Definitions Flashcards
Caveat emptor
Buyer beware
Uberrima fides
Utmost good faith
Risk registers
Type of documentation prepared by brokers for underwriters which would include individual exposures and claims experience, site inspection reports and preparation of health and safety reports; essentially a fact-finding tool used when talking to clients
Subjectivities
The term sometimes used to refer to terms and conditions, e.g. cover may be provided subject to a survey
Affinity routes to market
Tesco, M&S commoditising personal lines insurance
Lemonade
An online insurer for home insurance in the USA, promising a quotation within 90 seconds and payment of claims within 3 minutes
Subjectivity
A condition of a quotation that must be met
Rate per cent
The price in pounds for each hundred pounds of exposure (e.g. rate of 1.5% means the insurer charges £1.50 for every £100 of exposure)
Rate per mille
The price in pounds for each thousand pounds of exposure (e.g. 2.5 per mille means the insurer charges £2.50 for every £1,000)
Deposit premium
The initial premium that is charged based on an estimate of an adjustable premium where the exposure measure is unknown at the start of the period of insurance
Cover note
A document issued as evidence that insurance has been granted pending the issue of a policy or policy amendment documents/endorsements, which is temporary and superseded once the policy and certificate are issued
Parole evidence rule
Neither party can rely on any negotiations leading up to the contract, only the contract itself
Contra proferentem
The general rule of interpreting an ambiguous contract term against the party that drew it up gives the insurer a real incentive to be clear in their intentions - this term is applied by the courts
Recital clause
Preamble - the main purpose is to make the proposal form the basis of the contract
Market exclusions
Some general exclusions are common to all general insurance policies
Buy back
When you are charged an additional premium for something which is normally excluded
Suspensive
Insurers liability discharged from date of breach but resumes once remedied
Franchise
A fixed amount or period that acts as a threshold to determine whether claims are payable; once the period is exceeded the claim is payable in full and nothing deducted, whereas if it is not exceeded nothing is payable
Continental scale
For permanent partial disablements (PPD) insurers utilise a pre-set scale of benefits called continental scale to calculate lump sum payments
Theft
Theft Act 1968 definition; dishonestly appropriating the property belonging to another with the intention of permanently depriving the other of it
Flood Re
A reinsurance company owned and managed by insurers, funded by levies on member insurers (£180m), individual levies based on insurer’s share of home insurance market, with costs passed on to policyholders based on their risk of flood and to ensure affordability the individual cost is based on council tax bandings so that properties at significant risk of flood can still benefit from access to affordable flood cover without punitive excesses and/or barriers to indemnity
Riot
The Public Order Act 1986 defines a riot as a group of 12 or more people, gathered for and carrying out a common purpose with intent and force if necessary, in such a way as to alarm a person of reasonable firmness and courage. Separate scheme in place for Northern Ireland.
Gap terrorism/’lone wolf’ cover
Where a terrorist type incident occurs but does not meet the definitions of terrorism under an insurer’s policy
Types of exclusions under an all risks commercial policy
- Absolute exclusions: war, pollution, contamination, consequential loss
- Gradually operating exclusions: corrosion/rust, wind/rain damage to property in the open
- Aspects of cover which can be written into the policy: money, glass, subsidence
- Property or risks more appropriate to another class of business: motor vehicles, aircraft
Negotiability of money
How easily it can be converted to cash
Escort warranty
Depending upon the amount of money being carried, a specified number of able-bodied persons may need to be present
Uninsured working expenses
Those costs which vary in direct proportion to the level of turnover (raw materials etc)
Contributory negligence
Reduction in damages to reflect a claimant’s own negligence
Contractual liability
Agreements that the insured makes with third parties which are over and above the legal interpretation of ‘legally liable’
Claims-made policy
Policy applies to claims made against the insured during the period of insurance rather than losses occurring during the period of insurance, so most PI policies will also contain a retroactive date. The claim attaches to the year it is made, not when the advice was given.
Loss-occurring policy
Claim attaches to the year the accident happened rather than when the claim is made
Retroactive date
Usually predates the inception of an insurance contract, and are normally applied from the first date you have held an uninterrupted insurance – used by insurers to exclude claims relating to work which predates the retroactive date from which cover has been in place
Uninterrupted insurance
You do not have to have held uninterrupted insurance with the same insurer, just that insurance has been in place
Errors and Omissions Insurance
The PI insurance required to be held by intermediaries
Bunding
Containment of potentially hazardous materials
Litigious society
Prone to engage in lawsuits
The ‘underlying claims cost’
High frequency, low severity claims - should be approximately in direct proportion to the number of exposure units insured
Risk premium
The expected ultimate cost in claims of the risk being accepted, including an allowance for the degree of uncertainty attaching to the claims cost (whether in the estimating process or through the nature of the claims themselves); and further defined as representing the amount of money required today to fund claims (i.e. the time value of money is taken into account)
Periodic payment orders (PPOs)
Have increased in use for serious personal injury claims, adding significant costs to claims settlements as they are designed to make structured payments to claimants for life and to avoid the need for the state to fund care costs once settlements have been spend by claimants - increased cost comes from administration and better predicted lifespans of claimants
Claims run-off
Movements in claims which could produce a surplus or deficit
Latent claims
For liability classes, latent claims are an extreme form of IBNR as there may be more than 50 years between the cause and the claim in some cases, e.g. asbestos-related diseases such as mesothelioma (40 years ago), abuse, stress, toxic mould, EMF (mobile phone technology) - all long tail claims
Claims farming
When a company or a person encourages another to make a claim
Work transfer agreement
Insurer pays the intermediary a percentage of the premium charged in exchange for taking on more work (e.g. issuing documentation, delegated authority)
Risk capital requirement
Calculated by actuaries, is the proportion of total account premiums which must be kept as free reserves to ensure that an insurer can meet its claims obligations
Underwriting result
The business result without investment income - actual profit or loss value
Combined Operating Ratio (COR)
Combination of loss ratio, commission ratio and expense ratio - percentage
Probable Maximum Loss (PML)
The maximum loss that an insurer would be expected to incur on a policy
Proportional reinsurance
The reinsurer accepts an agreed share of the risk to be ceded, and pays any loss incurred on the same basis; can be divided into quota share and surplus
Quota share reinsurance
(Within proportional reinsurance) An agreed proportion of all insurances written by an insurer will fall within the treaty
Surplus
The insurer only reinsures those risks where the sum insured exceeds its own retention limit
Maximum retained line
Within surplus insurance (under proportional), the insurer will purchase additional lines equal to the line it is able to write
Non-proportional reinsurance
A reinsurer agrees to contribute to losses exceeding a specified figure for a premium negotiated with the insurer
Stop loss
(Within non-proportional reinsurance) The insurer is primarily concerned with its loss ratio, e.g. preventing its maximum loss ratio from exceeding 80%; it could obtain reinsurance for claims in excess of this - however the reinsurer will usually insist that an insurer shares in any reinsured loss, otherwise the insurer would effectively be guaranteeing that it would not suffer a loss
Retrocedant
A reinsurer obtaining reinsurance for itself
Retrocessionaire
A reinsurer accepting reinsurance from another reinsurer
Treaty reinsurance
Reinsurance that can be purchased to cover a wider portfolio of risks, either a class of business of an insurer’s whole book of business
Insuring clause
Operating clause
Condition
A contractual term that the insured agrees to comply with during the period of cover
Representation
Oral or written statements made during the negotiations for a contract; some may contain material information and others may not
Chattel
Personal possessions
Any other money limit
The limit to money while in the premises when open for business and while in transit
Direct discrimination
When someone is treated less favourably due to a protected characteristic or are thought to have, or because they associate with someone who has a protected characteristic
Protected characteristics
Defined within the Equality Act 2010 as age, disability, gender reassignment, race, religion, sex, sexual orientation, marriage and civil partnership, pregnancy
Associative discrimination
This already applies to race, religion and sexual orientation and has now been extended to cover age, disability, gender reassignment and sex - this is direct discrimination against someone because they associate with another person who possesses a protected characteristic
Perceptive discrimination
This already applies to age race, religion and sexual orientation and has not been extended to cover disability, gender reassignment and sex - this is direct discrimination because others think they possess a particular protected characteristic, and applies even if they do not have it
Indirect discrimination
This already applies to age, race, religion, sex, sexual orientation and marriage and civil partnership and has now been extended to cover disability and gender reassignment - can occur when there is a condition, rule, policy or even practice in a company that applies to everyone but particularly disadvantages people who share a protected characteristic
Data Subject Access Request (DSAR)
Under the GDPR, individuals have the right to access their personal data - this request can be made verbally or in writing, and the organisation generally has 1 month to respond although it can take an additional 2. If the organisation fails to respond the individual must firstly complain to the organisation, and if remaining dissatisfied, they can complain to the ICO. The first copy of an individuals personal data should be provided free, although charges are permitted for additional copies if the organisation feels such a request is unfounded or excessive, and can ask for a reasonable fee to cover admin costs.
Excess of loss
Liability layering; if an insurer can only accept a limit of £2m but the insured requires £5m, they will have to arrange additional protection of £3m with another, called excess of loss
Operational capacity
The size of risks an insurer is able to accept
Capital benefit
Lump sump payable in the event of death, loss of limbs, PTD, PPD, TTD, TPD
