Chapter 7 long ting Flashcards
A broker will require an excellent understanding of…
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
A deductible is a
Large excess.
What is an alternative way for the deductible to operate?
The policy limit sits on top of the deductible
A franchise is an alternative to a deducitible and involves…
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.
The objectives of a retention are..
1) Allows insurers to keep an arms length
2) Avoid pound swapping
3) Encourages good risk management by the insured
Data and claims analysis is used to..
Support programme design by
1) Ensuring correct limits
2) Correct level of deductible is selected
3) Evaluation of self insured options
Deductible analysis is used to see..
How claims would have been allocated between parties previously
Claims triangulation is a..
Tool that demonstrates claims reporting and incurred losses
Claims triangulation is used to..
1) Forecast claims experiance
2) Compare data at specific points
3) Will assist in establishing or improving or deteoriating claims
Brokers may also use projected…
and historic exposure data. such as a payroll for employers liability or turnover regarding public liabs
When analysing claims brokers must…
1) Apply adjustments for inflation before any deductible analysis
Personal and small commercial risks are…
Packaged together.
Large commercial risks…
1) Property programme on an all risks basis
2) Combine risks e.g EL with other liability risks
There is an option to place all clients separate insurances with one insurer this is called
Account underwriting
What needs to be considered iro deductibles?
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.
Policies that are longer than 12 months tend to contribute to…
continuity and premium stability.
Long term agreements =
1) Locked in rates with a typical 5% credit for 3 years and a 10% credit for 5 years
Multi year policies =
1) 3/5 year cycle
2) Premiums/terms can be considered @ the anniversary
There are limits on the changes that can be made
Evergreen policies =
1) No formal renewal date, on a rolling basis
2) For small commercial risks or non complex and poor claims
Conventional programmes =
1) Called guranteed cost programmes
2) Premium = fixed regardless of claims
3) Premiums may vary according to the exposure variables
Self insured programmes =
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
Multi line/cross class programmes =
1) No individual retentions
2) Classes are integrated to give combined retention with combined agg
Co-insurance in the london market where
1) The risk is complex
2) Where excess capacity is required
3) Where risk should be spread among insurers
Horizontal placement =
Each follower follows terms quoted by a lead
Vertical placement =
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
Alternative limit solutions include…
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
Specilist risks =
1) Environmental liability
2) Product guarantee
3) Motor uninsured loss recoveries
Companies will want to approach insurance…
Consistently across territories and it is up to the brokers to provide a solution
What are the benefits of a global programme?
1) Consistency of cover
2) Savings through group buying
What are the disadvantages of a global programme?
1) Complicate local relationships
2) Cause legislative problems
What are the key features of a global policy?
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
Local policies =
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
A master policy is a
Non admitted policy which is why a local policy is necessary.
A decentralised programme…
1) Splits programme by geography / trade
2) Useful where there is a large US exposure
3) A particular country highly exposed to natural hazard
Where a company has high exposure or diverse operations it is…
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.
An admitted policy =
An insurer can defend claims and pay them to the insured in a particular country
A non admitted =
cannot defend claims and pay them to the insured in a particular country
What is the preference iro admitted/non admitted policies
Issue locally admitted policies where possible under property and liability master programmes
What do difference in conditions / limits policies do?
Top up cover availability to same global standard as master policy
It must be clear what an insurer deems a local primary policy. Insurers are likely to make a distinction between….
1) Policies issued by them or local reps
2) Policies issued by another insurer
Local deductibles need to be at a level that..
1) A local operation can withstand without significant disruption to business
Corporate deductibles reflect whole groups ability to…
1) Retain risk
2) Obtain premium documents
What is another issue when dealing with global programmes (ddby)
Currency problems such as
1) Inflation
2) Currency fluctuations
3) Convertibility
4) Exchange rates
5) Co-insurance deficiencies
Brokers will become involved with allocating premiums among a clients various regions, countries or subsidiary. A broker must be mindful of…
Policy taxes
There is room for error when the programme is large and complex. The broker has the responsibility to ensure the programme is…
1) Up to date
2) All material facts are included.
Brokers may face, when dealing with global programmes….
1) Language barriers
2) Time differences
3) Local legislaiton
4) Different market practices
What does the inadvertent E+O clause do?
Restricts the insurers right to void the policy for fraud / deliberate misrepresentation / non disclosure.
Market cycle =
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
What affects the market cycle
1) Major events
2) Legal changes
3) Onerous legislation may result in new liabilities arising in different classes of business.
