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IF2 > Chapter 9- Underwriting Procedures > Flashcards

Chapter 9- Underwriting Procedures Flashcards

1
Q

What are the 4 processes for insuring a risk from an insurers perspective

A
  1. Once a proposal form has been completed by a prospective client this generally provide all the info necessary to consider the risk
  2. The insurer will quote a premium and state any special terms that apply
  3. If they agree to pay the proposer they will agree to pay the premium
  4. Confirmation that cover is in force may be verbal
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2
Q

When is the effective date for any is insurance policies

A

Once the proposer accepts the insurers offer by agreedintn to pay the premium the contract will be in force from the effective date

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3
Q

What processes come under the jurisdiction of the FCA and ICOBS in relation to underwriting

A

Negotiations, policy docs, initial response to enquiry, quotation

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4
Q

What do ICOBS and contract certainty have an impact on

A

Provision of information, process and on timing

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5
Q

What are the three parties involved when there is an intermediary

A

Proposer

Intermediary

Insurer

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6
Q

What are the 3 categories of intermediaries

A
  1. Appointed representatives
  2. Introducer appointed representative (issue literature but do not become involved)
  3. Wholesale broker- usually Lloyd’s or the London market
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7
Q

What are the two principal types that Enter into a TOBA

A
  1. Individually entered into with insurers and with Lloyd’s syndicates if Lloyd’s
  2. Entered into with clients
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8
Q

What are the TOBAS with insurers and what do they determine

A

They determine:

The nature of the relationship

Authority levels

Financial aspects

Risk transfer arrangements between the intermediary and the insurer

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9
Q

What does it mean by risk transfer under TOBAS with insurers

A

The acceptance by the insurer that monies once collected by the intermediary are treated as paid to the insurer

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10
Q

What do TOBAS with client involve

A

Identify services provided by the intermediary,

Terms of credit

A service Level Agreement

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11
Q

What do intermediaries document under TOBAS with clients

A

Compliance procedures

Procedure relating to advice, quotations and sales based upon FCA rules

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12
Q

Under TOBAS for clients if the status of the clients is unclear are they treated as a consumer or commercial client

A

Consumer

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13
Q

What is the provision of FCA required information

A

FCA give details of certain info about the intermediary and it’s services which must be provided prior to the conclusion of the contract

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14
Q

What 6 pieces of information must be given for the Provision of FCA required information

A
  1. Name and address of the company
  2. The fact that the firm is included in the financial services register
  3. Ownership: whether it owns more than 10% of an insurer
    4: whether an insurer owns more than 10% of it
  4. Who to write to it the customer has a complaint
  5. Whether it gives advice on the basis of a fair anylsis or the market
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15
Q

What must an intermediary do to provide advice on the basis of a fair analysis of the market

A

Must consider a sufficiently large number of contracts of insurance before offering a recommendation

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16
Q

What are telephone selling rules governed by

A

Distance marketing directive

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17
Q

What information needs to be given under distance communication

A

The identity of the person and their link with the fire

A description of the main characteristics of the financial service

The total price to be paid inc all taxes

Notice of the possibility that other taxes or costs may exist

The existence or absence of a right to cancel

That other info is available on request

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18
Q

What are the 14 things needed to be given after a distance sale

A
  1. The name and the main business of the firm
  2. The name and address of the representative
  3. The identity, address and capacity of any professional involved
  4. The info required for statutory status purposes
  5. The main characteristics of the service the firm will provide
  6. Notice of any financial market risks
  7. Any time limitations
  8. The arrangements for payment
  9. Any extra costs
  10. The minimum duration of the contact
  11. The law applicable
  12. The language to be use
  13. Complaint procedures

15, whether compensation is available

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19
Q

What must be established by the intermediary before providing a recommendation

A

Demands and needs

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20
Q

When making a recommendation regarding the sale or cancellation of the policy an intermediary must ensure what

A

Suitability

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21
Q

What 2 says would it be permissible to recommend a policy that does not meet the client demand and needs provided that:

A
  1. There is no policy that’ll meet all the demands and needs

2. The consumer is advised the D&n aren’t met

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22
Q

What must suitability take into account in regards to D&N

A

The level of cover and cost

Relevant exclusions

Excesses

Limitations

Conditions

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23
Q

What happens if a sale is done over the phone to the D&N

A

Should be done orally and then followed up with paper

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24
Q

If policies aren’t sold with personal recommendations how should the D&N be treated

A

The statement can be included within the product document stating who it is appropriate for

A record of the D&N can be given to the customer

A key features document can be given to the customer

The statement can be included in the prop form

25
Q

What happens if separate fees are to be charged by the intermediary either instead of commission or in addition to commission

A

They must be stated

26
Q

What happens if a commercial client asks for info on level of commission

A

Must be told in writing if the total remuneration under FCA

27
Q

What is the IDD

A

Makes it easier for firms to trade cross border, strengthen policyholder protection and provide a level playing field

28
Q

What are the 4 key provisions to IDD

A
  1. Professionalism
  2. Commission disclosure

3, harmonisation

  1. Price comparison websites are in scope
29
Q

What are the specific FCA rules for protection policies

A

Must be suitable for the customer,

They just fully understand

The choice must be theirs

30
Q

What are the two protection policies as defined by the regulators

A

Pure protection- death, sickness etc

Payment protection

31
Q

What are EDI systems

A

Electronic data interchange-

They function to obtain quotation for prospective policyholders

Private motor insurance is the most common type of policy using this

32
Q

What can an EDI system do

A

Provide quotation and the documentation once chosen

33
Q

What are the 7 legal implications for quotations

A
  1. The quotation remains open for Valid for a set number of days
  2. Unless the quotation states otherwise during this time cover is not effective
  3. The insurer is legally bound to honour the quotation in the event the proposer accepts
  4. If no period is set. The offer remains open for a reasonable time
  5. If there are material changes to the risk between the quotation and acceptable the insurer is not bound to maintain the quotation
  6. The proposer has a right to accept or decline the quotation
  7. If they don’t take up the quotation it is no longe valid
34
Q

What is the information supplied by insurers for FCA rules

A

Usually a key features document- it is compulsory for a pure protection and payment indemnity contracts

35
Q

What 13 things must a key facts document contain

A
  1. A statement that the policy summary doesn’t contain the full T&CS of the policy
  2. Name of the insurer
  3. Type of insurance and cover
  4. Significant features and benefits
  5. Significant and unusual exclusion or limitations
  6. The duration of the insurance contract
  7. A statement hat the the consumer may need to review and update cover

8, price information

  1. The existence and duration of the right to cancel
  2. Contact details of how a claim may be notified
  3. How to complain to the insurer
  4. Possible entitlement to compensation from the FSCS
  5. The key facts logo
36
Q

What does cancellation rights refer to

A

The initial period of cover during which the contract may be voided at the option of the policyholder

37
Q

Cancellation/ cooling off rights don’t apply to

A
  1. Travel, baggage or any short term policies
  2. A general insurance contract where the performance of which has not been fully completed

3 . A pure protection contract 6 months duration or less

  1. A pure protection contact effected by the trustees of an occupational pension scheme
  2. An insurance contract which is sold by an authorised persons
  3. A connected contract
38
Q

Where there is a right to cancel what rules apply

A

Duration of the cancellation period is 14 days for general insurance and 30 days for protection contracts

39
Q

Under cooling off why may the consumer be required to pay in certain circumstances

A

For general insurance contracts industry’s are entitled to a pro rata sum

For pure protection contracts no charges may be made unless a claim has been made

40
Q

What 4 things must be provided to a commercial client before the conclusion

A
  1. Appropriate info in good time
  2. The law applicable to the policy
  3. Arrangement for handling complaints
  4. The address of the head office
41
Q

Under commercial clients how many days do contract certainty define as ‘promptly’

A

30 days

42
Q

Why would an insurer issue statement of facts

A

Where some information has been gathered over the telephone

43
Q

What two things are on a printed proposal form containing a declaration

A

1- the declaration that the proposer must sign states the info supplied is correct

2- warning or important info tells info that should be disclosed

44
Q

What happened in the European court of justice to insurance premiums

A

Can’t take into account gender

45
Q

What are the two things premium calculation is based on

A

The premium rate- intended to reflect the hazards associated with the insured

The premium base- Measure of the exposure

46
Q

How is premium calculated

A

Sum insured x rate = premium

47
Q

What is a premium rate

A

It’s a future set by the insurer either rate per cent or a rate per mille

48
Q

What is meant by rate per cent

A

A rate per cent is the price in pounds for each hundred pounds of sum insured (e.g 1.5% would be £1.50 premium for every £100 of risk insured)

49
Q

What is a rate per mille

A

Is the price in pounds for each £1000

50
Q

What rates is EL based on

A

Wage roll

51
Q

What rates is PL based on

A

Turnover

52
Q

What policies are normally applied with a flat premium

A

Motor insurance- takes into account all various hazards associated with it

53
Q

What must be issued so both the insured and insurer are clear as to the terms agreed between them

A

A policy- contains all the details of the cover, period of cover, exceptions, conditions etc

54
Q

What 5 characteristics will be on a cover note

A

1- commencement date

2- statement that the policy follows the normal terms

3- risk specific information

4- any special terms that apply

  • how long the cover note lasts
55
Q

What 7 things need to be on a private car motor insurance certificate

A
  1. Registration number of vehicle
  2. Name of policyholder
  3. Date of commencement
  4. Expiry date
  5. Person entitled
  6. Class of use
  7. Confirmation that cover complies with uk law
56
Q

For EL certs what 5 things need to be on there:

A
  1. Name of policyholder
  2. Date of commencement of cover
  3. Expiry date
  4. Confirmation that cover complies
  5. Minimum amount of cover is not less than £5 million
57
Q

What are the 3 methods of collecting premiums other than annual payment

A

Credit facilities

Instalment facilities (usually personal lines)

Third party premium financing

58
Q

What contracts of insurance are not subject to IPT

A

Reinsurance contracts

Certain marine policies

Engineering inspection insurances

IF2 (15 decks)

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