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LM2 > Chapter 8 - Business Process > Flashcards

Chapter 8 - Business Process Flashcards

1
Q

What is a quotation?

A

Proposal from insurer to broker on terms and conditions of placing risk

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2
Q

What are 3 key legal implications on proposals? And when does reasonable time apply?

A

Time - limited period of if the broker wants to proceed
Reasonable time - if insurer has not specified quotation time period
Insurer is not on risk if client has only received quotation
Insurer cannot back out if client has accepted proposal

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3
Q

What happens if additional material information is supplied after initial quotation?

A

Vary or withdraw the original quotation

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4
Q

How is an insurance contract formulated?

A

Underwriters indicates proportion of risk they want to take and sign the contract. Reference is unique to them

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5
Q

What is a firm order?

A

Formal commitment to the placement from insurer to broker

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6
Q

What does lines of whole mean?

A

Percentage of risk which the broker holds (e.g. 50% of total) risk (Relative)

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7
Q

What does lines of order mean?

A

Percentage of risk if it was 100% (Absolute)

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8
Q

When are insurers actually on risk

A

When the inception date starts

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9
Q

What is concluded when the insurer signs on the MRC?

A

The contract between insurer and insured

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10
Q

What is signing down?

A

Proportionately downsizing the total line placed so that the total is 100%

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11
Q

What is a line to stand? What happens to other shares?

A

Where the risk proportion cannot be reduced, other insurer lines must reduce more

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12
Q

Why should brokers notfiy underwriters about signing down at the placing process?

A

Time lag between writing the risk and notification of signed line

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13
Q

In terms of permission, what is the difference between signing up and down?

A

Brokers must get express permission for signing up

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14
Q

What are the 4 main reasons why contracts are terminated?

A

Cancelled by insured
Cancelled by insurer
Fulfilment
Policy expiration

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15
Q

How many days usually do consumers have to cancel insurance?

A

14 days

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16
Q

What is a short rate premium provision?

A

Amount that insurers keep depending on how many days the policy was in force

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17
Q

What is a downgrade clause?

A

Insured removing insurers if their ratings drop too much or they go into run off

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18
Q

Who would the insurer deliver the notice of cancellation to?

A

The broker

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19
Q

Why might an insurer cancel their policy for marine

A

Vessel is sold, ownership is a key valuation

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19
Q

How does fulfilment cancel a policy

A

If the subject matter no longer exists

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20
Q

What happens in reckless breaches of fair presentation?

A

Contract is voided, premium kept

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21
Q

What happens in not reckless, what happens in fair representation (3 scenarios)

A

If insurer would not accept new t&c under any circumstances. Premium returned

New T&Cs required, same premium contract proposal rewritten

New T&Cs accepted, higher premium wanted - claims reduced

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22
Q

What happens if warranty is breached?

A

During breaching period, insured cannot make claims

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23
Q

What happens if fraud is found?

A

If fraud found, claims not paid, premiums kept

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24
Q

What are the 3 ways contracts are unexpectedly terminated?

A

Breach of fair representation
Breach of warranty
Fraud

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25
Q

Why might a insurer not want to renew business?

A

Contract has been loss making
Exit that class of business

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26
Q

Why might an insurer want to renew business?

A

Stable portfolio of clients
Cheaper admin than new contracts

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27
Q

What are the new 3 new features on FCA renewal transparency? Why has this occured?

A

Disclose last year’s premium
Encourage customers to shop around
Encourage customers (4x renewal) to shop around

Renewing customers were paying more than expected

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28
Q

What is a days of grace period?

A

Elastic end to policy coverage, enabling more scope if they are late to renew. Not an implicit concept

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29
Q

Why might a risk be written after inception and why is this risky?

What does WNKORL mean?

A

Slow placing process
Insurers are liable for claims starting from inception date

Warranted no known or reported losses

30
Q

What typical classes of business are proposal forms used? and Why?

Who fills these in? and what are they?

A

Yacht and professional indemnity.
yacht - treated as personal lines, insurer has to ask more questions

The insured typically fills it in, answers questions about the risk and signing a declaration

31
Q

What are the 3 key uses of an MRC?

A

Summarises risk as a standardised format
Indicate written lines
Sent to insured as copy of contract

32
Q

What are the 4 benefits of an MRC?

A

Standardised format, clearer information
Documentation
Comply with contract certainty requirements
Electronic submission of information

33
Q

What are the 3 types of MRCs and how are they different?

A

Open market - individually placed risk
Lineslip - Preset group, lead underwriter binds risk on behalf, each insurer indicates risk share
Binder - Delegated UW

Lineslip and binder have their risk section instead of open market risk section

34
Q

What are the 6 key sections of the MRC (RISSFB)

A

Risk details
Information (surveys and reports)
Security details (signed lines)
Subscription agreement (slip leader and claims)
Fiscal and regulatory (taxes)
Broker deductions

35
Q

What is a delinked contract?

A

Contract is entered into Xchanging asap, premium paid later

36
Q

What is the CDR? what is it used for?

A

Core Data Record
Used for downstream processing for:
Premium validation
Claims matching
Taxes
Regulatory

37
Q

What is an endorsement?

A

Changes to the contract presented by the broker

38
Q

What are the 4 key aims of the General Underwriters Agreement (GUA)

A

Responsibility for contract changes
Clarify authority limits
Flexibility for different COBs
Ensure underwriters are advised

39
Q

What are the 3 scheduling parts of the GUA and what do they represent?

What classes of business do they represent?

A

Part 1 - Slip leader only
Part 2 - Slip leader + agreement parties
Part 3 - all underwriters

Used to manage changes to a contract
Applies to non marine, marine cargo and political risk

40
Q

What is the MRCE

A

Market Reform Contract Endorsement - document used to standardise endorsements

41
Q

What is the process for premium processing?

A

LPANs created and submitted into DXC
Risk data captured on LIDS (lloyds) and POSH (Company)
Signing date and number created
Messaging will update insurers systems

42
Q

In a policy which section is specific to the insured?

A

The schedule

43
Q

What are the two types of condition precedents and what do they mean?

What could happen if any are breached?

A

Contract and liability. Condition must be satisfied for either the contract to exist or insurer to have any liability

Liability - claims are not paid, policy in force
Contract - contract not valid

44
Q

Under what circumstances would war be permitted to be covered?

A

Formal request is submitted to Lloyds

45
Q

What are warranties?

A

Promises made by insured on aspects of risk which insurer considers most important

46
Q

Describe the relationship between warranty and consumer contracts?

A

Refusal of claim cannot happen unless the breach of warranty is directly related to the claim

47
Q

What are suspensive conditions?
What is the link between breaches and loss

A

When warranty is breached, insurer takes no liability for any loss during that period

No relationship, no loss is required, if warranty is breached, coverage not sustained

48
Q

The insurance act highlighted that warranties would reduce 3 key risks, what are they

A

Particular types of losses, locations and times

49
Q

What are service companies and why are they used?

A

Delegated underwriting on behalf of syndicates
Used for business outside of lloyds

50
Q

Why are branch companies used? What are the disadvantages?

A

To satisfy business requirements of having an office in the country of business

Higher capex requirements

51
Q

What is the difference between conducting business on a service vs establishment basis?

A

Service = cross border, regulated only by home regulator
Establishment = office must be in coountry of business

52
Q

How does Lloyds brussels work?

A

Risks undertaken by Lloyds brussels are wholly underwritten back to syndicates. Used for direct and Re in EEA

53
Q

What is a pure risk follow?

A

Following line orders are identical to the lead line

54
Q

What is contract certainty? What are the 2 stages?

A

All parties know exactly what is going on
1. Finalise agreement on all terms and time of entry into contract
2. Documentation provided

55
Q

What are the 7 principles of contract certainty?

A
  1. When entering contract (all terms are unambiguous)
  2. After contract entry (documentation)
  3. Performance (audits & checklists)
  4. Contact changes (MRCE)
  5. Multi-insurers (clear signed lines on MRC)
  6. Final participation (lines enterd onto xchanging)
  7. Exclusions and Problems (brokers need to resolve)
56
Q

Provide an example of subjectivities on MRC

A

Surveys

57
Q

Do commercial cover allow periods of cancellation?

A

Yes

58
Q

What is the period for docs to be issued for comm. insurance?

A

30 days

59
Q

What is an aggregator?

A

Price comparison website

60
Q

Where would the broker’s code be found on MRC?

A

Risk details

61
Q

Under what circumstances would an insurer not use standard mrc wording?

A

Primary insurer is from another market

62
Q

What does the operative clause show in a general policy document?

A

What is covered

63
Q

When is an insurance interest required for non marine insurance?

A

Point of inception and claim

64
Q

Under GUA Part 1, give examples of things that can be changed by the sliper leader only

A

Typos, coverage restrictions, monetary exposure reduction, return premiums

65
Q

Under GUA Part 3 - what can be changed by slip leader + agreement parties

A

Geographical restructions
Policy extensions beyond 30 days
Jurisdiction of contract
Backdating

66
Q

List and summarise the 5 sections of the MRCE

A

Risk Identification - which MRC are you changing
Contract changes - headings of the contract which you are changing
Information - Surveys
Agreements - Who needs to sign off
Admin - Changes to broker renumeration, subscription agreements and tax and regulatory sections of the MRC

67
Q

What are the 3 documents required to begin premium processing

A

IPT
Any external documents
LPAN

68
Q

What are the new unified database names replacing premiums and claims?

A

ICOS - Claims
IPOS - Premiums

69
Q

What are the 7 sections of an insurance contract?

A

Heading - Name of insurer
Recital
Signatures
Operative Clauses - Policy Coverage
Exceptions
Conditions - Contract and liability precedents
Schedule - Areas personalised to the risk

70
Q

When would a non standard wording be used?

A

Insurer insuring the primary layer / leading the risk is not from london markets

71
Q

Provide an example of a condition precedent to liability

A

Claims must be notified within X period

72
Q

Provide an example of a condition precedent to contract

A

Insurable interest must be established at the time of inception and time of claim

73
Q

Can a slip leader be from an overseas market?

A

No

LM2 (10 decks)

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