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CII > IF3.2 Underwriting Process > Flashcards

IF3.2 Underwriting Process Flashcards

1
Q

define Subjectivity

A

Terms and condition

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2
Q

Statement of Fact

A

legally significant facts

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3
Q

Policy wording

A

Written the terms and conditions of the coverage

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4
Q

What has to be provided/ not provided in a quote

A

statement of fact
not policy wording

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5
Q

Quotation procedure

A
  • provide a quote and state how long it is valid for
  • if you accept within the timescale the insurer is legally bound to honour it
  • if you do not accept it within the time the insurer is not bound to honour it and the consumer must get a new one.
  • if the risks change, the insurer doesn’t have to accept
  • the insurer can withdraw the quote at any time
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6
Q

When is cover effective

A

at inception NOT at quotation

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7
Q

if no timescale is issued on the quotation then…

A

the timescale must be a reasonable time

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8
Q

What is a proposal form

A

a document for consumers to fill in their information

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9
Q

declaration

A

A declaration states that the information supplied by the proposer is true and correct to the best of the proposers knowledge and belief

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10
Q

Insurtech

A

the use of new technologies and digital tools to provide insurance services

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11
Q

Small commercial company proposals

A

packages where cover is up to a limit
(software houses provided the functionality of brokers to obtain quotations for companies)

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12
Q

Large commercial company proposals

A
  • presentations
  • surveys
  • fact finds
  • questionnaires
  • meetings
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12
Q

Consumer proposals

A

internet & phone calls

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13
Q

Specific Questions Examples

A
  • Risk Address (the location where the thing your insuring is)
  • Sum Insured
  • Business description
  • limits of indemnity
  • security measures
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14
Q

General Questions Examples

A
  • Name
  • Correspondence address (the person insuring)
  • Occupation
  • Insurance Period
  • Insurance History
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15
Q

When is pricing easier for insurers?

A

When they take on lots of the same risk (law of large numbers)

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15
Q

Premium

A

The amount paid to an insurer by the insured in consideration of the insurer agreeing to cover the risk

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16
Q

Premium rate

A

reflects the hazard associated with the insured

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17
Q

Premium Base

A

the measure of exposure (suitable measure of risk, aka sum insured)

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18
Q

Formula for premium

A

premium = rate x sum insured

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19
Q

greater risk… (effect on rate)

A

higher rate

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20
Q

Rate per cent or Rate per mile

A

a change in rate based on having more hazards and presenting a higher risk

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21
Q

Rate per cent

A

the price in pounds for each hundred pounds of exposure

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22
Q

rate per mile

A

the price in pounds for each thousand pounds of expoure

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23
Q

Alternative exposure methods

A
  • look at wage roll (employers liability)
  • look at annual turnover (product liability)
  • look at fees earned (PI insurance)
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24
Q

What does the insureds premium represent?

A

The amount of risk they represent and the likelihood of them taking money out of a common pool in the event they claim (doesn’t take into account expenses)

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25
Q

What happens if the exposure measure is unknown at the start of the period of insurance?

(Adjustable premium)

A
  • provide an estimate of what the exposure measure might be
  • at the end of the year submit a declaration showing the actual figures
  • then the premium is adjusted up or down depending on the difference
    (Consumer rights act doesn’t apply, the insurer must still be clear what will occur)
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26
Q

Deposit premium

A

the initial premium paid when the exposure is known and the premium will be altered at the end of the insurance term

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27
Q

Flat Premium

A

The premium is automatically given on input of the proposal form aka a rate is not applied to a premium base.

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28
Q

Advantages of a flat premium

A

quick and easy (especially for brokers)

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29
Q

Why a policy document issued

A

So that the insured and the insurer need to be absolutely clear as to the terms and conditions agreed between them

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30
Q

What does the policy document include?

A
  • details of the item/exposure insured
  • operative perils
  • period of cover
  • exceptions
  • conditions
  • the premium
    any other relevant information
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31
Q

what is a cover note

A

A temporary document issued as evidence that insurance has been granted (to temporarily replace a certificate)

32
Q

when is a cover note issued

A
  • granting temporary cover until a proposal form arrives
  • the insurer wishes a surveyor to visit the premises
  • If a new driver is added in motor insurance a cover note is issued.
33
Q

Features of a cover note

A
  • commencement date
  • statement that the policy follows the normal terms and conditions of the insurer for that class of insurance
  • risk specific information that identifies the property or liability that is covered
  • special terms that apply
  • expiry date of cover
34
Q

What has to be contained in motor insurance certificates

A
  • registration of vehicle
  • person entitled to drive
  • limitations as to use
  • name policyholder
  • date of commencement and expiry
  • confirmation that cover complies with UK statutory requirements
35
Q

What has to be contained in Employers Liability Insurance certificates

A
  • Name of policyholder
  • date of commencement and expiry date
  • name of insurer & authorised signature
  • level of cover (needs to show meets the minimum requirement)
  • statement from the insurer to show meets the minimum requirement
36
Q

Contract Certainty

A

The complete and final agreement of all terms between the insured and the insurer by the time that they enter into the contract, with contract documentation provided promptly thereafter

37
Q

Why do we have contract certainty?

A

to avoid disputes from uncertainty

38
Q

What are the different methods of paying a premium?

A
  • single upfront payment
  • credit
  • monthly installment
39
Q

What happens if the insured decides to pay in instalments?

A

a fee is added on to the premium to reflect the loss of interest

40
Q

Renewal Notice

A

Information about renewal inc the renewal premium

41
Q

If the insured does not pay the premium on renewal?

A

cover is lapsed

42
Q

Insurance Premium Tax (IPT)

A

The tax is payable by policyholders but insurers are responsible for collecting the tax and passing it to HMRC.

43
Q

Standard rate of IPT

A

12%

44
Q

Higher rate pf IPT

A

20% for travel insurance & additional insurances

45
Q

What type of insurance are not subject to IPT

A

reinsurance, life assurance & certain marine policies

46
Q

Loadings and Discounts

A

applied to the rate to reflect various inherent risk features

47
Q

Wage roll

A

payments to staff throughout the year

48
Q

Turnover

A

the amount taken by a business in a particular period

49
Q

When working out premium per mile…

A

divide by 10 first

50
Q

rate per mile

A

per thousand

51
Q

rate per cent

A

per hundred

52
Q

example of flat rate based

A

group travel, one off events

53
Q

When are cover notes neccessary

A

If there is a delay in updating the Motor Insurance Database (MID) you need one to show you’re covered.

54
Q

How quickly does a policy have to be given to a consumer according to contract certainty

A

7 days

54
Q

How quickly does a policy have to be given to a commercial client according to contract certainty

A

30 days

55
Q

What is credit

A

When a broker uses a third party company to pay the full premium then the client pays back in instalments.

56
Q

Difference between credit & instalments by direct debit

A

credit uses a third party and then the insured pays the bank back.
Instalments are provided by the insurer where you’re just delaying paying.

57
Q

Policy Lapse

A

In the event of non payment, cover will no longer be provided.

58
Q

Difference between per cent and per mile

A

A rate per cent is a price for each hundred pounds of exposure.
A rate per mile is the price for each one thousand pounds of exposure.

59
Q

In a proposal form, risk specific questions are

A

Question that pertain to the particular details of a proposed risk

60
Q

If a proposers accepts a quote when is the insurer legally permitted to withdraw these terms

A

Only if the basis of risk has changed

61
Q

What is the usual premium base for employers liability?

A

The wage roll

62
Q

What is the most common basis of premium calculation for public & product liability insurance

A

Turnover

63
Q

A valid employers liability insurance certificate must contain

A

the insureds Name

64
Q

minimum level of cover for medical treatment in a standard travel insurance policy

A

1m

65
Q

Personal accident benefits for a travel insurance policy

A

10-25k

66
Q

If an insurer wishes to check the claims history of a proposer it would check…

A

the claims and underwriting exchange (CUE)

67
Q

Can insurers assume positive answers to proposal form questions
(Consumer Insurance (Disclosure and representations_ Act 2012)

A

No, proposers have to expressly answer

68
Q

warning (or important note)

A

the material information & circumstances which should be provided and the dangers if they are not disclosed.

69
Q

General proposal questions

A

Common to most general insurances

70
Q

Specific proposal questions

A

risk specific questions

71
Q

What are applied to the rate to reflect various inherent risk features

A

loadings and discounts

72
Q

What does the policy contain?

A
  • all details of the item insured
  • operative perils
  • period of cover
  • exceptions
  • conditions
    -premium
  • other relevant information
73
Q

Who made contract certainty

A

ABI

74
Q

How quickly must policy document be sent according to contract certainty?

A
  • 7 days consumer
  • 30 days commercial
75
Q

What insurance is not subject to IPT?

A

reinsurance, life assurance, risks outside of the UK & marine policies

76
Q

What document forms the legal basis for an insurance contract

A

the proposal form

77
Q

Which section of the insurance policy contains a detailed extent of cover?

A

The operative clause

CII (28 decks)

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