Chapter 8 - B Flashcards
In which classes of business are proposal forms used in the London Market?
Yacht and professional indemnity insurance
Proposal forms are not widely used but have specific applications in certain insurance classes.
Why is yacht insurance treated as personal lines in nature?
The use of proposal forms places a greater burden on yacht insurers to ask all necessary questions
This approach contrasts with other insurance types where the insured is expected to know what information is important.
Who completes the proposal form?
The insured or jointly by the insured and the broker
This collaboration helps present the risk to the insurer.
What is the purpose of the proposal form?
To present the risk to the insurer for quotation and formal agreement to accept the risk
It works in conjunction with the MRC/slip.
What does the proposal form allow insurers to do?
Include questions about material matters and reduce the risk of non-disclosure
While it reduces risk, it does not completely eradicate it.
List general questions included in proposal forms.
- Name, address, nature of business
- Past insurance history, including previous losses and claims
- Turnover and other exposure-related information
- Geographical spread of the risk
- Amount of insurance being requested
These questions help insurers assess the risk more accurately.
What must the proposer declare at the end of the proposal form?
That the answers given are true to the best of their knowledge and belief
This declaration is crucial for the validity of the information provided.
True or False: Insurers can argue non-disclosure if they accept a proposal form without following up on missing information.
False
If insurers accept the form without inquiries, it complicates their ability to claim non-disclosure later.
What are the ways in which a client’s risk can be presented to underwriters?
Through actual/virtual presentations or electronic/paper documents
Brokers and clients can provide detailed information about their business to underwriters through various methods.
What is the Market Reform Contract (MRC)?
A document that summarises a client’s risk in a standardised format for underwriters
The MRC replaced the term ‘slip’ and serves multiple roles in the London Market.
List the distinct roles of the MRC.
- Summarises client’s risk for presentation to underwriters
- Indicates underwriters’ written lines in non-electronic placements
- Serves as the client’s copy of the insurance contract
Why was the MRC developed?
To standardise the structure of brokers’ slips and improve information accessibility
Prior to the MRC, there was no standardisation in brokers’ slips, leading to inefficiencies.
What are the benefits of using a standardised MRC?
- Easier for insurers to find information
- Facilitates contract documentation creation
- Aids compliance with contract certainty requirements
- Supports electronic submission of information
What are the three types of MRC documents produced?
- Open Market MRC
- Lineslip MRC
- Binder MRC
Define Open Market MRC.
Where the broker places each risk individually and visits each underwriter separately
This method allows brokers to engage with underwriters on a one-on-one basis.
Define Lineslip MRC.
A preset group of underwriters arranged by the broker, with agreements for individual risks
This allows for quicker binding of risks when certain underwriters agree.
Define Binder MRC.
Delegated underwriting authority given to an external third party operating within strict parameters
The third party reports back on the risks they have written each month.
What is the mandatory requirement for the MRC in the Lloyd’s market?
The MRC must be used for all placements of open market business
The company market highly recommends the use of the MRC but does not mandate it.
What are the six sections of a typical open market MRC?
- Risk details
- Information
- Security details
- Subscription agreement
- Fiscal and regulatory
- Broker remuneration and deductions
What changes were made in the MRC v3 issued in March 2023?
It brought together information in a more logical format and included new fields
This version supports the market’s move towards greater data discipline for the Core Data Record.
What type of insurance is referred to in the risk details?
All risks of physical loss or damage, hull and machinery.
What is the new mandatory subheading introduced in the contract classification?
Contract classification is either insurance or reinsurance.
What two further fields become mandatory if the contract is reinsurance?
- Treaty/Facultative
- Proportional/Non proportional
What does the insured’s retention refer to?
Any amount the insured is keeping, including deductibles/excesses.
