Chapter 9 - Compulsory insurance and statutory regulations

Question 1

Identify six types of insurance that are compulsory in the U.K.

Answer 1

Employers liability
Motor third party
Solicitors professional indemnity
Horse Riding Public Liability
Dangerous Animals/Dogs Public Liability
Insurance brokers professional indemnity

Question 2

Which Act applies to contracts and notices between consumer and seller. Terms are only binding on consumer if they are “fair”

Answer 2

Consumer Rights Act (2015)

Question 3

Which Act gives an injured party the right to claim directly against the liability insurer of the party who injured them. If the party is insolvent.

Answer 3

Third Parties (Rights Against Insurers) Act 2010

Question 4

Which Act implemented EU Gender directive. Insurers can not charge a higher premium based on gender.

Answer 4

Equality Act 2010

Question 5

Which Act allows parties to a contract to override privity of contract and allow a third party to enforce the contract if it expressly provides benefit to that third party.

Answer 5

Contracts (Rights Of Third Parties) Act 1999

Question 6

Which Act states that insurer may be liable to pay interest on claims if they have not paid claims within a reasonable time?

Answer 6

Enterprise Act 2016

Question 7

Identify three insurance policy terms that may be under Consumer Rights act grey list and be deemed unfair.

Answer 7

Term that hinders consumer’s right to take legal action
Term that allows a seller to change terms unilaterally
Term that applies disproportionately high cancellation charges

Question 8

What is the current rate of Insurance Premium Tax on policies other than Travel insurance?

Answer 8

12%

Question 9

What is the current rate of Insurance Premium Tax on Travel insurance?

Answer 9

20%

Question 10

Which regulator is the prime regulator for insurers

Answer 10

Prudential Regulation Authority

PRA

Question 11

Which regulator regulates insurance intermediaries

Answer 11

Financial Conduct Authority

PRA

Question 12

What are the PRA’s objectives

Answer 12

promote safety and soundness of UK financial system

contribute to ensuring the insurance policyholders PRA’s

Question 13

Who is the lead regulator of the Lloyd’s of London

Answer 13

PRA

Question 14

Who regulates managing agents

Answer 14

PRA and FCA

Question 15

Who regulates Lloyd’s brokers and members agents

Answer 15

FCA

Question 16

What is the FCA’s strategic objective?

Answer 16

To protect and enhance confidence in

the U.K. financial system.

Question 17

What are the FCA’s three operational objectives

Answer 17

Consumer protection
Integrity
Competition

Question 18

Which regulated fim risk category is most risky so firms get more intense supervision

Answer 18

Category 1

Question 19

Which regulated firm risk category is least risky an includes most insurance brokers

Answer 19

Category 4

Question 20

What are the three types of work in the FCA Supervision model?

Answer 20

Proactive
Reactive
Thematic

Question 21

What is the reporting system called under which the FCA gathers information on small firms?

Answer 21

GABRIEL

Question 22

How often do low risk small firms have a “touch point” with the FCA

Answer 22

Every 4 years

Question 23

Identify three areas where the FCA focus on:

Answer 23

Product governance
End-to-sales processes
Prevention of financial crime

Question 24

Which Act encourages “whistle blowing” by reducing employers ability to punish whistle blowers?

Answer 24

Public Interest Disclosure Act 1998 (PDA)

Question 25

What are Threshold Conditions?

Answer 25

The conditions a firm needs to meet to be authorised by PRA/FCA

Question 26

Regulated firms must have a responsibilities map under what regime?

Answer 26

Senior Managers and Certification Regime

Question 27

What are the regulators' rules which apply to senior managers called?

Answer 27

Rules of conduct

Question 28

Identify four discplinary powers of the regulator

Answer 28

Public censure Financial penalties Prosecution for criminal offences Civil and less formal remedies eg injunctions

Question 29

The difference between an insurers' assets and liabilities is known as?

Answer 29

Solvency margin

Question 30

What are the three pillars in Solvency II

Answer 30

Pillar 1 Capital requirements Pillar II Risk management Pillar III Disclosure

Question 31

Identify two ways an insurer can calculate their MCR and SCR

Answer 31

Standard formula | Internal model

Question 32

To what level of confidence must captal be held in respect of the SCR

Answer 32

99.5%

Question 33

To what level of confidence must captal be held in respect of the MCR

Answer 33

85%

Question 34

What is the SCR?

Answer 34

Solvency Capital Requirement

Question 35

What is the MCR?

Answer 35

Minimum Capital Requirement

Question 36

What will be higher MCR or SCR?

Answer 36

SCR

Question 37

What does ORSA stand for under what pillar of Solvency II is it required?

Answer 37

Own Risk and Solvency Assessment PIllar 2

Question 38

Identify two reports insurers are required to provide under Solvency II Pillar 3 Disclosure which is public and which private?

Answer 38

Solvency Financial Condition Report (SCR) Public | Regulatory Supervisory Report (RSR) Private

Question 39

Identify seven ways the PRA can intervene if an insurance company's capital is inadequate for the risks they face.

Answer 39

``` Restrict premium income Require more frequent accounts Require more information Prevent insurer accepting new business Require company to restore capital Impose requiremenst on investment policy Withdraw authorisation ```

Question 40

Identify seven items in an insurance broker's Retail Mediation Activities Return

Answer 40

Accounting information Regulatory capital PI insurance Threshold conditions Training and competence Conduct of business data Product sales data FCA fees data Complaints (Eligible complaints to be reported twice yearly) ```

Question 41

What is ICOBS

Answer 41

PRA/FCA rule book governing the sale of general insurance

Question 42

What is the cooling off period under a consumer policy

Answer 42

14 days

Question 43

What is the cooling off period for payment protection insurance?

Answer 43

30 days

Question 44

What is the mandatory CPD requirement under the Insurance Distribution Directive?

Answer 44

15 hours

Question 45

What are the three stages of money laundering?

Answer 45

Placement Layering Integration

Question 46

The process by which money obtained illegally is converted to legitimate funds is called?

Answer 46

Money Laundering

Question 47

Under the Proceeds of Crime Act (2002) who must insurers nominate to make disclosures to the Serious Organised Crime agency?

Answer 47

Money laundering reporting officer

Question 48

Identify four offences under the Bribery Act 2010

Answer 48

Pay bribe Receive bribe Bribe foreign official Failure of commercial organisation to have adequate procedures to prevent bribery

Question 49

The process of establishing a new client's identity is known as?

Answer 49

Client verification

Question 50

What are there cross cutting rule sunder the new Consumer Duty?

Answer 50

Act in good faith towards retail customers Avoid forseeable harm to retail customers And enable and support retail customers to pursue their financial objectives

Question 51

Under the new Consumer Duty what are the 4 areas where FCA expect to see good outcomes?

Answer 51

Products and services Price and value Consumer understanding Consumer support