Chapter 8 - A Flashcards
What is a quotation in the context of insurance?
A proposal or indication from the insurer as to the terms and conditions (including premium) for the risk put forward by the broker.
Why is obtaining multiple quotations beneficial for clients?
It allows the client to compare the various options available and weigh the merits of balancing cover and premium cost.
What are ‘aggregators’ in the insurance marketplace?
Websites like confused.com and comparethemarket.com that present clients with multiple quotations based on provided information.
True or False: An insurer’s quotation remains valid indefinitely.
False.
What happens if a client tries to accept a quotation after its expiry date?
The insurer can agree to the acceptance but is not obliged to do so.
What concept applies if the insurer does not specify a time period for quotation acceptance?
The concept of ‘reasonable time’ from contract law.
When are insurers considered on risk in an insurance contract?
At the point when the underwriter puts their line down on the broker’s slip.
What is ‘signing down’ in the insurance process?
The process in which shares of a risk are reduced to 100% when entering the market central databases.
List two reasons for natural termination of an insurance contract.
- Cancellation by the insured
- Expiry of the policy period
What is a downgrade clause in an insurance policy?
A clause allowing the insured to remove an insurer if certain stated circumstances occur, typically related to the insurer’s security rating.
What does the Insurance Act 2015 say about unexpected termination?
It can occur due to breach of the duty of fair presentation, breach of warranty, or fraud.
Fill in the blank: The insured must present insurers with all material facts about the risk that they know or ought to know, known as the duty of _______.
fair presentation.
What happens if a breach of the duty of fair presentation is deliberate or reckless?
The insurer may avoid the contract and retain the premium.
True or False: If the insured breaches a warranty, the insurer is automatically discharged from liability.
False.
What is the purpose of the FCA rules on renewal transparency for retail general insurances?
To require insurers and intermediaries to disclose last year’s premium and claims history to clients.
What is meant by ‘firm order’ in the insurance placement process?
The client giving their broker formal instructions to proceed with the placement.
What must the broker ensure regarding the order they have to place?
That underwriters are clear about the proportions or shares of the risk they are accepting.
What is a ‘written line’ in the insurance context?
The line that the insurer has agreed to take on a risk.
What does it mean if a risk is oversubscribed?
The total of all written lines taken by underwriters exceeds 100%.
What is the insurer’s obligation regarding valid claims after policy expiry?
Insurers’ obligations to deal with valid claims remain until the obligations under the policy have been satisfied.
What is the significance of the ‘signed line’?
It is the reduced line size after the signing down process.
What kind of evidence should be provided for a notice of cancellation by the insurer?
Evidence of receipt by the insured, such as a recorded delivery letter.
What is the main purpose of FCA rules introduced in 2017 regarding retail general insurance renewals?
To enhance transparency and consumer engagement at renewal
These rules require insurers and intermediaries to disclose last year’s premium and encourage consumers to shop around.
What specific information must be disclosed on renewal notices according to FCA rules?
Last year’s premium, mid-term adjustments, and encouragement to check cover and shop around
This aims to address concerns about consumer treatment and lack of competition.
What is the consequence for consumers who have renewed their insurance four consecutive times?
They receive an additional message encouraging them to shop around
This is part of the FCA’s effort to improve consumer engagement.
What are ‘Days of grace’ in the context of insurance policies?
A perceived ‘elastic’ end to the previous policy allowing late renewal
They are considered an ‘urban myth’ and may cause issues if clients believe they exist.
What must underwriters be cautious about when shown a risk that has already incepted?
They must avoid liability for any losses that occurred before they confirmed their participation
This can happen due to delays in the placement or renewal process.
What is the implication for underwriters if they write a line on a risk that incepted earlier?
They are liable for valid claims from losses occurring after the inception date
For example, if a risk incepted on 1 February and the line is written on 20 March, they cover losses from 1 February onward.
What warranty do underwriters use to protect against prior losses when writing a risk post-inception?
Warranted no known or reported losses (WNKORL)
This warranty helps ensure underwriters are not liable for claims that occurred before they took on the risk.
