IF3.8 Underwriting Considerations Flashcards
Purpose of underwriting
The understand the risks being proposed to decide whether or not the accept a risk
Is commercial or personal insurance simpler to underwrite
personal, more homogenous
Consumer Insurance (Disclosure and representations) Act 2012
The consumer must only answer, fully and accurately questions that the insurer asks of them.
Insurance act 2015
Commercial customers must give a fair presentation of risk.
What will the underwriting process assess?
- frequency and severity of possible claims (specifically looking at that class of business)
- The average claim per member of the group
- The proposers characteristics in comparison with the average member.
Factors used in the motor insurance underwriting process
- drivers age
- Type and make of the car
- type of use
- geographical area
- storage
- driving record
- cover required and/or extensions requested
- vehicle modification
Factors used in the health insurance underwriting process
- occupation (some jobs have increased risks which could effect the health)
- age
- family circumstances
- lifestyle and physical condition
- medical history (pre-existing conditions)
why may insurers limit the benefit of a health insurance policy
as to not entice people who are in financial difficulty to enter into an insurance contract and then break their arm to get a pay-out, for example
What may an insurer do in a proposer has a pre-existing condition
make them complete a medical exam to fully understand the risk.
What underwriting considerations are there for the buildings in household insurance?
- construction (standard materials: brick stone or concrete with a roof of slates, tiles, metal or concrete).
- location (is the location more at risk of storms, floods, subsidence, crime & arson)
What underwriting considerations are there for the contents in household insurance?
- Area (theft risks)
- Occupation during the day
- Security
What underwriting considerations are there for travel insurance?
- Destination (Countries such as the US has expensive healthcare)
- Purpose and duration of travel
- Group policies (a group is likely to all be involved in the same accident/ situation)
- Existence of pre-existing conditions.
What underwriting considerations are there for fire and special perils insurance?
- Use of building
- Types of goods stored on premises
- Construction and material (Brick, steel or timber)
- Safety feature
- Risk management features (management, control of contractors)
- number of floors and area
- method of heating and lighting
- location relative to perils (e.g. storm, flood, subsidence, theft and arson)
What underwriting considerations are there for theft insurance?
- Trade (some trades such as jewellers are more susceptible to theft than others)
- geographical area
- any moral hazard of owner
- nature and construction of the property (resistance to forced entry)
- Theft precautions (e.g. CCTV, security lighting, security guards & intruder alarms)
What underwriting considerations are there for glass insurance?
- use of the building
- geographical area (likely to have vandalism)
What underwriting considerations are there for money insurance?
- how the money is handled
- precautions when storing or transporting money
- how employees are paid
- how clients pay (card is safer than cash)
What underwriting considerations are there for legal expenses insurance?
proposers susceptibility to actions through the courts (employment criteria, views on H&S regulations and occupation)
What underwriting considerations are there for business interuption insurance?
how quickly the business can get up and running again:
- can they operate from another premises
- are there replacement machines available
- Is there any critical dependencies
- are there any seasonal features (dependent on key times of year, damage at these times may have result on business)
- external dependencies s.a. suppliers, customers and utilities.
also assess similar risks to the property underwriter
What underwriting considerations are there for employers liability insurance?
- wage roll
- number of employees
- trade and occupation, danger to the staff
What underwriting considerations are there for Public liability insurance?
- trade or business (how much contact the business has with the public)
What underwriting considerations are there for Pollution liability insurance?
- Trade
- Materials used (are there adequate controls to prevent contamination, what type of chemicals are used, where are they stored)
What underwriting considerations are there for products liability insurance?
- trade/business
- what are they manufacturing/selling
- quality control systems?
- where do they sell them to?
What underwriting considerations are there for professional indemnity insurance?
- occupation
- professional qualifications
- experience and degree of moral hazard
What underwriting considerations are there for Extended warranties insurance?
hey are not generally underwritten but stats will be assessed for the likelihood of a product breaking
How is credit rating an underwriting consideration?
- reflects their acceptance of risk
- a potential rating factor
Instances of fraud
- inventing a loss that never took place
- exaggerating the number of items stolen
- deliberating creating an insured event
- exaggerating the effects of an insured event
Who is effected by fraudulent claims
- the insurers (reduces money in the pool)
- the insured (increased premiums)
- the fraudsters (temptation to complete a fraudulent action again)
Insurance fraud Bureau (IFB)
deal with fraud prevention
- co-ordinate industry wide action (share info with all insurers)
- actively run public education campaigns
- operate centres of expertise on fraudsters and their methods of operation
pooled claims database
insurers share information from a variety of insurers and try to trap those repeated claimants by matching their new claims details agaisnt those already held
Motor Insurance Anti-Fraud and Theft Register (MIAFTR)
contains details of all total losses and all theft claims so insurers can check whether a claim has been reported more than once.
motor insurance database (MID)
details of all registered vehicles in the UK and related insurance details
Claims underwriting exchange
contains information on incidents reported to insurers by personal insurance policyholders.
Subscribed member submit claims data and check that the claim isn’t duplicated in any way.
Art Loss register
subscribed insurers give info to:
- increasing the recovery rate stolen art an antiques
- deterring theft by making the resale of stolen articles more difficult
application fraud
When a proposer applies for a policy fraudulently
what can a claims handler do to combat fraud?
be cautious of claims:
-made soon after policy inception or renewal
- where the insured has no documentation for lost items
- where the insured has several similar claims for similar accidental loss within a short space of time
2 things that help reduce fraud
- completing claims forms over the phone
- claims settlement by replacement rather than cash
equality act 2010
protects certain characteristics and prevents people being discriminated against
Protected characteristics according to the quality act
age, disability, gender reassignment, race, religion, sex, sexual orientation, marriage & pregnancy
Direct Discrimination
when someone is treat less favourably that another person because of a protected characteristic
Associative Discrimination
Discrimination against someone because they associate with someone with a protected characteristic
Perceptive Discrimination
Discrimination against someone because one believes they possess a protected characteristic
Indirect Discrimination
A policy or rule that applies to everyone but disadvantages people with certain protected characteristics.
Who does GDPR apply to?
Data controllers and data processors
Personal data
data that can be used to identify a person
Sensitive data
- race
- ethic origin
- politics
- religion
- trade union membership
- genetics
- biometric
- health
- sex life & sexual orientation
Data protection principles from GDPR
- data should be processed lawfully
- Data should only be collected for specified & legitimate purposes
- Data should be adequate, relevant and limited
- data should be accurate and up to date
- Data should be be kept no longer than necessary
- Data should be processed with appropriate security
Lawful Processing
- Consent must be freely given
- The processing is necessary for: a contract with the individual, the firm to comply with the law, protecting the individual, to perform a task in public interest, the firms genuine interests.
Rights under UK GDPR
- right to be informed
- right of access
- right to rectification
- right to erasure
- right to restrict processing
- right to data portability
- right to object
- rights in relation to automated decision making and profiling.
Who is a data breach reported to?
The information commission officer (ICO)
