Chapter 8 - Business process

Question 1

What are quotations used for?

Answer 1

Used by insurers to indicate the terms and conditions they will offer

Question 2

Can a broker obtain multiple quotations?

Answer 2

Yes

Question 3

Are quotations limited in their validity? What happens if insured accepts within the time?

Answer 3

Yes

Insurer must honour the offer
Insurer can honour after expiry

Question 4

How do London Market underwriters indicate their agreement to take all or part of the risk?

Answer 4

Putting a stamp on the Market Reform Contract (MRC) or agreeing electronically

Question 5

What is an underwriter’s agreement known as?

Answer 5

Written line

Question 6

Can a written line be reduced in size?

Answer 6

Yes

Question 7

What process creates the signed line?

Answer 7

Signing down

Question 8

When is an individual contract created between the insurer and insured?

Answer 8

Written line - physically or electronically

Question 9

When is an insurer on risk?

Answer 9

Start of policy period

Question 10

How can an insurance contract terminate?

Answer 10

Expiry
Cancellation - insured or insurer
Fulfilment - total loss then doesn’t exist

Question 11

How can an insurance contract terminate early? What is the aim of the Insurance Act 2015?

Answer 11

Behaviour by the insured
Breach duty of fair presentation
Breach of warranty
Fraud

Make it less easy for an insurer to terminate a contract

Question 12

How many sections are there in an MRC?

Answer 12

6

Question 13

Do different forms of MRC exist for open market, binders, lineslips?

Answer 13

Yes

Question 14

What is an MRCE?

Answer 14

Endorsement

Question 15

What does General Underwriters’ Agreement (GUA) do?

Answer 15

Sets out the way in which certain combinations of underwriters can agree changes to the risk

Question 16

What will the Core Data Record and MRC v3 do?

Answer 16

Move the market onto computable contracts

Question 17

What are conditions?

Answer 17

Include any terms in the policy

Question 18

What are conditions precedent?

Answer 18

Include terms which are fundamental to either the contract itself or to liability

Question 19

What are the two types of conditions?

Answer 19

Expressed
Implied

Question 20

What is a ‘warranty’? What happens if this is broken?

Answer 20

Is a promise by the insured- Consumer Insurance (Disclosure and Representations) Act 2012

If this is broken, the insurance will be suspended until the breach is remedied - Insurance Act 2015

Question 21

What are the 2 types of warranties?

Answer 21

Expressed
Implied

Question 22

What do exclusions do?

Answer 22

Set out what will not be covered under the policy

Question 23

Can exclusions be market-wide and specific to indv policies?

Answer 23

Yes

Market-wide e.g., radioactive contamination
Indv e.g., war - purchased elsewhere

Question 24

Why are service companies set up? Who are they set up by?

Answer 24

Set up by syndicates to enable them to access business from outside the Lloyd’s Market which they would not otherwise see

Question 25

Do syndicates have to comply with all Lloyd's regulatory requirements if business is written through service companies?

Answer 25

Yes

Question 26

What are branch offices used for?

Answer 26

Access business in different countries where they are required to set up a physical presence in that country in order to get permission from the regulator

Question 27

Can all insurers write business on a services basis which allows them to stay in their home state but access business in other EU countries?

Answer 27

Only EU insurers Not UK

Question 28

Can insurers write business on an establishment basis in the EU, which will involve them setting up offices there?

Answer 28

Yes

Question 29

What is Lloyd’s Brussels aka Lloyd’s Insurance Company S.A.,?

Answer 29

Belgian insurance company set up by Lloyd’s to allow services business to be written by the Lloyd’s market after the UK left the EU Includes Monaco

Question 30

What is contract certainty?

Answer 30

Complete and final agreement of all terms at the time the contract is entered into with documentation provided promptly MRC, BID assists ‘Promptly’ is 30 calendar days after inception for commercial business, but only 7 working days for consumers. audits and use of checklists.

Question 31

Is contract certainty BAU or a market reform project?

Answer 31

BAU

Question 32

Do the broker and client still have the same responsibilities in terms of the disclosure of material facts?

Answer 32

Yes

Question 33

What happens if an insurer does not specify the period of the quote?

Answer 33

‘reasonable time’ applies Standard rule in contract law

Question 34

What happens if a client wants to change the terms of the quote? Or material additional info is produced?

Answer 34

Offer and acceptance process starts again Insurer can vary or withdraw

Question 35

How do you sign down?

Answer 35

If all of the written lines add up to 150%, then the easiest way to reduce them to the right size to add up to 100% is to divide each line by 150 and then multiply by 100.

Question 36

What is ‘Days of grace’?

Answer 36

perceived ‘elastic’ end to the previous policy which allows the insured some scope should they be late in renewing their insurance.

Question 37

When is ‘Warranted no known or reported losses’ (generally written as WNKORL) used?

Answer 37

underwriters make sure that they do not have to pay for any losses before they actually write their line

Question 38

What are the standard clauses for the codes LSW, ISO, LMA, NMA, AVN?

Answer 38

LSW – London Standard Wording; * ISO – International Standards Organisation; * LMA – Lloyd’s Market Association; * NMA – Non-Marine Association (now part of LMA); and * AVN – Aviation Market.