LO5: Understanding the regulatory and legal requirements applicable to the transaction of insurance business

Question 1

reasons for compulsory insurance

Answer 1

• response to public concerns
• to provide funds

Question 2

road traffic act 1988
- what it says

Answer 2

its illegal to cause/permit use of a vehicle on a public road or any other public place without third party property damage and third party bodily injury/damage

Question 3

employers liability (compulsory insurance) act 1969
- what for
- exemptions?
- min liability insured?

Answer 3

• insures against their liability to compensate employees for injuries and disease caused by their employment
• family memebers, employees that dont ususally stay in the UK, governemtn agencies
  -£5m, sold at £10m as standard

Question 4

employers liability tracing office

Answer 4

used to identify insurers who cover certain employees

Question 5

riding establishments act 1970

Answer 5

public liability insurance must be in place to indemnify the rider and public

Question 6

professional negligence/ professional indemnity
- what professions

Answer 6

• solicitors
• accountants
• doctors
• dentists

Question 7

usa’s employer liability is…
- covers

Answer 7

workers compensation

covers
- illness
- injury
- death
- wages
- rehab

worker gives up rights to sue for damages

Question 8

usa compulsory motor insurance for…

Answer 8

commercial vehicles, not private ones

Question 9

usa disability insurance

Answer 9

• required in some states
• pays out for injury/illness not associated with the job

Question 10

turkey compulsory insurance

Answer 10

• property owner EQ
• motor

Question 11

australia compulsory insurance

Answer 11

• motor (similar to uk)

Question 12

germany compulsory insurance

Answer 12

any event for which german courts may consider one negligent (for third pary liability)

Question 13

consumer rights act 2015
- what?

Answer 13

ensures law, terms and notices in consumer contracts are fair

unfair = causes significant imbalance in the the parties right and obligations to the detriment of the consumer

Question 14

consumer rights act 2015
- how to make sure its fair

Answer 14

• transparent and prominent
• plain intelligible language
• legible

Question 15

consumer rights act 1025
- unfair example

Answer 15

makes the traders commitments subject to compliance with a particular formality

Question 16

contract (rights of third parties) act 1999
- what
- how

Answer 16

reformed privity rules, allows circumstances where a third party can have the rights to enforce terms of contract

contract must make express provision for enforcement or third party must be identified by name, class or description

can be contracted out by insurers

Question 17

privity of contract

Answer 17

only those part to the contract can enforce the terms in it therefore third parties cannot sue for breach

Question 18

insurance premium tax
- on?
- rates?
- exemption?

Answer 18

• on general insurance premiums in the uk paid by the insured
• standard rate = 12%
• high rate = 20% for travel insurance and those sold along with vehicle/electrical appliances like extended warranties

exemptions
- long term insurance
- reinsurance
- insurance in ships, aviation and international goods in transit
- risks located outside of the uk

Question 19

senior managers and certification regime (SM&CR)
- applies to
- what?

Answer 19

• applies to insurers and intermediaries
• provides a regulatory framework for individual accountability with focus on the senior individuals

Question 20

sm&cr requirements

Answer 20

• senior managers have statements of responsibilities stating areas for which they are personally accountable
• produce firm responsibility map thats knits these together
• ensure all senior managers are preapproved by regulators

Question 21

bank of England and financial services act 2016

Answer 21

duty of responsibility = senior managers should take steps that a reasonable person in their position would take to prevent breaches

Question 22

sm&cr parts

Answer 22

senior managers regime
certification regime
rules of conduct

Question 23

senior managers regime
- applies to?

Answer 23

applies to those performing senior management functions which includes
- heads of key business areas (area that could have own senior management function or can effect safety and soundness of the firm)
- group entity senior manager (employed in group/parent company and can significantly influence firms affairs)
-significant responsibility functions (senior execs. responsible for certain functions or business areas where key risks exist)

Question 24

certification regime
- applies to?

Answer 24

not smf (senior management functions) but can harm firm or customers in their role
- dont require outside approval by regulators (firms should assess fitness and propriety)

Question 25

sm&cr first tier rules

Answer 25

individual conduct
- integrity
- due skill, care and diligence
- open and cooperative with regulators
- due regard to the interests of customers and treat them fairly
- observe proper market standards

Question 26

sm&cr second tier rules

Answer 26

senior manger conduct
- reasonable steps to controlled effectively
- reasonable steps to ensure compliance with regulatory standards
- reasonable steps to delegate to the appropriate personnel
- disclose information fca or pra would expect

Question 27

rolls outside of tier one

Answer 27

ancillary roles (not specific to financial services)
- hr
- secretarial staff
- switchboard operators
- receptionists

Question 28

assessing individual fit and proper

Answer 28

• honesty, integrity and reputation
• financial soundness
• competence and capability, FCA requirements?

Question 29

compliance officer

Answer 29

compliance oversight function
- reports to the governing body of firm
- fca and pra regulated

Question 30

compliance officer roles

Answer 30

• communication of company policies
• organising training
• completion of regulatory returns such as governance, finance and complaints
• review company procedures
• maintain company compliance manual and ensure its followed

Question 31

mlro

Answer 31

regulated by fca and pra