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M80 > 3: Polciy And Practice > Flashcards

3: Polciy And Practice Flashcards

1
Q

What is the difference between a corporate strategy and an underwriting strategy?

A

Corporate strategy applies to the whole organisation where as underwriting strategy is more insurance related and will focus on:
Premium
Claims and expense ratios
Investment returns

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2
Q

What would an underwriting strategy aim to increase premiums :

A

To reduce loss ratio and increase ROCE

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3
Q

Why would they add in a min prem?

A

To improve expense ratios

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4
Q

Why an uwr exit or enter non standard markers

A
  • high risk usually generates higher rewards (e.g that roofs)
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5
Q

What are the pros and cons of personal lines insurance for the uwr?

A

Pros:
Not much cost for specialist underwriting as mainly computer driven

Cons:
Competitive market
High acquisition cost driven by marketing expenses

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6
Q

What are the pros and cons of non-standard lines insurance for the uwr?

A

Pros:
Higher premium due to more skilled underwriting being needed

Cons:
High expense ratios usually due to high commission rates

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7
Q

A moral hazard usually involves?

A
  • misleading or false answers
  • poor attitude
  • delays or exaggeration
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8
Q

A physical hazard usually involves

A
  • health and safety compliance
  • material damage: e.g sprinklers
  • BI: if more suppliers then they’d have higher chance of BI
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9
Q

The corporate objectives are implanted into the organisation through the X strategy which can achieve the corporate results and is then translated into business plans used by X X

A

The corporate objectives are implanted into the organisation through the UNDERWRITING strategy which can achieve the corporate results and is then translated into business plans used by Senior management

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10
Q

What is the operative clause?

OperatiVE = EV…

A

Details the type of EVENT insured against

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11
Q

What are the two types of exclusions

A
  • general: apply to whole policy

- specific: apply to certain parts of the policy

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12
Q

What is the condition clause?

Condition of the insurer would be concerned with their….?

A

Expresses the policyholders rights and obligations

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13
Q

The schedule describes the…

A

Precise subject matter

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14
Q

What are the two types of excesses?

A

Compulsory

Voluntary

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15
Q

Why might an insurer have a compulsory excess?

A

Makes the policyholder more responsible to minimise risk

  • reduce claims costs
  • get rid of high frequency low severity claims
  • reduce nuisance admin for small claims
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16
Q

What is the difference between an excess and a deductible?

Think about who their clients are and how they would price it

A 
A deductible is mainly for commercial risks
- pricing would be done on individual claims experience rather than on a whole class level
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17
Q

What is a franchise and how does it work? I f

A

Similar to an excess in that the insured takes on some of the risk
The insured will take on all claims that fall under the franchise limit but once it goes over then they will take all the claims

18
Q

A policy has a 400k franchise in place. How much would the pilcyholder and insurer pay for each of the below

1) 300k
2) 400k
3) 700k

A

1) insurer= 0, insured=300k
2) insurer=0, insured=400k
3) insurer =700k, insured=0

19
Q

Name 3 underwriting distribution channels

A

1) intermediaries
2) websites
3) direct sales (call centres)

21
Q

What could you use for the below to rate accounts

1) motor
2) property
3) liability

A

1) motor: type of vehicle, age of driver, use of vehicle (type, age, use)
2) peppery: use of building, building materials, age of building
3) liability: occupation, turnover, product

22
Q

What is delegated authority?

A

When an insurer authorises another party to act on its behalf

23
Q

In delegated authority the person to whom authority has been delegated to is known as the ?

A

Cover holder

24
Q

With regards to delegated authority, an agreement that sets up the scope/extent of authority as known as what?

A

Binding authority

25
Q

What are the benefits of Delegated authority

A
  • exposure to risks otherwise may not have
  • specialist knowledge in an area they don’t have
  • get income at low costs
  • build relationships with intermediary they would not have worked with before
26
Q

What are the disadvantages of DA?

A

1) need to give great consideration to the broker/partnered you choose to be your DA
2) conflicts of interest with a broker, as they may be more favourable of their own gain than the underwriters
3) if the cover holder doesn’t achieve the objections of the insurer and withdraws authority they may still lose money/affect their reputation in the meantime
4) breaching authority: not always clear on terms of accepting risks
5) regulatory aspects and the effect that errors could have on exposure and the purchase of the correct amount of reinsurance

27
Q

International business:

An insurer is looking to expand their territories, how can they do this?

A

1) open a local branch
2) appoint local agents
3) enter a joint venture with another insurer
4) acquiring a local insurer

28
Q

International business:

What implications may arise from expanding territories and opening local branches?

A
  • regulatory legislation may require certain cover to be purchased from a locally authorised insurer
  • certain cover may not actually be desirable in that area
  • local taxes may be payable
29
Q

What is the insurance fraud investigation group?

Think group= forum

A

Non profit org for fraud

They have a forum of numerous professional ins bodies to discuss anti-fraud initiatives and techniques

30
Q

What is the insurance fraud bureau and what do they do

Think IFB- FBI : they put a stop to it

A

Detects and prevents organised fraud

Funded by a levy from its members who are insurance fraud managers fe various insurance companies

31
Q

Who are the insurance fraud enforcement bureau and what do they do

Think enforcement=police

A

Made up of the ABI and city of London police

Objective is to change public perception that small time fraud is acceptable

32
Q

What is a legal intermediary in terms of fraud?

A

Pretend brokers who take advantage of vulnerable people who think they have a policy in place when they in fact use it to put in claims

33
Q

What is a professional enabler with regards to fraud?

A
  • professionals who may be complicit in submitting and progressing insurance claims they know to be false
    Drs, solicitors and surveyors
34
Q

What are the 4 anti-fraud databases?

A
  • CUE: claims underwriting exchange, central database to prevent multiple claims
  • Motor insurance anti fraud and theft register :share information about motor claims
  • insurance fraud register (IFR):an industry owned databases to share info on known fraudsters
  • motor insurance database (MID): holds insurance details for any vehicles registers and insured in the U.K.
35
Q

Who is responsible for establishing and maintaining anti money laundering systems?

A

Senior manager

36
Q

Who does the money laundering regulations act apply to?

1) life insurers
2) general insurers
3) both
4) none

A

Only life insurers

37
Q

What is the standard industrial classification code (SIC)

A

Government classification for all types of business and economic activities
They are generally used for economic analysis

38
Q

What are the advantages ofDA for brokers?

A
  • fewer costs in placing business
  • access to unique product with its own rating
  • can reduce competition by removing themselves from the open market trading
  • quick turnaround for clients
39
Q

What is a managing general agent? (MGA)

A

Similar to a delegated authority but as well as having authority to write risks will also do the marketing, selling and administration for the insurer.

It does not provide the funding for claims!

40
Q

Does an MGA provide funding for claims?

A

No

41
Q

What is a binding authority and what is included in it?

A

This is the agreement itself between the insurer and the cover holder who has accepted authority in a delegated authority.

It will cover:
The period of the delegated authority 
What classes can be bound 
What premium must be charged 
What area 
What extension to cover 
What limits apply 
What members of staff hold the underwriting authority and at which level 
What are the exlcuded trades?
42
Q

Importance of record and reporting

What is a Bordereau and what does it include

A

A record of delagated or managing general agents

  • identity of client
  • risk location
  • sums insurer
  • maximum amount of any one loss
  • breakdown of income section by section
  • retention rates of the business transacted
43
Q

Define commoditisation

A

Consumers care less about who they’re buying from and more about the best price

M80 (6 decks)

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