Policy Awareness Flashcards
What are the four main tasks of an underwriter?
- Assess the degree of risk the proposal would bring to the common pool
- Decide whether or not to accept the risk
- Determine the scope of cover to offer
- Calculate the premium
What 3 key elements must exist in a valid contract?
Offer, acceptance and consideration
In an insurance contract what is the consideration for both parties?
The insured pays or agrees to pay a premium
The insurer promises to indemnify the insured
What are the four main areas of a proposal?
- General questions
- Specific questions
- Declaration
- Warning/Important Notes
What are general questions?
Questions asked for every proposal eg name, address, location etc
What are specific questions?
Questions relating to the risk and cover being requested eg construction, make/model of car, security, number of employees/payroll etc
What is a declaration?
The proposer confirms that the information provided is true to the best of their knowledge and belief
What is a warning/important note?
The insurer points out any information the proposer needs to be aware of and reminds them of the penalties for non-disclosure/misrepresentation
How are breaches of non-disclosure categorised?
Deliberate and reckless
or
Neither deliberate nor reckless
How are breaches of misrepresentation categorised?
Honest
Careless
Reckless or deliberate
What remedy is available if a breach of non-disclosure is deliberate and reckless?
The insurer may void the policy ab initio, refuse all claims, and keep any collected premiums
What remedy is available if a breach of non-disclosure is neither deliberate or reckless
Depends on what action the insurer would have taken had the breach not occurred:
They could impose any terms they would have otherwise done (eg higher excess)
They could charge a higher premium (you can instead reduce the claim in proportion but some insurers opt out of this)
They could void the policy but they would have to return all collected premiums
How is contract certainty achieved?
By the final and complete agreement of all terms between the insurer and the insured before inception or renewal, with policy documentation issued promptly thereafter
Why is contract certainty important?
To avoid disputes
What must the underwriter ensure the premium is?
Equitable
Fairly represents the risk it brings to the common pool
What 3 key components make up the premium?
Risk cost + Operating cost + profit
What are the most common methods of premium payment?
Direct debit
Debit/credit card
Cheque
What is IPT? Who sets it?
Insurance Premium Tax
The government
What is the current rate of Insurance Premium Tax for most insurances?
12%
What is the higher rate of IPT and when is this charged?
20%
Travel insurance and extended warranty, among others
What are the 5 main forms of policy documentation?
- Schedule
- Policy booklet
- Certificate
- Cover note
- Information & services
What is a policy booklet?
The “wording” and terms and conditions of the contract. Details the cover provided. Normally pre-printed with indication of what sections apply to that particular customer
What is a schedule?
The variable details of the risk that make that policy relevant to the individual customer
What sort of information would you expect to see on a policy schedule?
Name Address Subject matter Sums insured Special conditions/exclusions Territorial limits Policy number Premium
What is the purpose of an insurance certificate and when are these issued?
Issued for compulsory insurances to show the insurance complies with the relevant legislation (eg motor and EL)
What is a cover note and when are these issued?
Issued as temporary proof of cover while policy documentation is prepared. Useful when proof of cover is required. Also used for mid term adjustments
What is the purpose of the information & services booklet?
Provides useful information such as how to make a claim and other services included eg roadside assistance and helplines
What are the usual 7 sections of a policy booklet?
- Header
- Recital clause
- Operative clause
- Conditions
- Exclusions
- Important Information
- Contact Details
What is in the header of a policy booklet?
Insurer name and company logo
What is the purpose of the recital clause?
Sets the scene by referring to both parties coming together to form the contract
What is the purpose of the operative clause?
Outlines the cover provided
What are conditions?
Rules the policy must abide by
What are exclusions?
Things not covered under the policy
What may be contained within the important information section of the policy booklet?
Complaints procedures, important notes, fraud info, etc
What may be included within the contact details in a policy booklet?
How to make a claim, legal advice and general policy help
What is a warranty?
A promise made by the insured
What happens in the case of a breach of warranty?
The insurers liability will be suspended until the breach is remedied
What are the two types of conditions?
Express or implied
What are express conditions?
Expressly stated in the policy
What are implied conditions?
Not expressly stated but implied by common law
What is the most common implied condition?
You must have insurable interest
What are some examples of express conditions?
You must take reasonable care and act as though you are uninsured
You must inform the insurer of any changes to the risk
You must not hinder the insurers investigations into a claim
What are conditions that are common across all insurers?
Market conditions
What are the standard 7 market conditions?
- Claims procedures
- Contribution
- Cancellation
- Arbitration
- Reasonable care
- Fraud
- Alteration
What are the 3 categories of conditions based on timeframe?
Precedent to the contract
Subsequent to the contract
Precedent to liability
What are some common market exclusions?
War and related perils Terrorism Riot and civil commotion Pollution/Contamination Sonic boom Nuclear and radioactive assemblies
What is an excess?
The first portion of any claim which the insured is responsible for paying
What are the 2 types of excess?
Compulsory
Voluntary - accepted in return for a premium reduction
When are insurers obliged to offer renewal?
Never
Where renewal is offered, when do the FCA say this should take place?
“In good time”
In general when is renewal usually negotiated in advance of the renewal date?
21 days for commercial customers, 28 days for retail
How much notice would an insurer usually give to cancel a contract?
At least 7 days written notice
How can a private customer cancel their insurance contract?
They have a 14 day “cooling-off” period post inception in which to cancel without charge. Beyond this it depends upon the cancellation condition but they may be charged an admin fee
