Chapter 8 - Business Process Flashcards
What is a quotation?
Indication from a insurer for terms and conditions about a risk
What are the legal implications of an insurer providing a quotation?
- do not remain valid indefinitely, insurer can specify time period for validity
- if client accepts after expiry, insurer can accept but is not obliged to
- if insurer does not specify time period, “reasonable time” applies
- if client accepts in time frame, insurer obliged to honour
- if client accepts subject to changes, insurer not obliged to accept changes
What is an insurer’s share of a risk called?
the order, i.e 50% order to place
When is an insurer on a risk?
When they put their line on a MRC, though exact liability is not yet known
What is signing down?
When a risk is over subscribed, lines are reduced proportionally to add up to 100%. New line is called “signed line”
What happens in signing down when an insurer wants their “line to stand”?
They keep their exact line, other lines are reduced proportionally to add up to 100%
What are some reasons for natural termination of a contract?
- cancellation by insured
- cancellation by insurer
- fulfillment
- expiry of the policy period
Under the Insurance Act 2015, what are the reasons for unexpected termination of a contract?
- breach of duty of fair representation , if would’ve offered on different terms treat as though those terms etc
- breach of warranty
- fraud
Why would an insurer not want to quote for a renewal?
- contract has been loss making
- exiting that class of business
Why would an insurer want to renew business?
- costs less to renew business
- more stable portfolio of clients = more reliable statistical data
What are “days of grace”?
Elastic policy expiry should the insured be late in renewing a policy
How do underwriters write a risk that has incepted?
They write on the basis of “Warranted no known or reported losses”
What lines of business are proposal forms common in?
yacht and PI
What is the role of the market reform contract?
- summarises risk into standardised format for underwriters
- underwriters formally write their lines here
- sent to client as their copy of the contract
What are the benefits of a standardised market reform contract?
- easy for insurers to find information
- easy to create a new one
- comply with contract certainty requirements
- works towards electronic slips
What is an open market MRC?
where broker places each risk individually one by one, visits each broker separately
What is a line slip MRC?
Preset group of underwriters arranged by broker, if norminated one or two agree to a risk the rest of the underwriters bound as well
What is a binder MRC?
Underwriters give delegated underwriting authority to third party who can act under strict parameters
What are the six sections of an open market MRC?
- risk details
- information
- security details
- subscription agreement
- fiscal and regulatory
- broker renumeration and deductions
What is the purpose of the general underwriters agreement?
- agreement between underwirters on a particular MRC as to who has to deal with contract changes
- clarify extent of authority of leaders and any other identified underwriters who have to agree changes
- flexibility for each line of business to refine rules to suit requirements
- all underwriters advised of changes even if not involved in agreement
what are the three parts of the general underwriters agreement?
- slip leader only
- slip leader plus agreement parties
- all underwriters
What is a market reform contract endorsement?
document in a set format to populate relevant information for a requested change to an mrc
What are the sections of a market reform contract?
- risk and endorsement indentification
- contract changes
- information
- agreement
- contact administration
What are the two types of conditions?
- condition precedent to liability
- condition precedent to contract
What is a condition precedent to contract?
Example would be requirement for insurable interest
Give an example of condition precedent to liability
Claims must be notified within x days
What is a warranty?
Promise made by the insured relating either to facts or to the performance of a certain risk
i.e. something will or will not be done, or a certain fact exists or does not exist
What occurs if there is a breach of warranty under the Insurance Act 2015?
policy is suspended until breach is remedied - insurer takes no liability for loss during suspension
Why might business not come into the london market?
- business is handled by regional or overseas brokers not prepared to use Lloyd’s brokers to access London Market
- loyalty to local insurance providers if overseas
What is operating on a services basis?
insurers write EU risks without setting up an office in that country, regulated by home regulator
What is operating on an establishment basis?
Setting up an office in country want to write risks in
What is contract certainty?
All parties knowing exactly what is going on at the time the contract comes into force
How is contract certainty achieved?
by the complete and final agreement of all terms between the insured and insurer at the time they enter into that contract with contract documentation provided promptly afterwards
