Chapter 9 - Compulsory insurance and statutory regulations Flashcards
Identify six types of insurance that are compulsory in the U.K.
Employers liability Motor third party Solicitors professional indemnity Horse Riding Public Liability Dangerous Animals/Dogs Public Liability Insurance brokers professional indemnity
Which Act applies to contracts and notices between consumer and seller. Terms are only binding on consumer if they are “fair”
Consumer Rights Act (2015)
Which Act gives an injured party the right to claim directly against the liability insurer of the party who injured them. If the party is insolvent.
Third Parties (Rights Against Insurers) Act 2010
Which Act implemented EU Gender directive. Insurers can not charge a higher premium based on gender.
Equality Act 2010
Which Act allows parties to a contract to override privity of contract and allow a third party to enforce the contract if it expressly provides benefit to that third party.
Contracts (Rights Of Third Parties) Act 1999
Which Act states that insurer may be liable to pay interest on claims if they have not paid claims within a reasonable time?
Enterprise Act 2016
Identify three insurance policy terms that may be under Consumer Rights act grey list and be deemed unfair.
Term that hinders consumer’s right to take legal action
Term that allows a seller to change terms unilaterally
Term that applies disproportionately high cancellation charges
What is the current rate of Insurance Premium Tax on policies other than Travel insurance?
12%
What is the current rate of Insurance Premium Tax on Travel insurance?
20%
Which regulator is the prime regulator for insurers
Prudential Regulation Authority
PRA
Which regulator regulates insurance intermediaries
Financial Conduct Authority
PRA
What are the PRA’s objectives
promote safety and soundness of UK financial system
contribute to ensuring the insurance policyholders PRA’s
Who is the lead regulator of the Lloyd’s of London
PRA
Who regulates managing agents
PRA and FCA
Who regulates Lloyd’s brokers and members agents
FCA
What is the FCA’s strategic objective?
To protect and enhance confidence in
the U.K. financial system.
What are the FCA’s three operational objectives
Consumer protection
Integrity
Competition
Which regulated fim risk category is most risky so firms get more intense supervision
Category 1
Which regulated firm risk category is least risky an includes most insurance brokers
Category 4
What are the three types of work in the FCA Supervision model?
Proactive
Reactive
Thematic
What is the reporting system called under which the FCA gathers information on small firms?
GABRIEL
How often do low risk small firms have a “touch point” with the FCA
Every 4 years
Identify three areas where the FCA focus on:
Product governance
End-to-sales processes
Prevention of financial crime
Which Act encourages “whistle blowing” by reducing employers ability to punish whistle blowers?
Public Interest Disclosure Act 1998 (PDA)
What are Threshold Conditions?
The conditions a firm needs to meet to be authorised by PRA/FCA
Regulated firms must have a responsibilities map under what regime?
Senior Managers and Certification Regime
What are the regulators’ rules which apply to senior managers called?
Rules of conduct
Identify four discplinary powers of the regulator
Public censure
Financial penalties
Prosecution for criminal offences
Civil and less formal remedies eg injunctions
The difference between an insurers’ assets and liabilities is known as?
Solvency margin
What are the three pillars in Solvency II
Pillar 1 Capital requirements
Pillar II Risk management
Pillar III Disclosure
Identify two ways an insurer can calculate their MCR and SCR
Standard formula
Internal model
To what level of confidence must captal be held in respect of the SCR
99.5%
To what level of confidence must captal be held in respect of the MCR
85%
What is the SCR?
Solvency Capital Requirement
What is the MCR?
Minimum Capital Requirement
What will be higher MCR or SCR?
SCR
What does ORSA stand for under what pillar of Solvency II is it required?
Own Risk and Solvency Assessment PIllar 2
Identify two reports insurers are required to provide under Solvency II Pillar 3 Disclosure which is public and which private?
Solvency Financial Condition Report (SCR) Public
Regulatory Supervisory Report (RSR) Private
Identify seven ways the PRA can intervene if an insurance company’s capital is inadequate for the risks they face.
Restrict premium income Require more frequent accounts Require more information Prevent insurer accepting new business Require company to restore capital Impose requiremenst on investment policy Withdraw authorisation
Identify seven items in an insurance broker’s Retail Mediation Activities Return
Accounting information
Regulatory capital
PI insurance
Threshold conditions
Training and competence
Conduct of business data
Product sales data
FCA fees data
Complaints (Eligible complaints to be reported twice yearly)
~~~
What is ICOBS
PRA/FCA rule book governing the sale of general insurance
What is the cooling off period under a consumer policy
14 days
What is the cooling off period for payment protection insurance?
30 days
What is the mandatory CPD requirement under the Insurance Distribution Directive?
15 hours
What are the three stages of money laundering?
Placement
Layering
Integration
The process by which money obtained illegally is converted to legitimate funds is called?
Money Laundering
Under the Proceeds of Crime Act (2002) who must insurers nominate to make disclosures to the Serious Organised Crime agency?
Money laundering reporting officer
Identify four offences under the Bribery Act 2010
Pay bribe
Receive bribe
Bribe foreign official
Failure of commercial organisation to have adequate procedures to prevent bribery
The process of establishing a new client’s identity is known as?
Client verification
What are there cross cutting rule sunder the new Consumer Duty?
Act in good faith towards retail customers
Avoid forseeable harm to retail customers
And enable and support retail customers to pursue their financial objectives
Under the new Consumer Duty what are the 4 areas where FCA expect to see good outcomes?
Products and services
Price and value
Consumer understanding
Consumer support
