 year cycle
2) Premiums/terms can be considered @ the anniversary

There are limits on the changes that can be made

Question 19

Evergreen policies =

Answer 19

1) No formal renewal date, on a rolling basis

2) For small commercial risks or non complex and poor claims

Question 20

Conventional programmes =

Answer 20

1) Called guranteed cost programmes
2) Premium = fixed regardless of claims
3) Premiums may vary according to the exposure variables

Question 21

Self insured programmes =

Answer 21

1) Client retains an amount of each loss
2) Full policy limit operates in excess of deductible
3) Sum of all retentions insured are limited to a predetermined agg
4) Influenced by tax and local regulation

Question 22

Multi line/cross class programmes =

Answer 22

1) No individual retentions

2) Classes are integrated to give combined retention with combined agg

Question 23

Co-insurance in the london market where

Answer 23

1) The risk is complex
2) Where excess capacity is required
3) Where risk should be spread among insurers

Question 24

Horizontal placement =

Answer 24

Each follower follows terms quoted by a lead

Question 25

Vertical placement =

Answer 25

1) Broker obtains quote from lead insurer
2) The broker takes the risk to other markets
3) Followers are encouraged to quote the risk on the same wording but at a lower premium of the lead

Question 26

Alternative limit solutions include…

Answer 26

1) Fac RI = One off RI in order to increase capacity and write a higher line
2) Excess layers = additional layers of cover organised to follow underlying policy
3) Umbrella policy = sits over the policy / programme but is independent of the cover provided and has its own wording

Question 27

Specilist risks =

Answer 27

1) Environmental liability
2) Product guarantee
3) Motor uninsured loss recoveries

Question 28

Companies will want to approach insurance…

Answer 28

Consistently across territories and it is up to the brokers to provide a solution

Question 29

What are the benefits of a global programme?

Answer 29

1) Consistency of cover

2) Savings through group buying

Question 30

What are the disadvantages of a global programme?

Answer 30

1) Complicate local relationships

2) Cause legislative problems

Question 31

What are the key features of a global policy?

Answer 31

1) Global master policy operates across all countries
2) The master policy sits above the corporate deductible
3) The corporate deductible sits above local policies

Question 32

Local policies =

Answer 32

1) Underwritten at local level
2) Provide widest form of cover locally in line with the cover provided by the master policy
3) usually a local deductible

Question 33

A master policy is a

Answer 33

Non admitted policy which is why a local policy is necessary.

Question 34

A decentralised programme…

Answer 34

1) Splits programme by geography / trade
2) Useful where there is a large US exposure
3) A particular country highly exposed to natural hazard

Question 35

Where a company has high exposure or diverse operations it is…

Answer 35

1) Sensible for a divisional programme whereby each operation has their own programme which may be combined at a higher level such as an excess layer or umbrella.

Question 36

An admitted policy =

Answer 36

An insurer can defend claims and pay them to the insured in a particular country

Question 37

A non admitted =

Answer 37

cannot defend claims and pay them to the insured in a particular country

Question 38

What is the preference iro admitted/non admitted policies

Answer 38

Issue locally admitted policies where possible under property and liability master programmes

Question 39

What do difference in conditions / limits policies do?

Answer 39

Top up cover availability to same global standard as master policy

Question 40

It must be clear what an insurer deems a local primary policy. Insurers are likely to make a distinction between….

Answer 40

1) Policies issued by them or local reps

2) Policies issued by another insurer

Question 41

Local deductibles need to be at a level that..

Answer 41

1) A local operation can withstand without significant disruption to business

Question 42

Corporate deductibles reflect whole groups ability to…

Answer 42

1) Retain risk

2) Obtain premium documents

Question 43

What is another issue when dealing with global programmes (ddby)

Answer 43

Currency problems such as

1) Inflation
2) Currency fluctuations
3) Convertibility
4) Exchange rates
5) Co-insurance deficiencies

Question 44

Brokers will become involved with allocating premiums among a clients various regions, countries or subsidiary. A broker must be mindful of…

Answer 44

Policy taxes

Question 45

There is room for error when the programme is large and complex. The broker has the responsibility to ensure the programme is…

Answer 45

1) Up to date

2) All material facts are included.

Question 46

Brokers may face, when dealing with global programmes….

Answer 46

1) Language barriers
2) Time differences
3) Local legislaiton
4) Different market practices

Question 47

What does the inadvertent E+O clause do?

Answer 47

Restricts the insurers right to void the policy for fraud / deliberate misrepresentation / non disclosure.

Question 48

Market cycle =

Answer 48

1) Increase capacity
2) More insurers join the market
3) Lower premiums
4) Less profit
5) Capacity withdrawn
6) Insurers exit the market
7) Higher premiums
8) Higher profits looped

Question 49

What affects the market cycle

Answer 49

1) Major events
2) Legal changes
3) Onerous legislation may result in new liabilities arising in different classes of business.