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LM2 > Chapter 8 - Business Process > Flashcards

Chapter 8 - Business Process Flashcards

1
Q

What is a quotation?

A

Proposal from insurer to broker on terms and conditions of placing risk

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2
Q

What are 3 key legal implications on proposals? And when does reasonable time apply?

A

Time - limited period of if the broker wants to proceed
Reasonable time - if insurer has not specified quotation time period
Insurer is not on risk if client has only received quotation
Insurer cannot back out if client has accepted proposal

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3
Q

What happens if additional material information is supplied after initial quotation?

A

Vary or withdraw the original quotation

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4
Q

How is an insurance contract formulated?

A

Underwriters indicates proportion of risk they want to take and sign the contract. Reference is unique to them

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5
Q

What is a firm order?

A

Formal commitment to the placement from insurer to broker

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6
Q

What does lines of whole mean?

A

Percentage of risk which the broker holds (e.g. 50% of total) risk (Relative)

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7
Q

What does lines of order mean?

A

Percentage of risk if it was 100% (Absolute)

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8
Q

When are insurers actually on risk

A

When the inception date starts

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9
Q

What is concluded when the insurer signs on the MRC?

A

The contract between insurer and insured

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10
Q

What is signing down?

A

Proportionately downsizing the total line placed so that the total is 100%

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11
Q

What is a line to stand? What happens to other shares?

A

Where the risk proportion cannot be reduced, other insurer lines must reduce more

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12
Q

Why should brokers notfiy underwriters about signing down at the placing process?

A

Time lag between writing the risk and notification of signed line

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13
Q

In terms of permission, what is the difference between signing up and down?

A

Brokers must get express permission for signing up

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14
Q

What are the 4 main reasons why contracts are terminated?

A

Cancelled by insured
Cancelled by insurer
Fulfilment
Policy expiration

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15
Q

How many days usually do consumers have to cancel insurance?

A

14 days

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16
Q

What is a short rate premium provision?

A

Amount that insurers keep depending on how many days the policy was in force

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17
Q

What is a downgrade clause?

A

Insured removing insurers if their ratings drop too much or they go into run off

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18
Q

Who would the insurer deliver the notice of cancellation to?

A

The broker

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19
Q

Why might an insurer cancel their policy for marine

A

Vessel is sold, ownership is a key valuation

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19
Q

How does fulfilment cancel a policy

A

If the subject matter no longer exists

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20
Q

What happens in reckless breaches of fair presentation?

A

Contract is voided, premium kept

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21
Q

What happens in not reckless, what happens in fair representation (3 scenarios)

A

If insurer would not accept new t&c under any circumstances. Premium returned

New T&Cs required, same premium contract proposal rewritten

New T&Cs accepted, higher premium wanted - claims reduced

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22
Q

What happens if warranty is breached?

A

During breaching period, insured cannot make claims

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23
Q

What happens if fraud is found?

A

If fraud found, claims not paid, premiums kept

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24
What are the 3 ways contracts are unexpectedly terminated?
Breach of fair representation Breach of warranty Fraud
25
Why might a insurer not want to renew business?
Contract has been loss making Exit that class of business
26
Why might an insurer want to renew business?
Stable portfolio of clients Cheaper admin than new contracts
27
What are the new 3 new features on FCA renewal transparency? Why has this occured?
Disclose last year's premium Encourage customers to shop around Encourage customers (4x renewal) to shop around Renewing customers were paying more than expected
28
What is a days of grace period?
Elastic end to policy coverage, enabling more scope if they are late to renew. Not an implicit concept
29
Why might a risk be written after inception and why is this risky? What does WNKORL mean?
Slow placing process Insurers are liable for claims starting from inception date Warranted no known or reported losses
30
What typical classes of business are proposal forms used? and Why? Who fills these in? and what are they?
Yacht and professional indemnity. yacht - treated as personal lines, insurer has to ask more questions The insured typically fills it in, answers questions about the risk and signing a declaration
31
What are the 3 key uses of an MRC?
Summarises risk as a standardised format Indicate written lines Sent to insured as copy of contract
32
What are the 4 benefits of an MRC?
Standardised format, clearer information Documentation Comply with contract certainty requirements Electronic submission of information
33
What are the 3 types of MRCs and how are they different?
Open market - individually placed risk Lineslip - Preset group, lead underwriter binds risk on behalf, each insurer indicates risk share Binder - Delegated UW Lineslip and binder have their risk section instead of open market risk section
34
What are the 6 key sections of the MRC (RISSFB)
Risk details Information (surveys and reports) Security details (signed lines) Subscription agreement (slip leader and claims) Fiscal and regulatory (taxes) Broker deductions
35
What is a delinked contract?
Contract is entered into Xchanging asap, premium paid later
36
What is the CDR? what is it used for?
Core Data Record Used for downstream processing for: Premium validation Claims matching Taxes Regulatory
37
What is an endorsement?
Changes to the contract presented by the broker
38
What are the 4 key aims of the General Underwriters Agreement (GUA)
Responsibility for contract changes Clarify authority limits Flexibility for different COBs Ensure underwriters are advised
39
What are the 3 scheduling parts of the GUA and what do they represent? What classes of business do they represent?
Part 1 - Slip leader only Part 2 - Slip leader + agreement parties Part 3 - all underwriters Used to manage changes to a contract Applies to non marine, marine cargo and political risk
40
What is the MRCE
Market Reform Contract Endorsement - document used to standardise endorsements
41
What is the process for premium processing?
LPANs created and submitted into DXC Risk data captured on LIDS (lloyds) and POSH (Company) Signing date and number created Messaging will update insurers systems
42
In a policy which section is specific to the insured?
The schedule
43
What are the two types of condition precedents and what do they mean? What could happen if any are breached?
Contract and liability. Condition must be satisfied for either the contract to exist or insurer to have any liability Liability - claims are not paid, policy in force Contract - contract not valid
44
Under what circumstances would war be permitted to be covered?
Formal request is submitted to Lloyds
45
What are warranties?
Promises made by insured on aspects of risk which insurer considers most important
46
Describe the relationship between warranty and consumer contracts?
Refusal of claim cannot happen unless the breach of warranty is directly related to the claim
47
What are suspensive conditions? What is the link between breaches and loss
When warranty is breached, insurer takes no liability for any loss during that period No relationship, no loss is required, if warranty is breached, coverage not sustained
48
The insurance act highlighted that warranties would reduce 3 key risks, what are they
Particular types of losses, locations and times
49
What are service companies and why are they used?
Delegated underwriting on behalf of syndicates Used for business outside of lloyds
50
Why are branch companies used? What are the disadvantages?
To satisfy business requirements of having an office in the country of business Higher capex requirements
51
What is the difference between conducting business on a service vs establishment basis?
Service = cross border, regulated only by home regulator Establishment = office must be in coountry of business
52
How does Lloyds brussels work?
Risks undertaken by Lloyds brussels are wholly underwritten back to syndicates. Used for direct and Re in EEA
53
What is a pure risk follow?
Following line orders are identical to the lead line
54
What is contract certainty? What are the 2 stages?
All parties know exactly what is going on 1. Finalise agreement on all terms and time of entry into contract 2. Documentation provided
55
What are the 7 principles of contract certainty?
1. When entering contract (all terms are unambiguous) 2. After contract entry (documentation) 3. Performance (audits & checklists) 4. Contact changes (MRCE) 5. Multi-insurers (clear signed lines on MRC) 6. Final participation (lines enterd onto xchanging) 7. Exclusions and Problems (brokers need to resolve)
56
Provide an example of subjectivities on MRC
Surveys
57
Do commercial cover allow periods of cancellation?
Yes
58
What is the period for docs to be issued for comm. insurance?
30 days
59
What is an aggregator?
Price comparison website
60
Where would the broker's code be found on MRC?
Risk details
61
Under what circumstances would an insurer not use standard mrc wording?
Primary insurer is from another market
62
What does the operative clause show in a general policy document?
What is covered
63
When is an insurance interest required for non marine insurance?
Point of inception and claim
64
Under GUA Part 1, give examples of things that can be changed by the sliper leader only
Typos, coverage restrictions, monetary exposure reduction, return premiums
65
Under GUA Part 3 - what can be changed by slip leader + agreement parties
Geographical restructions Policy extensions beyond 30 days Jurisdiction of contract Backdating
66
List and summarise the 5 sections of the MRCE
Risk Identification - which MRC are you changing Contract changes - headings of the contract which you are changing Information - Surveys Agreements - Who needs to sign off Admin - Changes to broker renumeration, subscription agreements and tax and regulatory sections of the MRC
67
What are the 3 documents required to begin premium processing
IPT Any external documents LPAN
68
What are the new unified database names replacing premiums and claims?
ICOS - Claims IPOS - Premiums
69
What are the 7 sections of an insurance contract?
Heading - Name of insurer Recital Signatures Operative Clauses - Policy Coverage Exceptions Conditions - Contract and liability precedents Schedule - Areas personalised to the risk
70
When would a non standard wording be used?
Insurer insuring the primary layer / leading the risk is not from london markets
71
Provide an example of a condition precedent to liability
Claims must be notified within X period
72
Provide an example of a condition precedent to contract
Insurable interest must be established at the time of inception and time of claim
73
Can a slip leader be from an overseas market?
No

LM2 (10 decks)

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