Chapter 8

Question 1

What is a quotation?

Answer 1

Indication from a insurer for terms and condititons about a risk

Question 2

What are the legal implications of an insurer providing a quotation?

Answer 2

• Do not remain valid indefinetely, insurer can specify time period for validity
• If client accepts after expiry, insurer can accept but is not obliged to
• If insurer does not specify time period, “reasonable time” applies
• If client accepts in time frame, insurer obliged to honour
• If client accepts subject to changes, insurer not obliged to accpet changes

Question 3

What is an insurer’s share of a risk called?

Answer 3

The Order, i.e 50% order to place

Question 4

When is an insurer on a risk?

Answer 4

When they put their line on a MRC, though exact liability is not yet known.

Question 5

What is signing down?

Answer 5

When a risk is over subscribed, lines aee reduced proportionally to add up to 100%. New line is called “signed line”

Question 6

What happens in signing down when an insurer wants their “line to stand”?

Answer 6

They keep their exact line, other lines are reduced proportionally to add up to 100%

Question 7

What are some reasons for natural termination of a contract?

Answer 7

• Cancellation by insured
• Cancellation by insurer
• Fulfillment
• Expiry of the policy period

Question 8

Under the Insurance Act 2015, what are the reasons for unexpected termination of a contract?

Answer 8

• Breach of duty of fair representation, if would’ve offered on different terms treat as though those terms etc
• Breach of warranty
• Fraud

Question 9

Why would an insurer not want to quote for a renewal?

Answer 9

• Contract has been loss making
• Exiting that class of business

Question 10

Why would an insurer want to renew business?

Answer 10

• Costs less to renew business
• More stable portfolio of clients = more reliabile statistical data

Question 11

What are “days of grace”?

Answer 11

Elastic policy expiry should the insured be late in renewing a policy

Question 12

How do underwriters write a risk that has incepted?

Answer 12

They write on the basis of “Warranted no known or reported losses”

Question 13

What lines of business are proposal forms common in?

Answer 13

Yacht and PI

Question 14

What is the role of the market reform contract?

Answer 14

• Summarises risk into standardised format for underwriters
• Underwriters formally write their lines here
• Sent to client as their copy of the contract

Question 15

What are the benefits of a standardised MRC?

Answer 15

• Easy for insurers to find information
• Easy to create a new one
• Comply with contract certainty requirements
• Works towards electronic slips