Underwritting Procedures And Premium Payment Flashcards
Conduct of business is regulated by the FCA and the rules imposed by this regulator have an impact on…
How information is acquired, how negotiations are conducted and final issuing of documents
The requirement for contract certainty has an impact on…
The provision of information, the process and on timing
Insurance is often placed through an intermediary these can be…
An authorised person, an appointed representative or an introducer appointed representative. They may be a wholesale broker
The responsibility for the actions of appointed representative is accepted by an authorised person
They may act for an intermediary or an insurer. They must indentify their principal in any documentation that they provide
An introducer appointed representative is
Brochures. Involved in non-real-time financial promotions. Issue proposal forms or prospectus
A wholesale broker intermediary
Is an authorised person used to access a particular market like Lloyds or the London market
Terms of business agreement
Intermediaries that are FCA authorised persons carry on their business under these terms. There are two types one applies to relationships with insurers and one applies to relationships with the client
The FCA rules state that…
Certain information about the intermediary and its services must be provided prior to the conclusion of the contract
For distance communications…
Certain minimum information must be supplied, with further, more detailed information supplied in a durable medium Eva before the conclusion of the contract or immediately after if this is not possible
The clients demands and needs must be established before…
A recommendation is made in a statement of them provided to the client before the conclusion of the contract. Any recommendations that are made must be suitable for the clients demands and needs
Commission does not need to be disclosed unless…
A commercial customer asked for the information. Any fees charged must be stated
Strict rules apply to doze offering protection policies to ensure…
That customers understand the products being offered and that, where a recommendation is made it is suitable
If a proposal has not taken up a quotation within the set period…
It is no longer valid and the insurer is not obliged to honour it
Responsibilities for production of information and timing
The information that must be supplied by insurers to customers is generally provided by means of a key features document
Cancellation rights
Firms must offer cancellation rights to a consumer upon inception of renewal for specified contracts
Intermediaries must provide a commercial customer with…
Appropriate information in good time to enable it to make a decision
Once the proposal form is completed it is submitted to…
The insurer who will quote a premium and state any special terms that apply
Sometimes proposal forms don’t need a paper copy…
There is a growing trend particularly with private motor and household for information to be obtained by telephone or the Internet with no generation of a paper copy
What is a premium
A premium is the amount paid to an insurer in consideration of the insurer agreeing to cover the risk
Premiums are calculated by…
Applying a premium rate to a premium base. The rate is intended to reflect the hazards associated with a particular insured and the premium base is the measure of exposure.
Insurers can no longer take account of the subject of the proposes tender when deciding on the premium to charge or the benefits to offer
The premium rate
Reflects the hazards associated with a particular insured
The premium base…
Is the measure of exposure
An adjustable premium is used
Where at the start of the insurance it is only possible to estimate what the premium base might be. You can find this generally with employers liability. Rebates can apply
Flat premiums are used in…
In motor insurance and in situations where there is no obvious exposure measure. You can use this for public liability risks when there may be no work carried out away from the insured premises and third parties can’t gain access
Policy documentation can be issued when…
Both the insured and the insurer are clear as to the terms agreed a policy is issued containing details of the cover, the period of cover, exclusions, conditions, premium and other relevant information
Certificate of insurance
Is issued where it is compulsory by law to have insurance. The certificate is issued to prove that the policy is in force
Insurance cover will begin when…
As soon as the insurer except to proposal And the proposal has paid the premium
Insurance premium tax applies to general insurance where the insured risk is located in the UK.
Insurance premium tax is generally 12% however travel insurance some vehicles and domestic electrical appliances it is 20%
Appointed representative.
A person or firm not directly authorised by the FCA but are able to act as an intermediary. An authorised person takes responsibility for their actions
What is EDI
Electronic data Interchange. Basically a system where you can provide quotation online by submitting data
What are the benefits of EDI systems when providing quotations?
Single emperor of information. Speed of operation. Easy price comparison
What information does the FCA insist is provided to a client about an intermediary that is an authorised person?
Name, address, statutory status and the scope of the service the intermediary is offering
How can a statutory status of an intermediary be checked
It can’t be checked on the FCA website or by telephone
What is the legal significance of procedures relating to quotations?
The quotation remains valid for a set number of days, during which time cover is not affective unless stated otherwise. The insurer is legally bound to honour the quotation in the event that the proposal except a quotation within the timescale. However they insurer is not bound to maintain a conversation if the circumstances upon which the quotation was based change
What is the purpose of the declaration and warning important note with a proposal form?
The declaration confirms that the information supplied by the proposal is true and correct to the best of the proposes knowledge and belief. The warning important no concerns those facts which should be disclosed and point out the dangers of non-disclosure of material facts
How is insurance premium defined?
And insurance premium is the amount paid to an insurer in consideration of the insurance acceptance of the risk
What is the basic formula by which insurance premium is calculated?
Sum insured X rate =equals premium
What is the legal significance of an insurance policy
It is evidence of the contract of insurance it is not the contract itself. The policy contains all the details of cover, period of cover, exclusions, conditions and the premium.
What circumstances or certificate of insurance issue?
A certificate of insurance is issued to an insured to prove that an insurance policy is in force usually where that insurance is compulsory by law like employers liability and motor insurance
One of the disadvantages of technology is ability to gather data and analyse large amounts of data…
Some risks to become uninsurable
Who introduced a standardised insurer Tober template with the aim of lowering costs
British insurance brokers Association
The FCA rules require an intermediary to take into account the customers existing insurance cover for what type of policy
Pure protection policies
The European Court of Justice is gender ruling affects what type of insurance
Motor, life insurance and purchases of annuities. Annuities insurance is which entitles investors to a series of annual sums.
The information contained in a service legal agreement
Include response times for enqueries, complaints or claim notifications
Where a wholesale broker is used to place a risk for a client regular tea responsibility rest with
The client facing internediary only
An insurance policy’s legal significance is as the
Evidence of the contract
Martin buys a car and asks an intermediary to arrange insurance. From what point does the insurance become effective?
From the time and date shown on the cover note issued by the intermediary.
A proposal form is normally used by an underwriter as a means of obtaining material information because it
is convenient and cost-effective.
An insurer mistakenly quotes a premium of £500 instead of £5,000. The quotation has NOT yet been accepted. What option, if any, is available to the insurer to rectify its mistake?
Send the proposer a second quotation with the correct premium stated.
What personal information about the proposer, other than name and address, is required on a commercial fire insurance proposal form?
Occupation
A direct motor insurer asks a proposer questions over the telephone and prepares a statement of fact based on the proposer’s responses. What is the next stage in processing this proposal?
The statement of fact is sent to the proposer to check
John purchases a motor insurance policy and asks the insurer NOT to send him a policy document as he understands the extent of cover. Why would the insurer send him a policy document anyway?
The policy is evidence of the contract and it must be sent to meet contract certainty regulations.
A customer requests an insurance quotation and indicates a wish to accept it. At what point is the contract made?
When the customer agrees to pay the premium
Which document governs the relationship between an intermediary and the client?
Toba
Which organisations’ rules will an insurance intermediary primarily base their compliance procedures on?
FCA
When must an intermediary provide a client with a demands and needs statement?
Before the conclusion of a contract
Ensure since day should a document detailing the relevant information disclosed this is known as
The statement of facts
A statement that a quotation is issued by an insurer subject to the completion of a proposal form is an example of
A condition
In order for an insurance contract to be legally valid either a premium must be paid or
I promise to pay must be made
Who carries the credit risk when a premium is paid instalments using third-party premium financing
The finance company
