General Insurance

Question 1

Cover in motor insurance

Answer 1

Covering damage to the policyholders’ vehicle
Covering damage caused by policyholder to another vehicle or property
3rd party indemnity for medical costs

Question 2

Cover in household insurance

Answer 2

Contents protected against theft, fire, flood, subsidence
Structure protected against acts of nature, fire, subsidence
May also cover 3rd party claims

Question 3

How is office premium calculated?

Answer 3

risk premium (expected claim frequency * expected cost of claim)
+ loadings for tax
+ commission
+ expenses
+ profit
+ contingencies
- investment income
+ cost of reinsurance

Question 4

4 main drivers of protif/loss in general insurance

Answer 4

Level of Premiums
Amount of Claims - average frequency, average severity
Level of Expenses
Investment returns

Question 5

List, describe and give a example of different categories of liability with categorisation by nature approach
give matching techniques for each type

Answer 5

Guaranteed in money terms - benefit payments where the amount is specified in money terms - a pure endowment - pure/approximate matching
Guaranteed in terms of a price index or similar - benefits whose amount is directly linked to an index. this index might not be a nationally published one, like with benefits declared by the sponsor - CPI linked annuity - index-linked securities
Discretionary - any payments that are payable at the discretion of the provider - assets that will produce in the highest expected return
Investment-linked - benefits where the amount is directly determined by the value of the investments underlying the contracts - unit-linked investment contracts - investing in the same assets used to detemine the benefits

Question 6

3 reserves that a geneal insurer will need to calculate regularly and methods

Answer 6

reserve for unexpired risk
(proportionate appraoch)

reserve for outstanding claims
(a case by case estiamte)

reserve for IBNR claims
(statistical analysis)

Question 7

describe public liability insurnace

Answer 7

public liability indemnifies the insured
against legal liabilities
arising from some form of negligence
that resulted in death/injury to a third party
or damage to property belonging to a third party
other than those liabilities covered by other liability insurance products

in many cases, legal costs will also be covered