Module 1: The development of packaged commercial insurances Flashcards
If a company does not have insurance - what would they do if there was a big loss such as a fire?
They would have to have a large amount of money set aside or it could ruin there business
How many employees does a small business typically have?
firms that employee up to 49 people
What is the benefit of insurance for a small buisness?
They are able to transfer the financial consequences of risk to the insurer for a small fee ie premium
What % of buisness’ in the UK are small buisness’?
99%
How competitive is the market for commercial packaged insurance?
Highly competitive market with competition based on cover as well as price
The UK’s regulatory structure is split between three bodies - Who are they?
FCA,
FPC,
PRA
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?
The FCA is responsible for the conduct of business regulation across the UK’s financial services industry and the prudential regulation of small firms.
What is the FPC responsible for?
Macro-prudential regulation and watching for emerging risks to the UK’s financial system.
What is the PRA responsible for?
The micro-prudential regulation of systemically important firms, e.g. bank and insurers.
What does ICOBS stand for?
Insurance: Conduct of Business Sourcebook
What is the ICOBS?
A FCA Handbook which outlines the regulations specific to the conduct of general insurances
What 8 areas does the ICOBS cover?
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.
Define consumers?
a policyholder or potential policyholder acting outside their trade, business or profession;
What date did the IDD come into place?
1st of October 2018
What are the three main benefits that the IDD aim to put in place?
Its aims are to make it easier for firms
- to trade across borders,
- to strengthen policyholder protection and
- to provide a level playing field.
How many CPD hours for the IDD require for insurance professionals to complete annually?
15 hours
Is the FCA a proactive regulator?
Yes
How does the FCA expect firms to apply “treating client fairly”
By embedding it into the firms culture/ day to day operations and include it in their corprorate strategy.
Is there specific rules from the FCA in regards to the fair treatment of clients?
Nothing specific, it is down to senior managers to ensure the correct approach is embedded into the practices of their firm
What is the FCA definition of a “vunerable customer”?
Someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care
What are the four key drivers of “vunerability”?
Heath
Life Events
Resilience
Capability
Are all customers with vunerable characteristics vunerable?
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.
Supervision within a firm is conducted through a risk framework based of three pillars. What are they?
- 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.
What does “thematic” mean?
Having or relating to subjects or a particular subject
Is the FCA focused on protecting insurers or customer?
Primarily customers
Who recieves the highest level of supervision by the FCA?
Firms with a large number of retail customers (fixed portfolio firms)
What is the benefit to the insured of having more automated options for combined and packaged insurance products?
- A single proposal form, policy document, premium and renewal date for numerous insurance policys
- Lower premiums
What is the benefit to the insurer of having more automated options for combined and packaged insurance products?
- Lower handling costs
- Ease of review at renewal stage
What are the key differences between packaged policys and combined policys?
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.
What will a typical packaged policy always include?
- Damage to buisness contents including theft, money and glass
- Buisness Interuption
- Employers’, Public and Products Liability Insurance
What size of firm is combined policys suited to?
Medium and Large firms who wish to have an individulised approach to their insurance arrangments.
What are a few examples of buisness’ that would be well suited to a packaged policy?
- Care homes
- Surgerys
- Offices
- Hotels and guest houses
- Salons
- Commercial liability
- Shops
What makes a buisness well suited to a packaged policy?
What is the benefit to the insurer and insured because of this?
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.
How have schemes developed the concept of package policies further?
By offeing preferential cover and terms for specific trades and particularily members of a certain trade associations and federations.