Underwriting considerations

Question 1

What does the underwriting process generally consist of?

Answer 1

An assessment of:

• the major underwriting factors affecting claims experience for the particular class of business
• the ‘average’ claim per member of the group
• the proposer’s characteristics in comparison with the ‘average’ member.

The underwriter is evaluating the hazard associated with the risk which is being proposed.

Question 2

What are personal insurances?

Answer 2

Insurance arranged for private individuals acting outside their trade, business or profession.

Question 3

What are commercial insurances?

Answer 3

Insurances arranged for businesses.

Question 4

What are the most important underwriting considerations for buildings and contents within household insurance?

Answer 4

Buildings:

• Construction
• Location

Contents:

• Area
• Occupation during the day
• Security
• Type and level of cover

Question 5

What are the key considerations for underwriters in health insurance?

Answer 5

• Age
• Gender
• Occupation

Question 6

What are the key considerations for underwriters in travel insurance?

Answer 6

• destination
• purpose and duration of travel
• group policies
• existence of pre-existing conditions.

Question 7

What are the key considerations for underwriters in motor insurance?

Answer 7

• driver’s age
• type and make of vehicle
• type of use
• geographical area
• storage
• driving record
• cover required and/or extensions requested
• vehicle modifications.

Question 8

What are the key considerations for underwriters in employers’ liability insurance?

Answer 8

The principal rating consideration is the danger of a particular occupation (e.g. office worker versus scaffolder).

The insurer is concerned not just with the likelihood of an employee being injured but also of their suffering a disease or other form of illness.

Question 9

What are the key considerations for underwriters in public liability insurance?

Answer 9

The major underwriting considerations with public liability insurance are the trade activities of the policyholder and the amount of contract they have with the public and other third parties.

Question 10

What are the key considerations for underwriters in products liability insurance?

Answer 10

The principal consideration is the proposer’s trade or business.

A drug manufacturer’s potential exposure and risk would be, for example, greater than a business that manufactures socks.

In addition to the nature of the product insurers will need to know to whom the product is sold and where. Exports to North America can be a major concern.

Question 11

What are the key considerations for underwriters in pollution liability insurance?

Answer 11

Risk assessment is heavily weighted towards trade, the materials used and controls in place.

The insurers will need to know what chemicals are used and how they are stored.

Question 12

What are the key considerations for underwriters in professional indemnity insurance?

Answer 12

Insurers will need to know what the activities of the policyholder are and how much experience they have.

The risk premium will be relative to the potential consequences of poor advice.

Question 13

What are the main rating factors with regard to fire and special perils?

Answer 13

• method of heating and lighting
• risk management features (housekeeping, control of contractors etc.)
• property use
• types of goods stored on premises
• construction and material
• safety features
• number of floors and area
• method of heating and lighting
• location relative to perils such as storm, flood, subsidence, thefy and arson.

Question 14

What are the key considerations for underwriters in theft insurance?

Answer 14

• trade
• geographical area
• nature and construction of the property (resistance to forced entry)
• theft precautions: intruder alarms, cctv etc.

Question 15

What are the key considerations for underwriters in glass insurance?

Answer 15

The use of the building (in relation to the likelihood of glass being broken) and the geographical area (vandalism is a major concern).

Question 16

What are the key considerations for underwriters in money insurance?

Answer 16

A business which handles a lot of cash (for example a shop owner) will be more at risk of a loss than one where most transaction are on account and money is transferred electronically via the bank network (such as an office).

Question 17

What is pecuniary insurance?

Answer 17

Pecuniary insurance means ‘relating to money’.

Pecuniary loss insurances are those that protect the insured against purely financial losses rather than physical damage to property.

This includes legal expenses and business interruption amongst others.

Question 18

What are the main examples of fraud?

Answer 18

• inventing a loss event which did not take place.
• exaggerating a claim
• deliberate act
• insuring twice (or more) in an attempt to claim from more than one insurer for the same loss.

Question 19

Which organisation is closely involved in taking steps to help prevent insurance fraud?

Answer 19

The Association of British Insurers (ABI).

Question 20

What is The Claims Underwriting Exchange (CUE)?

Answer 20

A series of registers recording claims in various classes…

…(household and motor) as well as personal injury and industrial illness incidents through a shared database.

Information is kept for six years except personal injury and illness records that are kept indefinitely.

Question 21

What are the benefits of The Claims Underwriting Exchange (CUE)?

Answer 21

CUE is a database which allows participating insurers to check information on a proposal form with that held on the register,

with the aim of preventing multiple claims fraud and the misrepresentation of claims histories.

The database can be checked when a new claim is notified or at inception.

Question 22

What are the aims of the Art Loss Register ?

Answer 22

A database formed through collaboration between insurers and the art world in response to increasing art theft, the Art Loss Register’s aims are to:

• increase the recovery rate of stolen art and antiques.
• deter theft by making the resale of stolen articles more difficult.

Question 23

What is The Motor Insurance Anti-Fraud and Theft Register (MIAFTR - now MIAFTR 2)?

Answer 23

MIAFTR is a database which contains details of all total loss and theft claims.

Insurers can therefore check whether a total loss or theft of a vehicle is being claimed for more than once.

Question 24

What is the Motor Insurance Database?

Answer 24

The MID is a database which contains details of all registered vehicles in the UK, and the related insurance details, which assists the police in tackling motor vehicle crime.

Question 25

What indicators should claims handlers look for which might lead to a potential fraudulent claim?

Answer 25

• Claims made soon after policy inception or renewal
• where the insured has no documentation for lost items
• where the insured has several similar claims for similar accidental loss or damage within a short space of time.

Question 26

What forms of measures do claims handlers use to combat fraud?

Answer 26

• completing claim forms over the telephone

- claims settlement by replacement rather than cash.

Question 27

What are the Protected Characteristics?

Answer 27

• age
• disability
• gender reassignment
• race
• religion or belief
• sex
• sexual orientation
• marriage and civil partnership
• pregnancy and maternity

Question 28

What 4 types of discrimination are considered illegal under the Equality Act 2010?

Answer 28

Direct Discrimination - treating someone less favourably because of a protected characteristic

Associative Discrimination - a person associates with someone who has a protected characteristic

Perceptive Discrimination - a person associates with someone who is thought to have a protected characteristic

Indirect Discrimination - arises from a condition, rule, policy or practice in a company which applies to everyone but particularly affects those who have a protected characteristic.

Question 29

Under the Data Protection Act 1988 name the first 4 of the 8 principles businesses handling personal data must abide by.

Answer 29

The 8 data protection principles require
personal data to be:

1) fairly and lawfully processed
2) held for specified and lawful purposes
3) adequate, relevant and not excessive
4) accurate and up to date

Question 30

Under the Data Protection Act 1988, name the last 4 of the 8 principles businesses handling personal data must abide by.

Answer 30

The 8 data protection principles require personal data to be:

5) not kept for longer than is necessary
6) processed in accordance with the rights of individuals
7) secure
8) not transferred to countries outside the EU unless that country has an adequate level of protection.

Question 31

Under the Data Protection Act 1988, what are the 7 rights that individuals who have personal data held about the have?

Answer 31

The seven rights of individuals are the right to:

• find out what information is held about them (on computer or manually)
• prevent information being processed relating to them that may cause damage or distress to them or
  anyone else
• prevent processing of information for direct marketing purposes
• object to decisions being made by automated means
• compensation for damages and distress caused by breach of the Act
• rectify, block, erase and destruct inaccurate data
• ask the Information Commissioner’s Office (ICO) to assess whether the Act has been contravened.