Chapter 9 Flashcards
What is an UW?
A person who makes the decision on behalf of an insurer whether to accept any risk presented
What is the task of UWs?
To manage the ‘common pool’ of premiums as effectively + profitably as possible
What are the 4 main functions of an UW?
- Assess the risks being presented to the pool
- Decide whether or not to accept the risk + if so, how much of the risk to accept
- Determine the terms + conditions to be offered
- Calculate an appropriate premium
What is a subscription market in the LM?
Risks can be placed on a subscription basis - so, more than 1 insurer participates in the same risk, each taking a fixed percentage of the risk
Why might an insurer want to be part of a subscription market?
•Size of risk + an UW has specific authority levels
•UWs wanted to balance their portfolio
•The risk might be good + the broker wants to spread it amongst many insurers
•It’s a new class of business for the insurer + wants to spread the exposure of its pool
What is the exception to the subscription market?
The mutual insurance sector - where the majority of risks are accepted 100% by 1 insurer
What is the leaders role in a subscription market?
• Review the risk presentation from the broker
•Consider whether to accept it
•Decide the terms + conditions
•Quote premium
What are the characteristics of a good lead underwriter?
Provides a good quotation to the client + is credible + supportable by ‘following market’
Who are the following market UWs in a subscription market?
•Insurer who isn’t the leader
•They each have a separate + distinct contact of insurance with the insured
What is competitive law in a subscription market?
•It prohibits behaviour where the normal competitive nature of the insurance market is removed
•It tries to prevent a situation where the market acts together to the detriment of the client
What are the 5 principles the ‘European Federation of Insurance Intermediaries (BIPAR) have, which concerns the placement of business with subscription markets?
- Broker should specify the demands/needs of client
- Broker will advise client on market structures + merits of single insurer vs multiple placement
- If client wants multiple, then broker will advise them
- If lead + following insurers are on same terms + conditions, then broker shouldn’t accept an insurer trying to increase premium because someone else successfully has
- Broker will keep client informed of progress during the placement of a risk
What are ‘smart follow’ UWs?
They use data + trackers to write portfolios of business w/ much lower operational cost basis than traditional UWs
What are multiple placements in a subscription market?
•Insurers subscribing to the risk can agree different terms + conditions, such as premium
•So, the broker must present multiple sets of info to Xchanging for the risk recording + premium transfer process
In subscription market, what is overall leader, slip leader, + bureau leader?
•Overall leader: they may be overseas, so broker has to present risk to LM UWs (slip + bureau leader)
•Slip leader: LM leader in Lloyd’s or company market
•Bureau leader: If slip leader isn’t from Lloyd’s then this is the 1st Lloyd’s UW
In a subscription market, how is changes to risks handled?
•Will be in the slip to identify who handles changes or claims, etc
•The leader is always involved in risk changes, but if have multiple different slips due to different terms then multiple leaders will have been created
In a subscription market when changes to risks are handled, what is the ‘general underwriters agreement (GUA)’?
A default mechanism dividing changes into 3 sections:
1. Non-material changes will be agreed by the leader
2. Anything not in 1 or 3 is leader + some agreement parties
3. Material changes should be agreed by all UWs
In a subscription market, what is the ‘single claims agreement party (SCAP)’?
Allows the subscribing insurers to agree at the time of placing, that claims that were eligible could be agreed by a single insurer only (the slip leader - a Lloyd’s syndicate or UK authorised insurer)
What are the issues with electronic claims handling in subscription markets?
•The existence of more than 1 slip creates ‘ghost’ leaders who have become involved in claims handling even when they never intended to write the risk
•This is because systems can’t deal with ‘leader scenarios’
