Module 1: The development of packaged commercial insurances Flashcards

1
Q

If a company does not have insurance - what would they do if there was a big loss such as a fire?

A

They would have to have a large amount of money set aside or it could ruin there business

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2
Q

How many employees does a small business typically have?

A

firms that employee up to 49 people

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3
Q

What is the benefit of insurance for a small buisness?

A

They are able to transfer the financial consequences of risk to the insurer for a small fee ie premium

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4
Q

What % of buisness’ in the UK are small buisness’?

A

99%

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5
Q

How competitive is the market for commercial packaged insurance?

A

Highly competitive market with competition based on cover as well as price

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6
Q

The UK’s regulatory structure is split between three bodies - Who are they?

A

FCA,
FPC,
PRA

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7
Q

Who is responsible for the conduct of business regulation across the UK’s financial services industry and the prudential regulation of small firms, e.g. brokers and IFAs?

A

The FCA is responsible for the conduct of business regulation across the UK’s financial services industry and the prudential regulation of small firms.

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8
Q

What is the FPC responsible for?

A

Macro-prudential regulation and watching for emerging risks to the UK’s financial system.

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9
Q

What is the PRA responsible for?

A

The micro-prudential regulation of systemically important firms, e.g. bank and insurers.

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10
Q

What does ICOBS stand for?

A

Insurance: Conduct of Business Sourcebook

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11
Q

What is the ICOBS?

A

A FCA Handbook which outlines the regulations specific to the conduct of general insurances

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12
Q

What 8 areas does the ICOBS cover?

A

Application;
General matters;
Distance communications;
Information about the firm, its services and remuneration;
Identifying client needs and advising;
Product information;
Cancellation; and
Claims handling.

All the rules apply to alterations and renewals, as well as new business.

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13
Q

Define consumers?

A

a policyholder or potential policyholder acting outside their trade, business or profession;

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14
Q

What date did the IDD come into place?

A

1st of October 2018

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15
Q

What are the three main benefits that the IDD aim to put in place?

A

Its aims are to make it easier for firms
- to trade across borders,
- to strengthen policyholder protection and
- to provide a level playing field.

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16
Q

How many CPD hours for the IDD require for insurance professionals to complete annually?

A

15 hours

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17
Q

Is the FCA a proactive regulator?

A

Yes

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18
Q

How does the FCA expect firms to apply “treating client fairly”

A

By embedding it into the firms culture/ day to day operations and include it in their corprorate strategy.

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19
Q

Is there specific rules from the FCA in regards to the fair treatment of clients?

A

Nothing specific, it is down to senior managers to ensure the correct approach is embedded into the practices of their firm

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20
Q

What is the FCA definition of a “vunerable customer”?

A

Someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care

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21
Q

What are the four key drivers of “vunerability”?

A

Heath
Life Events
Resilience
Capability

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22
Q

Are all customers with vunerable characteristics vunerable?

A

No but they may be more likely to have additional or different needs which if not met my firms, could limit their ability to make decisions or represent their own interests.

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23
Q

Supervision within a firm is conducted through a risk framework based of three pillars. What are they?

A
  • Proactive supervision for the biggest firms
  • Event-driven, reactive supervision of actual or emerging risks
    -Thematic work that focuses on risks and issues affecting multiple firms or a sector as a whole.
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24
Q

What does “thematic” mean?

A

Having or relating to subjects or a particular subject

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25
Q

Is the FCA focused on protecting insurers or customer?

A

Primarily customers

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26
Q

Who recieves the highest level of supervision by the FCA?

A

Firms with a large number of retail customers (fixed portfolio firms)

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27
Q

What is the benefit to the insured of having more automated options for combined and packaged insurance products?

A
  • A single proposal form, policy document, premium and renewal date for numerous insurance policys
  • Lower premiums
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28
Q

What is the benefit to the insurer of having more automated options for combined and packaged insurance products?

A
  • Lower handling costs
  • Ease of review at renewal stage
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29
Q

What are the key differences between packaged policys and combined policys?

A

Packaged policys are pre-defined cover under a single contract. They are not individually underwritten or rated. It will all be with the same underwriter.

Combined policys are made up of a number of different covers, underwritten indivudually and grouped together.

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30
Q

What will a typical packaged policy always include?

A
  • Damage to buisness contents including theft, money and glass
  • Buisness Interuption
  • Employers’, Public and Products Liability Insurance
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31
Q

What size of firm is combined policys suited to?

A

Medium and Large firms who wish to have an individulised approach to their insurance arrangments.

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32
Q

What are a few examples of buisness’ that would be well suited to a packaged policy?

A
  • Care homes
  • Surgerys
  • Offices
  • Hotels and guest houses
  • Salons
  • Commercial liability
  • Shops
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33
Q

What makes a buisness well suited to a packaged policy?

What is the benefit to the insurer and insured because of this?

A

Buisness’s where there are many risks with similar characterists and they are more predictible in terms of claims stats.

This means insurers can offer a pre-determined sum insured/limits with no underwriting.

This makes in cheaper for the insurer and the insured beenfits from reducted premium levels.

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34
Q

How have schemes developed the concept of package policies further?

A

By offeing preferential cover and terms for specific trades and particularily members of a certain trade associations and federations.

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35
Q

What to schemes help maximise for insurers and intermediaries?

A
  • Volume of buisness avalible to them
  • Their knowledge of risks being underwritten
36
Q

What is the 1st and then 2nd leading drain on insurers’ finances?

A
  • Claims
  • Staff expenditure and recourcing
37
Q

How are insurers combating the financia drain of staff expenditiure and resourcing?

A

By developing teams of multi-disciplined, trained staff capable of underwritting and administering all classes of insurance included in package policys.

38
Q

Why are insurers opting to move there location to the UK that had previously had offshore locations in places such as India for a cost saving mesure?

A
  • Customer feedback about the quality of service was poor
  • Continued technological developments in the UK
39
Q

What are three comon non-insurance benefits insurers have introducted to their policys?

A
  • Helplines and advice
  • Authorised repairs and suppliers
  • Risk control advice
40
Q

Due to the current econmical climate and financial pressures what are customers focused on when renewing?

A

Customers only want to be paying for cover that is really needed.

41
Q

What is a buisness risk?

A
  • Any exposure of an organisation to factors that will lower is profits or cause it to fail
  • Antything that treatens an organisations ability to meet its target or achieve its financial goals
42
Q

What percentage of employment in the Uk is from small buisness’?

A

48%

43
Q

What are the main two types of small buisness’s?

A
  • Soler Traders
  • Partnerships
44
Q

Who ownes a LTD company?

A

Shareholders

45
Q

What changes in technology have impacted on the purchase of packed insurance policys in general?

A
  • Call cennter technology
  • Use of EDI (Electronic Data Interchange) systems by intermediaries
    -the opportunity to purchase insurance over the internet, either from a direct insurer or intermediary, or through an aggregator website.
46
Q

What doess FPC stand for, what are they within and what are they responsible for?

A

the Financial Policy Committee (FPC)

  • within the Bank of England
  • responsible for macro-prudential regulation and watching for emerging risks to the UK’s financial system;
47
Q

What does Macro-prudental regulation mean?

A

Macro- prudential regulation involves the identification, monitoring and mitigation of systemic risks before they can crystallise, preventing those risks from triggering instability in the financial sector.

48
Q

What doess FCA stand for and what are they responsible for?

A
  • Financial Conduct Authority (FCA),
  • responsible for conduct of business regulation across the financial services industry
  • the prudential regulation of small firms (such as insurance brokers and IFAs).
49
Q

What does prudential regulation mean?

A

prudential regulation is a legal framework focused on the financial safety and stability of institutions and the broader financial system

50
Q

What doess PRA stand for, what are they a part of, what are they responsible for and what do they seek to do?

A
  • Prudential Regulation Authority (PRA),
  • part of the Bank of England,
  • responsible for the micro-prudential regulation of systemically important firms (principally
    banks and insurers).
  • It will not seek to prevent all firm failures, but will try to ensure that firms can fail without bringing down the entire financial system;
51
Q

What is a “dual regulated entity” ?

A

An entity regulated by both the PRD anf FCA.
Some firms are only regulated by the FCA and they are “solo” regulated.

52
Q

What to books are relevant rules divided up between?

A

-PRA Rulebook
- FCA Handbook

53
Q

The regulations specified to the conduct of general insurance is contained in what book?

A

Insurance: Conduct of Buisness Sourcebook (ICOBS) which is part of the FCA Handbook.

54
Q

Firms selling and administering packaged commercial insurances need systems and procedures in place to abide by what rules?

A

Rules outlined in the ICOBS.

55
Q

What stage in the lifecycle of a product should the fair treatment of customers be applied?

A

Throughout the whole lifecycle.

56
Q

What two conduct categories do authorised firms fall into?

A

Fixed portfolio firms

Flexible portfolio firms

57
Q

What is the relevance to the FCA of what conduct catagory a firm falls into?

A

Based on which of the two catagories the firm falls into, the FCA determines the nature and intensity of supervision needed.

58
Q

What is a fixed portfolio firm, how many are there in general and how much supervision do they recieve?

A
  • smaller number of firms
  • based on factors such as size, market presence, customer footprint.
  • recieve the highest level of supervision
59
Q

What will the FCA do when supervising fixed portfolio firms?

A
  • allocated them a named individual supervisor
  • supervised on a continuous assesment
60
Q

What is a flexibled portfolio firm, how many are there in general and how much supervision do they recieve?

A
  • most comon type of regulated firm
  • no allocated/dedicated supervisor
    supervised on a reactionary basis
  • as/when FCA recieves a report or has concerns about a firms activitys they will supervise
  • supervision is primarily based on a pro-active approach through market based thematic work and programs of activty aligned with the key risk identified in the sector in which the firm operates.
61
Q

When did the FCA most recently publish guidelines clarifying its expectations of firms on the fair treatmetn of vunerable clients and what was the purpose of this?

A
  • Feb 2021
  • drive improvments in the way firms treat vunerable consumers so they are consistently able to achieve outcomes that are as good as everybody else.
62
Q

What can firms expect to be asked by the FCA in relation to the treatment of vunerable consumers?

A
  • how their buisness model, the actions they have taken and their culture ensure the fair treatment of all customers, including vunerable customers.
63
Q

What could make someone a vunerable client based on a “life event”

A
  • Bereavement or other traumatic life event could make someone temporarily (or perminanyly) vunerable and impair there judgment/usual competency.
64
Q

Does a consumer have to agree they are vunerable?

A

No they may not wish to be regarded or treated as vunerable

65
Q

What are some exampled of a vunerable client deriving under “health”?

A
  • Physical Disability
  • Sever or long-term illness
  • Hearing or visual impairments
  • Mental health condition or disability
  • Addicition
  • Low mental capacity or cognitive disabilities
66
Q

What are some exampled of a vunerable client deriving under “life events”?

A
  • Retirment
  • Bereavement
  • Income Shock
  • Relationship breakdown
  • Domestic abuse including emotional control
  • Caring responsibilities
67
Q

What are some exampled of a vunerable client deriving under “Resillience”?

A
  • Inadequate or erratic income
  • Over indebtedness
  • Low savings
  • Low emotional resilience
68
Q

What are some exampled of a vunerable client deriving under “capability”?

A
  • Low knowledge or confidence in managing finances
  • Poor literacy or numeracy skills
  • Poor english language skills
  • Poor or non-existent digital skills
  • Learning difficulties
  • No or low access to help or support
69
Q

The Financial Lives Survey 2017 estimated how many people in the UK display one or more characteristics of being potentially vunerable?

A

25.6million or half the population

70
Q

What is meant when the FCA identifies vunerable people to have a financial exclusion?

A
  • less likely to have a bank or insurance
  • often have no savings, pensions or investments
71
Q

What is meant when the FCA identifies vunerable people to have less access to services?

A
  • difficulty accessing financial services
  • may find it difficult to use technology based channels
  • may not be able to physically access a branch due to physical limitations
72
Q

What is meant when the FCA identifies vunerable people to have a partial exclusion?

A
  • may not eb able to search their options effectivly
  • issues making informed decisions
  • they may percieve they are excluded
73
Q

What is meant when the FCA identifies vunerable people to have a disengagment?

A
  • may be reluctant to switch to a different provider
  • may not be aware they can switch
  • dont shop around
74
Q

What is meant when the FCA identifies vunerable people to have be scammed ?

A
  • more vunerable to scans
  • less inclided to monitor affairs
  • unable to evaluate information
75
Q

What is meant when the FCA identifies vunerable people to have debt?

A
  • mental health issues and addiciton make people more prone to excessive debt

or

  • over-indebtedness can cause depression/the mental illness
76
Q

What is meant when the FCA identifies vunerable people to be prone to miss-selling?

A
  • cave under pressure tactics
77
Q

What is meant when the FCA identifies vunerable people to have less chance of managing products or services?

A
  • less capible to manage themself
  • unlikely to bring this to a providers attention
78
Q

What is meant when the FCA identifies vunerable people to be more prone to buying the wrong products or services?

A
  • often choose a product that is not the most suitable or affordable
  • unable to evaluate the advantages and disadvantages
79
Q

In the IDD what is on the “professionalism” key provision?

A
  • posses appropriate knowledge
  • ability to complete tasks/duties adequately
  • complete 15 hours of CPD a year
80
Q

In the IDD what is on the “Commission Disclosure” key provision?

A

pre-contractual disclose of the :
- intermediary
- the nature (not amount) of their remuneration (commision or other fee arangements)

Contracts with large risks or for professional customers:
- this clause is waived
- firms must state what type of firm they are
- whether they provide a personal recommendation

81
Q

In the IDD what is on the “Harmonisation” key provision?

A

IDD is a min harmonisation directive, allows member states to set stricter state requirments (gold plate)

82
Q

The IDD introducted a new catagory of insurance seller called ancillary insurance intermediaries. What do they do?

A

Includes connected travel insurance providers that dont sell or introduce insurance as their main buisness, but still do so and therefore are subject to selling rules.

83
Q

What does the IDD require all general insurance firms in retail and small corporate market to provide there customers?

A

IPIDs - Insurance product information documents which are similar to the Key Features Documents most insurers already used.

84
Q

Can you have motor insurance included on a packaged commercial policy?

A

NO

85
Q

Do we cover motor trader and landlords under packaged policys?

A

Yes but not in this unit.

86
Q

What is homogenity?

A

Law of large numbers principle

87
Q

Where are schemes usually avalible through?

A

One particular intermediarie who is able to maximise the volume of buisness avalible to them and their knowledge of the risks being underwritten.