Insurance, legal and regulatory Flashcards
1
Q
Why is some insurance made compulsory?
A
To provide funds for compensation, and that there are fund available when there is been a loss, which is not their fault.
2
Q
What is the legal act, which made motor insurance compulsory?
and what does it require?
When does a certificate need to delivered?
A
The Road traffic act 1998.
Made it a crime to drive/use a vehicle on the road without insurance, which would provide cover against third party property damage and third party bodily injury.
The motor insurance certificate still needs to be delivered, but is no longer required for the policy to be effective.
3
Q
Other then motor insurance what is the other form of liability insurance which is compulsory for private individuals?
What level of cover, would be satisfactory
A
The ownership of Dangerous wild animals or dangerous dogs.
The nature and scope of such insurance is not defined in the Dangerous Wild Animals Act 1976. However, the local authority which issues the appropriate licence, must be satisfied as the adequacy of the insurance.
4
Q
What did the Employers’ Liability Act 1969, make compulsory?
A
For employers in the UK to effect employers liability insurance. Which would insure them against their liability to pay compensation to employees who sustain bodily injury or disease, arising out of liability to pay compensation to employees who sustain bodily injury or disease arising out of and in the course of their employment.
The minimum required limit is £5 million, though the insurance market sets £10 million as standard.
No certificate needs to be show, employees just need reasonable access (this would be via an electronic format)
5
Q
What must the proprietors of riding establishments must have
A
It is compulsory that these owners, have public liability.
The insurance must indemnify the insured against the claims arising from the use of the insured’s horses.
6
Q
What professions need to get Professional indemnity insurance?
A
1) Solicitors: need to get insurance that cover them against claims for financial loss suffered by clients as a result of the solicitors’ professional negligence.
2) Insurance intermediaries: This insurance must cover against financial loss suffered by third party caused by their professionals negligence up to the substantial limits.
The minimum level is currently 1,300,380 (eruos) for a single claim, and for aggregate losses, the higher of 1924500(euros) or 10% of annual income (up to £30m)
7
Q
What does privity of contract mean?
And what did the Contracts (rights of third parties ) act 1999 do?
A
That a person can only enforce a contract if they are a party to it. Therefore, even is a contract is made with the purpose of benefitting someone who is not a party to it, that person has no right to sure for breach of contract .
The Act reforms this rule and sets out the circumstances in which a third party will have a right to enforce a term of the contract.
8
Q
What did the Third parties (right against insurers) Act 2010 do.
What must happen in order for the Act to apply?
A
Sets out to protect insurance proceeds from the effects of insolvency.
The act permits a third party to bring a claim directly against a insurer, without having to restore the insolvent company to the register.
Prevents insurance monies being paid to the insolvent insured and then on to general creditors s part of insolvency proceedings, rather than being paid to the intended beneficiaries of an insurance policy.
For the Act to apply an insured must:
Incur a liability to a third party for which they have insurance.
Be insolvent.
9
Q
What does good faith mean
A
Means that disclosure must be made in a reasonably clear and accessible manner and material representation of fact, expectation or belief must be “substantially correct”
10
Q
What does the principle of good faith mean?
A
That the parties to a contract must volunteer material information in all negotiations before the contract come into effect.
11
Q
What does the principle of good faith mean to the prosper
A
They have a duty to duty to disclose all material circumstances about the risk to the inurer.
12
Q
What does the principle of good faith mean to the insurer?
A
They cannot introduce new non-standard terms into the contract that were not discussed during negotiations, neither can the insurer withhold the fact that discounts are available for certain measures that improve a risk
13
Q
What is the Insured’s duty of disclosure - consumer insurance.
What Acts governs it?
A
Consumer insurance ( Disclosure and Representations) Act 2012.
Removed the common law duty on consumer to disclose any information that a prudent underwriter would consider material and replaces it with a duty to take reasonable care not to make a misrepresentation - By making sure that questions asked by insurers are answered fully and accurately
-This only applies to consumers, not business/commercial insurance
14
Q
What is the Insured’s duty of disclosure - non-consumer insurance.
What Acts governs it?
A
The insurance Act 2015
Policyholders are now obligated to make a fair presentation of the risk.
This is defined as:
Makes disclosure of every material circumstances which the insured knows or ought to know.
Makes this information presentable in a way which is would be reasonably clear and accessible to a prudent insurer.
15
Q
Insurer’s duty of disclosure - non-consumer insurance -what are they
A
Notifying the insured of a possible entitlement to a premium discount
Only taking on risks which the insurer is registered accept
Ensuring that all statement are true
16
Q
Give a brief overview of Prudential Regulation Authority
A
PRA:
sits within the BoE and is responsible for the stability and resolvability of systematically important financial institutions.
Will not seek to prevent all firms failures but will seek to ensure that firms can fail without bringing down the system.
Will place a “judgement based” approach to supervision.
17
Q
Give a brief overview of Financial conduct authority
A
FCA:
Responsible for conduct of business and market issues for all firms and prudential regulation of small firms.
Focused on taking early action, before consumer determinet occurs.
Shift towards thematic reviews and market - wide analysis to identify potential problems in areas such as financial incentives.
Reviews the full product life cycle from design to distribution with power to ban products where necessary.
18
Q
Give a brief overview of Financial policy committee
A
FPC:
A committee within the BoE responsible for monitoring emerging risks to the financial systems as a whole and providing strategic direction for the entire regulatory regime.
19
Q
What are the PRA’s objectives?
A
1) Promote the safety and soundness of the firms it regulates
2) To contribute to ensuring that policyholders (of insurance polies) are appropriate protected.
Secondary objectives: To facilitate effective competition in the markets for services provided by PRA authorised firms
20
Q
What are the PRA’s threshold conditions
A
A firms head office to be in the UK
A firms business to be conducted in a prudent manner and that the firm maintains appropriate finanical and non-finanical resources
The firm itself to be fit and proper and appropriately staffed.
The firm and its group to be capable of bring effectively supervised
21
Q
What is the PRA’s approach to supervision?
A
Judgement based, forward looking and focused on key risks.
Characterised by a move away from rules and a focus on forward looking analysis.
The aim is to “pre-empt raised before they crystalise”
22
Q
PRA - what is the risk assessment framework
A
The Consideration of the potential impact on policyholders and the financial system of a firm coming under stress of failing.
Risk mitigation by the firm, which considers both operational mitigation which covers management and governance oft the firm combined with its risk management and control.
Financial mitigation and financial strength - Specifically reserves/capital/liquidity.
Structural mitigation and the firm’s resolvability.
23
Q
PRA - what is the intensity of supervision.
A
Depends on the level of a companied riskiness: the threat of harm to policyholders and the PRA’s objectives from failure.
Supervisory resources are allocated to each firm based on the impact assessment.
24
Q
FCA : what are their objectives
A
Overarching strategic objectives: Make sure the relevant markets function well.
Operational objectives:
1) Consumer protection - Against bad conduct.
2) Integrity: proceeding and enhancing the integrity of the UK financial system.
3) Competition: promoting effective competition in the interest of consumers
25
FCA: approach to regulation
Product intervention and governance - The FCA will intervene at an early stage to pre-empt and prevent widespread harm to consumers.
Super-complaints - FCA able to review and react to detailed submissions by consumer groups.
26
FCA - Approach to supervision
THE FCA requires all firms to meet it's high level principle of business.
Proactive: pre-emptive identification of harm through review and assessment of firms and portfolio.
Reactive: Dealing with issues that are emerging or have happened to prevent harm growing.
Thematic: wider signastic or remedy work where there is a actural or potential harm across a number of firms.
27
FCA - accountability
Required to report annually to government and parliament.
Also required to make a report to the treasury in the event of a regulatory failure and where this failure was due to the FCAs actions.
28
What are the first 7 Principles for business (PRIN)
Business must be conducted with:
1) Integrity
2) skill, care and diligence
3) Mangerement and control: the frim has effective managerement
4)Financial prudence
5) Market conduct: the frim observes proper standard of market conduct.
6) Consumer interests: Conflicts of interests must be managed fairly
7) Communication with client: Informatin given to the consumer must be clear, fair and not misleading.
29
What are the 8-11 Principles for business (PRIN)
8) Conflicts of interest: must be managered fairly.
9) Customers relationship of trust
10) clients assets A firm must arrange adequate protection for clinet asessts when it is responsible for them.
11) Relationship with regulators: A firm must deal with its regulator in a open and cooperation way, and must disclose to the FCA approximately anything relating to the firm of which that regulator would be reasonably expect notice
30
FCA treatment of customers - What are the six positive consumer outcomes that firms should strive to deliver to ensure the fair treatment of customers
IT is the role of the firms to ensure that they implement procedures to achieve the below outcomes
1) Consumers can be confident they are dealing with a firm where the fair treatment of customers is central to corporate culture.s
2) Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
3) Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
4) Where consumers receive advise the advice is suitable and take into account of their circumstances.
5) Consumers are provided with products that perform as firms have led them to expect.
6) Consumers do not have unreasonable post-sale barriers imposed by firms to changein
31
What are the senior management arrangement systems
introduced as a new regulatory framework for individual accountability.
Firms are required to do:
Ensure each senior manager has a statement of responsibilities, setting out the areas for which they are persons accountable.
Ensure that all senior managers are pre-approved by the regulators before carrying out their role
32
What are the three pillars of the Senior Management and certificate regime
1) Senior mangers regime: Any firm wishing to apoint a new senior leader/manager, they must be prepared and then summit an application to the regulators approval. This should include a statement of responabilites should be prepared for each senior manager.
2) Certification regime: Applies to indivduals who are not senior managers, but have a role which is deemed capability of causing a significant harm to the firm. This requires the firm to annually asset the fitness and propriety of the person performing other key roles.
3) Conduct rule:
33
What is tested for in the Fit and proper test.
Who determines who passes?
They are tested for being "fit and proper" for their function.
They are tested for:
1) Honesty, integrity and reputation
2) Competence and capability
3)Financial soundness
The onus to determine wo is "fit and proper" is on the firm.
34
What is the public interest disclosure act 1988
Concerns with whistle blowing.
It states that induvial who make qualifying disclosures of information in the public interest have the right not to suffer detriment by any act or omission of their employer because of disclosure.
A qualifying disclosure can be: A criminal offence - A failure to comply with legal obligations - A miscarriage of justice -....
35
What are the Discipline and enforcement - PRA and FCA
Public censure: Where the FCA considers that the firm has failed to meet a requirement, The FCA may issue a public statement of misconduct on an approved person. With the effect of trying to damage their reputation (of the firm and person).
Financial penalties: FCA can impose financial penalties on a firm where the firm has broken a rule.
Prosecution of a criminal offence: The FCA can bring criminal prosecution proceeding against individual for a wide range of offences. EG: Carrying on regulated activity without authorisation.
36
What is the first pillar of Solvency II
1) Financial requirement: they need to meet a:
1) solvency capital requirement- The level of capital required to give 99.5% confidence that assets will be sufficient to cover liabilities over the following 12 months
2) Minimum capital requirement - the level of capital requirement to give national supervisors 85% confidence that assets will be sufficient to cover liabilities over the following 12 months.
37
What is the second pillar of Solvency II
Governance and supervision : - key is the own risk and solvency assessment (ORSA) - which is a set of process and procures that are used to identify, asses, monitor, manage and report the short and long term risks a (re) insurance company faces or may face.
This enables companies to determine the level of funds which would be necessary to ensure that their solvency needs are met.
38
What is the third pillar of Solvency II
Sets out how information should be given to the regulator.
1) Solvency and financial condition report - which is a public report
2) Regulator supervisory report - A private report between a firm and its national supervisor.
39
What does the insurance Distribution Directive aim to do.
Make it easier for firms to trade across borders.
Strengthen policyholders protection.
Provide a level playing field
40
What are the key provisions of the insurance Distribution Directive
These are overarching requirements
Professionalism.
Commission disclosure
Harmonisation
New product governess requirements
41
What is money laundering
The process by which criminals and terrorists convert money that has been obtained illegally into legitimate funds
42
What are the three stages of money laundering?
Placement
Layering
Integration
43
Money laundering - what are the three principal offences under the terms of the criminal justice act 1993
Assistance to a criminal where you either know or suspect, or ought to have known or suspected that money laundering was taking place
failing to report either actual knowledge or suspicion of money laundering
Tipping off someone that you suspect of being involved in money laundering or that there is a formal or police investigation under way
44
What does the Proceeds of Crime Act 2002 (POCA) do
Extends the range of offence for money laundering.
Offences under POCA are:
Concealing/disguising/converting or transferring criminal property or removing it to the UK
Acquiring, possessing or using criminal property.
Failing to disclose that someone else is engaged in money laundering.
45
What is the FCA's responsibility in regard to money laundering
Responsibility to prevent and detect money laundering.
To doe this Firm must have in place systems and control with regard to money laundering.
46
Who and What is the role of the MLRO
The Money laundering reporting officer (MLRO)
is a Director or senior manager who takes overall responsibility for establishing and maintaining effective anti-money laundering systems and controls within the firm.
47
What is expected of the MLRO
To be based in the UK
Required to have a certain level of authority and independence within the firm.
Required to have sufficient resources and information to enable them to fulfil their responsibilities.
48
What new criminal offences did the bribery act 2010 create
The act made it a crime to:
Giving/promising or offering a bribe
Requesting, agreeing to receive or accepting a bribe
Bribing a foreign public official
Failure by commercial organisations to prevent active bribery being committed on its behalf.
49
What are the three steps of risk management?
1) Risk identification
2) Risk Analysis
3) risk control
50
What risks are un-insurable
Non-financial risk
Speculative risk
Fundamental risk
51
What is a fundamental risk
A risk which arises from a cause outside the control of any one individual or group of individual and their effects are usually widespread.
52
What is a pure risk
Are those where there is the possibility of a loss but not a gain
53
What are the features of an insurable risk
Its a fortuitous event (Accidental / unexpected)
An insurable interest is present
Not against public policy
Homogenous exposures ( a large number of similar risks, which give the insurer the ability to forecast the expected frequency)
54
What does Equitable premiums mean
Each person wishing to join the pool must be prepared to make an equitable (fair) contribution to that pool.
55
What is co-insurance, and what are the two distinct ways it is seen in the insurance market?
Co-insruance is when a risk is shared being two or more parties.
Types:
Risk sharing between insurers
Risk sharing with the insured (when they take a excess or deductible)
56
What is Duel insurance
When there are two or more polices in force which cover the same risk.
57
What is self-insurance
occurs when an agent has decided to carry the risk themselves.
58
What are the types of insurer as defined by ownership?
Propriety companies (owned by shareholders)
Mutual companies (owned by policyholders )
Captive insurers ( An insurer owned by its parent company)
59
What are the types of insurer as defined by function.
Composite companies - These accept several types of business and represent the major part of the company market.
Specialist insurers - These tend to issue polices for only one class of business
60
What did the Lloyds act 1982 do
Created the Council of Lloyd's, which is responsible for the management and supervision of the Lloyd's market.
61
in regard to Lloyds what are Syndicates
Are the groups of private individuals or corporate investors who carry the risk.
These are also known as names.
62
Lloyds - What are Managing agents
These are who the syndicates outsource the day-to-day running of the insurance.
They are companies established to manage one or more syndicates on behalf of the members that will provide the capital.
Their responsibilities include employing the underwriters and claims adjusters
63
What are members agents?
These advise potential corporate and individual members Names on the advantages and disadvantages of investing in the Lloyds market.
This advise will cover: Syndicate selection and performance, reserve requirements and compliance issues
64
How do you place a risk, at Lloyds?
The broker puts a summary of the risk to be placed and the suggested terms and conditions onto a document called a Market Reform Contract (known as a slip)
What, and how information, is put on this is governed by clear market rules.
65
What is contract certainty?
Is achieved by the complete and final agreement of all terms between the insured and insurers by the time they enter into contract, with contract document provided promptly thereafter.
66
What is the legal definition of the agent
An agent is one who is authorised by one party, termed the principle, to bring that principle into a contractual relationship with another, termed the third party.
67
What is the role of a loss adjustor?
Are experts in processing claims from start to finish and act for the insurer.
68
What is the role of a loss assessor?
Are experts in dealing with insurance claims and act for the insured/policyholder, preparing and negotiating claims on their behalf.
69
What is the role of the ABI?
Association of British Insurers
The largest of the insurance market associations.
ABI confers with the government on matters of interest to its members
70
What is the BIBA
British Insurance Brokers' Association
The major non-statutory trade association for insurance intermediaries.
it seeks to maintain and improve the highest standards of business behaviour and to protect and enhance the interest of its members for the benefits of the general public.
71
What is the LMA?
Lloyds market association
Provides representation, information and technical services to underwriting business in the Lloyds market
72
What is LIIBA
London and international insurance brokers association
An intendent trade body, representing the interest of insurance and reinsurance brokers operating in the London and international market.
73
What is the LMRC
The London Market Regional Committee
They intend to maintain a lobbying role and to represent the sector to the sector to the FCA, Europe, the UK Government and other stakeholder
74
What is the MIB, what are there objectives?
Motor insurance bureau
Reduce the level and impact of uninsured driving in the Uk
Compensate victims of uninsured and untraced drivers fairly and promptly
Provide first class data assets management and specialist claim services
75
What is the rate of IPT?
12% is the standard rate
A higher of 20% is applied to travel insurance and some vehicles, and domestic and electrical appliances.
76
What is the name for the insurer who buys the reinsurance cover?
Reinsured
Cedant
Ceding office
77
What is it called when an reinsurer, reinsures a risk.
What is the risk called?
Retroceding
Retrocession
78
What is the function of the Risk manager
Why are they needed?
The systemic identification, analyses and economic elimination or control of risk that threaten the business.
Providing guidance on best practices in these areas to management
The transfer of appropriately identified risk by contract or insurance.
To demonstrate to the regulator their ability to comply wit solvency II risk-based capital requirements.
79
Solvency II - how is monitoring maintained?
Each financial year, every authorised insurance company must prepare and submit information, as part of the monitoring process, to the PRA.
80
Solvency II - when is there intervention?
The PRA, will intervene if the monitoring process identifies a problem.
If this does occur it can;
Restrict the company's premium income.
Require the company to restore its capital position.
81
How does the FCA require firms to report certain information, in order to monitor its regulatory position?
This focus on monitoring relies upon the completion by firms of a Retail Mediation Actives Return (RMAR), which is summited via an online system name GABRIEL.
82
What is the purpose of RMAR?
To provide a framework for the collection of information required by the FCA as a basis for its supervision actives.
It also helps the FCA to monitor capital adequacy and financial soundness.
83
RMAR - when are complaints forms needed to be submitted by?
Firms are required to complete and submit a complaints return via an online form within 30 days of their accounting refence date and half year accounting reference date
84
RMAR - Accounting information.
Frequency, and information depends on the size of the firm.
Larger firm, with higher income may be required to report more frequently. Moreover, the firm must supply details of its profits and loss an balance sheet and its assets and liabilities.
85
What are cancelation rules?
Cancelation rules do not apply to short-term polices or events ( of less then one month's duration). Neither do they apply were the terms o f the contract have not been met in full.
Beyond these, consumers, but not commercial consumers, have the right to a cooling-off period of 14 days for most general insurance contracts
86
What are the claims handling rules?
The firm must keep their client advised on the progress of their claim.
Insurers must not unreasonably reject a claim reject a claim, and must settle it promptly once the claim has been agreed.
Insurers are also not able o refuse to pay a claim (from a consumer policyholder ) where a warranty has been breached
87
What did the Enterprise Act 2016, add in regard to claims?
Insurers must pay any sums due to their insured within a "reasonable time".
If this is not done, the insured will be entitled to enforce payment of the claim and pursue a claim for damages.
88
What did the IDD set out to do?
Sets out consumer protection provisions in insurance and the scope of regulation includes all firms that sell, advise on or conclude insurance contracts and those assist in administering and preforming.
89
What are the IDD general principles
These are overarching requirements.
Distributors must act honestly, fairly and professionally in the best interests of their customers
Distributors must communicate in a wat which is clear, fair and not misleading.
Remuneration (commission/fees etc) of a distributor or its employees, and performance management of employees, must not conflict with the duty to act in the customer's best interest
90
What did the criminal justice act do?
Made it a criminal offence to launder gains from other crimes.
The act provides for unlawful conduct to include any conduct occurring in a country outside the UK that would be unlawful in that country or which would have been unlawful if committed in the UK
91
The Proceeds of crime act 2002 created the assets recovery Agency - What is there role?
They are financial investigation whose purpose is to recover the proceeds of criminal activity
92
What did the Serious crime act 2007 do?
Extended the range of serious crime prevention order that could be made to the High court and amended POCA in a number of important ways.
93
What did the Money laundering regulations 1993 do
For firms in the financial sector. It requires the creation and maintenance of systems to prevent and control money laundering and effective training to be place.
94
What is the definition of financial crime
Fraud, dishonesty, misconduct in, or misuse of information relating to, a financial market or handling the proceeds of crime.
95
What are the fines that the FCA, can levy on firms that fail to prevent bribery occurring
Inadequate measures taken by the firm to prevent financial firms, have led to two fines being more then £5 million.
96
What does the Uk general data protection regulation (UK GDPR) require firms to do
Maintain records of personal data and processing activities, and a firm has a significant legal liability if it is responsible for a breach.
97
What data does the UK GDPR apply to
Applies to the personal data of an identified living individual.
98
What does the Uk GDPR consider as sensitive personal data
Race
Ethnic origin
politics
Religion
Trade union membership
Genetics
Biometrics
Health
sex life
Sexual orientation
99
What are the Data protection principles under the UK GDPR?
1) Lawfulness, fairness and transparency
2) Purpose limitation
3) Data minimisation
4) Accuracy
5) Storage Limitation
6) integrity and confidentiality
100
What are the 6 lawful bases for processing data?
1) Consent - must be given freely
2) Contract
3) Legal obligations
4) Vital interests
5) Public task
6) Legitimate interests
101
Under UK GDPR, what must firms do if there has been a breach of notification
There is a duty on all organisations to report certain types if data breachs to the ICO, and in some cases to the individuals affected.
102
what are the main elements of the DPA 2018
Ensuring that sensitive health, social care and education data can continue to be processed, to ensure confidentially in health and safeguarding situations.
Restricting the rights to access and delete data where there are legitimate grounds for doing so
Setting the age from which personal consent is not needed to process data online
103
The DPA 2018 can now levy fines to the most data breaches, how much is this?
It can levy fines of up to £17.5 million or 4% of annual global turnover.
The ICO can bring criminal proceedings against a data controller or processor if they have altered records following an SAR with the prevent disclosure.
104
Under the Consumer right act 2015, terms in contracts and notices will only be binding upon the consumer if they are fair. What would be classed as unfair terms?
As those that put the consumer at a disadvantage, by limiting the consumers rights or disproportionately increasing their obligations as compared with the trader's rights and obligations.
105
What are the five central principles in the code of ethnics?
Comply with he code and all relevant laws and regulations
act with the highest ethical standards and integrity
act in the best interest of each client
provide a high standards of services
Treat people fairly-
106
What principles must firms have, in regard to training and competence?
Employ personnel with the skills, knowledge and expertise necessary for the discharge of responsibilities allocated to them
Take into account the nature ,scale and complexity of its business and the nature and range of financial services and activates undertaken in the course of that business.
107
Define competence
Means having the skills, knowledge and expertise needed to discharge the responsibilities of the employee's role.
This includes achieving a good standard of ethical behaviour
108
What are the three key areas of training that the FCA states firms need to consider?
Assessing competence
maintaining competence
Record-keeping
109
how long must firms keep records of training and assessment of competence
Three years from the time that the employee ceased to carry out that role.
110
What is the definition of a complaint
Any oral or written expression of dissatisfaction, whether justified or not, or on behalf of, a person about the provision of, or failure to provide, a financial service, which alleges that the complainant has suffered ( or may suffer ) financial loss, material distress or material inconvenience .
111
Who are classed as a "eligible complainant"
Consumer
Micro-enterprise
Charity with an annual income of less then £6.5 million
Trustee of a trust with a net asset value of less than £5M
Consumer buy-to-let consumer
Small business at the time the complainant refers the complaint to the respondent
Guarantor
112
How long must a complaint be on record for?
They must be retained on file for at least three years from the date the complaint was received, and a record must be kept of measures taken for its resolution
113
What did the Financial services and market act 200 introduce
The Financial Ombudsman service
114
What is the FOS?
An independent mechanism for dealing with disputes from eligible complainants. It aims to provide both impartial and independent resolution of disputes between either insurer and policyholder or intermediary and client.
115
What is the maximum the FOS can reward?
£375,000
116
What is the FSCS
The financial services compensation scheme
The compensation fund of last resort for customers of deposit-taking companies and investment firms, as well as for those authorised insurance companied and intermediaries
117
When will the FSCA give 100% protection
For compulsory insurance
Professional indemnity insurance
Long-term insurance
Claims for injury, sickness or infirmity of the policyholder
118
When will the FSCA give 90% protection
is there a upper limit?
Other types of general insurance that dont get 100%
There is no upper limit
119
What is the agents duty - for them to be considered to be the insurers's agent .
When is the agent presumed to be the consumers agent
Is the appointed representation of the insurer
Collects information from the consumer with express authority from the insured to the insured.
Has authority to bind the insurer to cover and does so.
in all other cases, it is presumed that the agent is the consumer's agent
120
When will there need to be disclosure, as a continuing requirement?
Commercial property insurance - May have a condition in of the continuing disclosure of removal to another circumstances or circumstances that increase the risk of damage.
Motor insurance - will always require the policyholder to disclose any chances in the material circumstances.
Public liability insurance- Will want to know if there has been any extensions of actives
121
What are the limitations of an insurers right to information?
If an proposer, only partial answers a question, and the insurer does not seek further detail - they have waived their right.
- This is the same if the prosper left a question blank, and it wasn't followed up on by the insurer.
- If they explicitly state what material circumstances are, which were provided by proposer, they cannot later state they need more information - after a claim has occurred.
122
If the insured has breached the duty of good faith- what can the insurer do
They now have the right to avoid the policy
123
What does the insurance act 2015 state as information that doesn't need to be disclosed?
information that lessens the risk
Information the insurer knows
Information the insurer ought to know
information the insurer is presumed to know.
information waived by the insurer
Spent convictions
124
What are the consequences of misrepresentation by consumers
Where the prosper deliberately or recklessly answers wrongly, the insurer will be entitled to avoid the policy ab inito (from the beginning)
125
Consequences of a breach of the duty of fair presentation. (non-consumers)
unless the insurer has contracted out the duty to make a fair presentation of the risk to an insurer will only be able to avoid the policy if the insured has made a deliberate or reckless breach.
126
Consequences of a breach of the duty of fair presentation. (non-consumers) - At original placement, and If breach was deliberate or reckless
If breach was deliberate or reckless insurers may avoid the contract, refuse all claims and do not have to return the premium.
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Consequences of a breach of the duty of fair presentation. (non-consumers) - At original placement, and If breach wasn't deliberate or reckless
The remedy depends on the impact:
1) If the insurer would not have entered into the contract at all they can avoid it and refuse all claims - but must return the premium.
2) If the insurer would have entered into the contract, but on different terms, then the contract will be treated as if those terms applied unless the insurer chooses not to apply them.
x= (premium actually charged/higher premium) *100
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What does the insurance act 2015 - change in regards to breach of warranty?
A breach of warranty will no longer automatically terminate the contract. instead, an insurer's liability will be suspended from the time of the breach.
Meaning that the insurer will have no liability for losses occurring or attributable to something occurring during the period of suspension
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When does a contract come into acceptance
When one party makes an offer which the other accepts unconditionally.
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With a postal acceptance of contract- when does the contract thought to be accepted?
when the letter - agreeing to the conditions - is sent.
Applying even if the contract is lost of destroyed
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What is consideration?
each party keeping there side of the bargain, which supports the contract.
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Insurer's right to cancellation
Most polices have a cancellation conditions, which allow allows the insurer to cancel, provided that a letter is sent to the insured last known address, giving 14 days notice.
If this condition is invoked a pro-rata return premium is sent to the insured.
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Policyholder's rights to cancellation
if excessing a right to cancel they may only be required to pay for the service actually provided
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What are the three ways of creating an agent/principal relationship.
1) Agent by consent - where both parties enter into a legally enforceable agreement.
2) Agency by necessity - Where a person is entrusted with someone else's goods and it becomes necessary to act in a certain way in order to preserve the property in an emergency.
3) Agency by ratification - Occurs to a situation where an agent acts without authority, but the principal accepts the act as having been done by the agent on their behalf
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What are the Duties of a agent
1) Obedience
2) Personal performance
3) Due to care and skill
4) Good faith
5) Accountability
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What are the duties of a principle
Remuneration
Indemnity
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How does an agency get terminated
1) mutual agreement by the principle
2) The agency being withdrawn by the principle or given up by the agent.
3) The death, bankruptcy, or insanity of either party.
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Give a brief overview of Home insurance
Covers building/or contents (usually on a "new for old" basis") against a wide range of perils.
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What are the types of health insurance you can get?
1)personal accident: cover in the event of accidental death or bodily injury
2) Sickness: Cover for an inability to work due to sickness
3) Private medical insurance: Cover for individuals who seek medical treatment outside the NHS.
4) Short-term income protection: Designed to pay an agrees monthly amount during a short period, when the individual can't work because of an accident, sickness or redundancy.
5) Critical illness: Cover in the event of the diagnosis of a defined range of serious illnesses
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What is the definition of contribution
The right of an insurer to recover part of a claim payment where two or more polices cover the same interest, the same risk and are in force when the loss occurs
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What the requirements that need to be satisfied before contribution arises
1) Two or more policies of indemnity must exist
2) The policies must cover a common insurable interest
3) The policies must cover a common peril which give rise to the loss
4) The polices must cover common subject-matter
5) Each policy must be liable for the loss
6) Neither policy must contain a non-contribution clause
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What must be common for contribution to arise?
insurable interest
peril
subject matter
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Applying the contribution principle: Rateable proportion.
What are the two ways of determining the rateable proportion of a claim.
This is the share of any claim that an insurer pays when two or more insurers cover the same risk, usually in proportion to the respective sums insured.
1)By sum insured
2) By independent liability
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Applying the contribution principle : describe the sum insured method.
This is done by calculating how much the proportion of a loss is by appointing it in with the sums insured under each policy.
(Policy sum insured/total sum insured)*100
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Applying the contribution principle : describe the Independent liability method.
This method calculates the amount payable under each policy as if no other policy existed and the insurer was alone in indemnifying the insured.
The loss is then shared in a proportion to the intendent liabilities of the two polices.
(policy sum insured/total value at risk)*100
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What is the defemination of subrogation
defined as the right of an insurer following the payment of a claim, to take over the insured's rights to recover payment from a third party responsible for the loss.
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What are the insurer's subrogation rights?
In keeping with indemnity insurers are also not entitled to recover more then they have paid out.
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What are the three way subrogation rights may arise?
Tort - under common law, everyone has a duty to act in a reasonable way towards others. A breach of this is called tort.
Contract -
Statute
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what are some circumstances in which insurers are barred from exercising subrogation rights?
1) insured has no rights: subrogation relies on the insured having rights. If they have waived those rights, they cannot be re-acquired.
2) Benefit policies: If a person negligently causes a accident in which the insurer is injured, there is no right to recovery from the insurer
3) Subrogation waiver : these clauses are usually designed to prevent the insurer from pursing any subrogation right it may have against a parent or subsidiary company.
4) Negligent fellow employees: Insurers have generally agreed not to pursue recovery rights against negligent fellow workers.
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Define indemnity
The financial compensation sufficient to place the insured in the same financial position after a loss as they enjoyed immediately before the loss occurred.
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What polices are not indemnity polices? what is a alternative name for them?
polices which provide fixed benefits.
These are referred benefit policies.
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What are the four types of ways of providing indemnity
1) Cash payment
2) Repair
3) Replacement
4) Reinstatement
153
How is indemnity measured: for property insurance?
The measure of indemnity is valued at the date and place of loss.
154
What are agreed value policies
The value of the subject-matter of insurance is agreed at the start of the contract and the sum insured is fixed accordingly.
155
What are first loss policies
Where only a part of the whole total value is insured.
Due to the belief that there will not be a total loss.
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What is the formula for used for underinsurance?
(sum insured/value of goods at risk)*loss
157
What is the difference between an excess and a deductible
A deductible is just a large excess.
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When must there be an insurable interest for life insurance?
There must be an insurable interest at inception of a life policy. However, there is no need for there to be a valid insurable interest at the time of a claim.
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What did the Marine insurance act 1906 state
That any marine insurance contract was void in the absence of insurable interest at the time of loss.
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What did the Marine insurance (Gambling policies) act 1909 do?
Made it a criminal offence to effect a marine policy were either there is no insurable interest, or where there is no reasonable expectation of such an interest.
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What are the three ways insurable interest is made
Common law
Contract
Statue
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What is a majeure?
An unforeseeable circumstances that prevent someone from fulfilling a contract
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The proximate cause of an occurrence is always the ...
Dominant cause, which has a direct link between it and the resulting loss.
