Chapter 5 - Legal and Regulatory Requirements

Question 1

What insurances are compulsory for private individuals?

Answer 1

TP motor and PL if owning wild animals / dangerous dogs

Question 2

What insurances are compulsory for professions and businesses?

Answer 2

MO and EL if applicable

Question 3

What are the main reasons for insurances being compulsory?

Answer 3

• provide funds for compensation

- response to national concerns

Question 4

What does the Road Traffic Act 1998 say?

Answer 4

illegal to drive in any public place without insurance covering TP property damage and TP bodily injury / death

Question 5

What does the EL Act 1969 say?

Answer 5

Insurers employers can pay claims arising out of bodily injury or disease arising out of / during their employment

Minimum limit of indemnity £5m

Question 6

What does the Riding Establishments Act 1970 say?

Answer 6

Compulsory to hold PL insurance if have a riding school etc, indemnifies claims arising out of use of horses

Question 7

What can the insurer do if there is a breach of warranty on compulsory insurance?

Answer 7

Must pay claim but can sue insureds for claim amount back

Question 8

What does the Consumer Act 2015 say?

Answer 8

unfair terms in a consumer contract will not be binding on that consumer

Question 9

Under the Consumer Act 2015, what is deemed unfair?

Answer 9

contrary to the requirement of good faith, causing significant imbalance in the parties’ rights and obligations under that contract to the detriment of the consumer

Question 10

What did the Contracts (Rights of Third Parties) Act 1999 change?

Answer 10

Allowed third parties not privy to the contract to claim on the contract - third party must be expressly identified in contract

Question 11

What is the standard and higher rate of insurance premium tax?

Answer 11

12% and 20% of premium gross of brokerage - paid by client on top of premium

Question 12

What is exempt from insurance premium tax?

Answer 12

Long-term insurances, reinsurance, and things like aircraft / ships insurance

Question 13

What does SM&CR do?

Answer 13

• encourage staff to take personal responsibility for actions
• improve conduct
• staff clearly understand who does what in the firm

Question 14

What are the three parts of SM&CR?

Answer 14

• senior managers regime
• certification regime
• rules of conduct

Question 15

What roles are covered by the senior manager regime?

Answer 15

• head of key business area
• group entity senior manager
• significant responsibility manager

Question 16

What is the certification regime?

Answer 16

Applies to those not in senior management functions that could cause significant harm to consumers - required to be fit and proper and evaluated annually

Question 17

What are the guidelines for being fit and proper?

Answer 17

• honesty, integrity, and reputation
• competence and capability
• financial soundness

Question 18

What is a key function?

Answer 18

Something that is part of the effective system of governance