Notes From Chapter Review Flashcards
How regularly does electrical equipment need to be tested?
All new electrical installations must be inspected, the frequency normally being every one to five years, the inspection of portable electrical appliances is not required
Chapter 2C4
What does it suggest if a material is stored away from a plant at a low temperature?
It has a low auto ignition temperature
Chapter 2A1
Who needs to be consulted when assessing the reinstatement cost of a listed building?
The local planning authority
Chapter 2B2D
What type of building will fire resistant flooring have the most impact on?
A building with many stories (concrete or hollow clay block will be used)
Chapter 2B2A
Insurers will typically regard an adverse weather event as a storm only if …
A number of buildings in a specific area have sustained damage at the same time
Chapter 3B1
How many able bodied people are required to transport cash?
£2500-£5000: 2 people
£5000-£8000: 3 people
£8000-£12000: 4 people
Above £12000: approved security organisation
Chapter 4F3
What reporting should be undertaken by a surveillance tear?
When ever possible a watchman, guard, CCTV operator or security officer must have a fixed routine of reporting at set intervals during the surveillance
Chapter 4D3
What is a hinge bolt?
A bolt fitted to thehinge of a door to prevent it from being lifted of its hinges. These will often be fitted on external doors to prevent access
Chapter 4D1A
What is burglary?
Section 9 of the theft act defines burglary as entering any building as a trespasser and steal anything in the building or a part and inflicting or attempting to inflict on any person therein any grievous bodily harm.
What sources can an insurer use to identify patterns of theft risk?
Their own loss records
Pooled insurance figures (e.g. ABI)
Statistics from research & surveys
Published crime figures
Chapter 4B1
What is the definition of fire used by insurers?
In the absence of a legal definition insurers accept that fire must include:
Actual ignition
Something on fire that should not have been on fire
An event which must be accidental or fortuitous as far as the insured is concerned
Chapter 5A1A
Why is premium charged in the UK to insure earthquake & subterranean fire relatively high?
Because these events have a large potential geographic impact
If a window is knowingly left open will a claim be accepted?
No, any claim for lossor damage is likely to be denied. This is in line with the reasonable precautions policy condition, which means the insured is expected to act as if uninsured is always implied.
Chapter 5D3B
What is the intruder alarm condition?
The condition does not state an alarm must be fitted, but if one is fitted it must be used
What is floating insurance?
Insurance on stock belonging to an insured which is at various locations. Stock is insured at all or any location in one overall amount. An inner limit may be applied stating no more than £x will be paid for a single loss at one location
Chapter 6D4
What inflation index is used by insurers when looking at the effects of inflation on building items?
Inflation values provided by the royal institute of chartered surveyors
If a building is insured on a reinstatement basis with a rebuild time of 18 months, the sum insured should be based on rebuild costs how many months in the future?
30 months: 12 month policy + 18 months rebuild
Chapter 6A3
What is reinstatement to match?
A clause that caters to the fact it May not be possible to replace items as a like for like basis. The insurer will provide new similar equipment & also cover ang costs associated with compatibility
What is inadvertent omission to insure?
Provided the insurer is made aware of any omissions or errors in the sum insured as soon as it is discovered & provided Ag additional premium is paid full cover will apply retrospectively
What is the typical limit for money stolen during the day?
£5,000
A factory would take eight months to rebuild and a further two months before the factory was working at full capacity. Assuming they increase advertising on completion of the repairs, it is further estimated that profits would be restored to pre-incident levels after six months. What should the indemnity period be?
14 months (8 months rebuild + 6 months to return to profit)
What are business interruption policies based on?
Turnover of the business
Chapter 8B1
A furniture manufacturer sells 25% of its goods through its own shops with the balance sold through other retailers. If a fire at its factory halts production for three months, its business interruption insurance will cover the insured profits of the:
Manufacturer and it’s own shops
Chapter 8E
A manufacturer suffered a fire which resulted in the partial closure of its factory for two months. During that time, turnover reduced from £100,000 to £70,000 per month, but expenses only reduced by 12.5% from £24,000 per month due to overtime payments. Ignoring any excess, how much will the firm receive from its insurers for business interruption?
£54,000
Chapter 8A
What highly competitive trades benefit from the additional increased cost of working?
Bakers, farmers, publishers etc
What is the motor vehicles extension on a BI policy?
To extend BI coverage to interruption caused by damage to a vehicle that is away from its own site.
An extension that covers ‘specified disease, food poisoning, vermin pests and defective sanitation, murder or suicide’ will typically:
Set a maximum indemnity period, and sometimes set a monetary limit in addition.
Typically 3 months and either 10% of the sum insured or £100,000 (whichever is less)
Chapter 9B3O
For which businesses is the BI transit extension most appropriate?
Companies where there could be a reduction in turnover following damage of goods in transit to a customers site or where machinery is sent from one factory to another
What is EML widely used for?
Widely used by insurers to determine their retention and reinsurance arrangements
Chapter 10C
With business interruption insurance, what is likely to be a ‘requirement’ in a survey?
Replace locks on all doors and windows before the policy commences.
Chapter 10A2A
If an insured would like to reduce its building insurance premiums, which measure on its own is likely to result in the greatest discount?
Installation of sprinklers
Chapter 11D2
When a security survey has been carried out and the risk requires alarm protection, insurance cover will be conditional on:
The installation & operation of the alarm from policy inception
What trades will typically not be accepted, due to historical claims activity or inherent risk presented?
Dealers in used tires
Waste warehouses (textiles etc)
Multi-storey multi-tenure risks with wooden floors
Specialist audio/visual photographic and computer dealers
Unoccupied buildings
Chapter 11A1
What are burning costs and how are they calculated?
Used to assess risk performance and level of premium required. They consider past claims values, inflation, expenses and profit.
Take a loss average (3 years or greater). Multiply by 100 and divide by the difference between 100 and the expense (i.e. 100-35 = 65) finally add the inflation
Which two elements will usually have the most impact on the basic premium charged?
The extent of losses suffered by the insurer and its overall management efficiency
Chapter 11C
What three factors is fire insurance rating based on?
Classification: grouping according to trades or section of trades
Discrimination: the differentiation of individual risks in a specified classification with regard to the particular features present in any one risk
Experience: relationship of losses to premiums in any given classification over a period of years (loss ratio)
A wholesaler was forced to move from its existing premises, surrendering its property under a compulsory purchase order. Before the transaction is complete, the empty factory was destroyed by fire from a lightning strike. Under normal circumstances, to what extent are its insurers liable for the cost of the damage?
They are not liable for damage to the building, as the wholesaler no longer has an insurable interest in the property.
The insured imports vodka and other spirits. A fire broke out at its warehouse destroying its entire stock, including a large quantity of rum which had been brought into the UK via an agent and not declared to HMRC. Under the rule in Geismar v. Sun Alliance and London Insurance Co Ltd [1977], how is the insurer likely to treat the claim?
They are unlikely to pay out for losses relating to the rum, or any other non-declared items, but may accept the claim for the remainder of the stock.
A hard insurance market is most likely to result in what?
increased reinsurance premiums, reduced commission, and higher premium levels
Why does a housing development nearing completion pose a specific underwriting risk?
Attractiveness of building materials
How many people must be using/threstening evidence for it to be deemed a riot under the Public order act 1986?
12
The regulatory reform (fire saftey) order 2005 does bot apply to private houses or what?
Offshore installations
What crime is committed if a person esters a shop & uses threatening behaviour to force the proprietor to open the safe & steal goods?
Robbery
What 2 exclusions are always applied to the riot & civil commotion section of an insurance policy?
Nationalisation & work stoppages
When the special condition of average applies to a policy, it will typically be used where the sum insured declared is less than
75% of the value of the property at the time of damage
Under pool re the categories of commercial risk which May be reinsured are
Completed buildings & other property only
What is the typical maximum an insurer hill pay under a capital additions clause?
£500,000
For a business interruption policy arranged on a declaration linked basis, to what extent, if any, does average apply?
It applies if the estimated insured profit is less than 50% of the rate of insured profit applied to the annual turnover.
A business continuity plan could be of assistance to an insurer with underwriting and
Estimating maximum loss assessment
Why would an insurer, having been offered a large multi-tenure risk, primarily decide to coinsure the risk rather than fully use its reinsurance treaty, despite reinsurance capacity being available?
To avoid over exposing its treaty reinsurers
To which contingency of a business interruption insurance will an insurer typically apply to a franchise?
Accidental failure of utilities
