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IF 1 > IF1 - Chapter 2 > Flashcards

IF1 - Chapter 2 Flashcards

1
Q

Insurance Market Restrictions

A

Some parts of the world insist on risks within the country concerned being placed with a domestic or specific insurer or with an insurer authorized by the State to underwrite that form of insurance in that country.

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2
Q

Catastrophe Exchange

A

Insurers/reinsurers switching risk when their portfolio has accumulated too much of the same risk in one area - i.e. householdinsurance with an insurance - seems simple enough, but concern is that there are many risks in same geographic area. Seek protection by reinsurance - can exchange part of portfolio for flood risks fin one area with another insurer for different part of the world - so can get quite complicated - one local risk spread worldwide

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3
Q

Five main groups of people in an insurance market

A

Buyers, intermediaries, aggregators, insurers, reinsurers

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4
Q

Information Flow

A

Figure 2.1

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5
Q

Interaction

A

Figure 2.2

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6
Q

Buyers

A

individuals, partnerships, companies, public bodies, associations and clubs

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7
Q

Partnerships

A

Do not have a separate legal existence, each of the partners being jointly and severally liable. Professional negligence

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8
Q

Companies

A

Separate legal existence from those who own the company

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9
Q

Insurer requirements by FSA

A

Financial Services Authority FSA authorizes insurances to sell - insurance undertakings

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10
Q

Proprietary Companies

A

Usually shareholders - Some are publicly quoted and have plc behind their names - usually brand names but even then brand names may operate under different banners/names like how RSA has More Th>N - Some are Ltd, usually small to medium sized companies

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11
Q

Mutual Indemnity Associations

A

Like mutual companies, but have origins in being self-managed pools - marine insurance - Protection and Indemnity ASsociations

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12
Q

Captive Insurance

A

Owned by non-insurance parent company - tax efficient way of transferring risk

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13
Q

Lloyds

A

Not an insurer but an organization of facilities for placing risks

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14
Q

Syndicates (Lloyds)

A

groups of private individuals or corporate members who actually carry the risks (provide financial backing). Each syndicate employs a managing agent and the agent appoints the underwriters. - Each year members will allocate capital to each syndicate which determines how much they can underwrite in one year which is the syndicate capacity

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15
Q

Lloyds (transacting insurance)

A

traditional way - approach a box - risks are placed on a slip of paper and the broker runs around first to the underwriter who decides a premium and then he runs to the underwriters to “scratch the slip” which is where the term underwriter comes from - each syndicate then can decide how many shares of the risk they want to accept - then when the slip is filled, the organization called Xchanging will pepare and sign the policy

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16
Q

Names

A

actual risk carriers were originall all individuals called Names - people who had a certain level of wealth and could insure risks - guaranteeing their share of losses up to the full extent of their personal fortune which is a big commitment - nowadays with changes - with capital from companies and limited liability for individuals or limited partnerships - much less unlimited liability - less than in 2010, less than 4%

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17
Q

Lloyds reform

A

wanted to open to non-lloyds brokers - Legislative Reform Order 2008 - removed this requirement

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18
Q

Contract Certainty

A

ensure that all parties are aware of coverage and terms of the policy - London Market Principles - to help with concerns of an insurers’ liability - Full wording must be agreed before any insurer commits to the contract - evidence of cover must be issued within 30 days of inception for commercial risks

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19
Q

FSA exempt

A

all insurance activities must be authorized byFSA or exempt - to be exempt you must be an appointed representative (AR) or introducer appointed representative (IAR) or a member of a professional body that has equivalent rules to the FSA (Designated professional body) For ARS and IARS, someone will take responsibility for them

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20
Q

Authorized Persons

A

Intermediary firms - Must follow FSA rules for accounting, training, competence, reporting requirements.

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21
Q

Appointed Representatives

A

individual or company that is appointed by an authorized person under terms of contract - may be actuing for an insurer OR for an intermediary - Principal takes responsibility for representatives actions - can work for more than one principal - usually people or companies that have a non insurance main occupation like garages, associations, etc…

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22
Q

Introducer appointed representatives

A

kinda like marketing - limited to effecting introductions and distributing non real time financial promotions - usually provide no advice

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23
Q

Lloyds Insurance Brokers

A

Before you had to be registered to be called a broker - Lloyds brokers are those registered with Council of Lloyds

24
Q

Services of an intermediary

A

Could be what we do - Or extend to even more functions if you have a Terms of Business Agreement with the insurer

25
Q

Broker Networks

A

Can get access to centralized services including accounting, training, development, etc… - greater purchasing power in negotiations with insureres

26
Q

Consolidations

A

These are companies that grow by acquiring others within the marketplace - sometimes blurs lines between insurers and intermediaries

27
Q

Marketing Mix

A

In insurance marketing process involves decisions on product, price, promotion,and place (latter 2 for distribution)

28
Q

Distribution Channel

A

Direct - Employees will promote using mailing techniques - Indirect - Brokers or representatives

29
Q

Schemes and Delegated Authority

A

Some even let intermediaries issue coverage - great deal of flexibility- Usually policy wording is negotiated to fit a particular category of client

30
Q

Reinsurance (why do it?)

A
  1. to smooth peaks and troughs in claims experience
  2. protect the portfolio (balance sheet)
  3. Provide better customer service
  4. Support for insurers entering new areas of business
31
Q

Facultative Reinsurance

A

protect from a single known risk - like catastrophes

32
Q

Protecting The Portfolio

A

arrange facilities to enable them to place a range of risks that fall within agreed criteria - called treaties - or can protect portfolio as a whole - pay out of the overall lost ratio exceeds a certain figure

33
Q

Improving Customer Service

A

Extra capacity provided enables insurers to accept much more than their own net capacity

34
Q

Types of Reinsurers

A

Lloyds syndicates, insurance companies, specialists

35
Q

Retroceding

A

reinsurers reinsuring themselves is called retroceding

36
Q

Underwriters

A

Job is to manage pool effectively - assess risks that people bring, decide whether or not to accept, determine terms and conditions, calculate a suitable premium to cover claims, provide a reserve, meet all expenses, and provide profit

37
Q

Claims Personnel

A

Job is to deal quickly and fairly with claims, distinguish between real and fraudulent claims, assess cost of claim so a realistic value is placed upon it prior to payment (reserving), determine whether others such as loss adjusters need to be involved, be able to settle claims with minimum of wastage

38
Q

Loss Adjusters

A

expert in processing claims - large claims or complex ones, loss adjuster will investigate, determine what extent policy covers, emergency measures, negotiation of amounts claimed, negotiation with specialist suppliers, recommendation for settlement - suppose to be independent

39
Q

Loss Assessors

A

appointed by insured to prepare and negotiate a claim on their behald - fees paid for by the insured but fees cannot be claimed and recovered from insurer

40
Q

Surveyors and those providing forensic services

A

Will carry out a variety of functions including risk assessment but will also investigate claims like gathering evidence, determining whether any fire accelerant was used, lack of maintenance etc… - similar to loss adjusters but more specifically focused -usually called in when something is suspicious - also advises on whether immediate action must be taken (employing night watchman), any underwriting action, etc..

41
Q

Actuaries

A

professionally qualified person who applies statistics to problems of insurance, investment, financial and risk management, and demography

Life insurance applying mortality statistics, time value for of money techniques

42
Q

Risk Managers

A

steady trend of developing a formal strategy for risk management - identifying risks, providing guidance on best practice in these areas, transfer of risk by contract or insurance

43
Q

Compliance Officer

A

Person whose role is to oversee compliance…usually FSA ensure firm abides by the rules and regulations

44
Q

Association of British Insurers

A

Formed in 1985 representing insurers in the UK - was a merger of a number of other associations - Includes foreign insurers working in the UK - gather statistics, codes of practice, PR, greater awareness etc - Two councils General Insurance Council and Life Insurance Council

45
Q

International Underwriting Association of London (IUA)

A

world’s largest representative organization for international and wholesale insurance and reinsurance companies - centered upon London Underwriting Centre in London

46
Q

British Insurance Brokers Association (BIBA)

A

COmply with principles governing conduct - promote members’ views on legislation, encourage and provide training for professional conduct, nominating members for committee seats, encourage links between partners, liaising with other bodies

47
Q

London Market Regional Committee (LMRC)

A

When LMBC isbanded in 2009, BIBA created this - lobbying role, represent the sector to financial security authority, Europe, UK gov, etc…

48
Q

London and International Insurance Broker’s Association (LIIBA)

A

Job is to ensure that London remains where the world wants to do business by continuing the transformation of market processes and maintaining the highest professional standards - was the old LMBC - broker commission transparency

49
Q

Institute of Insurance Brokers

A

Trade body, represent members’ interests to government, authorities, EEA commission, etc… Non profit distributing org limited by guarantee

50
Q

Lloyds Market Association

A

Provides representation, information, and technical services to underwriting businesses in the Lloyds market

51
Q

Chartered Insurance Institute (CII)

A

Education and professionalism

52
Q

Chartered Institute of Loss Adjustors (CILA)

A

Provide rules of conduct, leading authority on claims issues, requires members to be impartial, consists of individual loss adjustors, rather than the firms that employ them.

53
Q

Faculty and Institute of Actuaries

A

provides manuals of actuarial practice and issue guidance notes - provide education, promote to the public, provide membership services

54
Q

Motor Insurance Bureau (MIB)

A

Formed in 1946 as private company with agreements with the government to help compensate victims of negligent motorists - two agreements (untraced drivers and uninsured drivers)

55
Q

Untraced Drivers Agreement

A

Applies to the provision of compensation for personal injury or death, plus property damage in limited circumstances - Property damage claims are only considered where the vehicle is identified but the driver cannot be traced

56
Q

Uninsured drivers’ agreement

A

concerned with third party personal injury or third party damage, when there is no motor insurance policy in force

57
Q

Motor Insurers’ Information Center (MIIC)

A

set up as subsidiary of MIB to reduce number of uninsured drivers in the UK - imposed requirement to be able to identify insurance details from license plate

IF 1 (3 decks)

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