General Questions Flashcards
(20 cards)
Meg needed liability insurance to cover her consultancy business. She was recommended a standard policy which met her needs and incorporated standard industry exclusions. Which, if either, of the Consumer Rights Act 2015, or the Contracts (Rights of Third Parties) Act 1999 are likely to apply to Meg’s policy?
neither consumer rights nor rights of third parties
Lija received her insurance policy documentation 14 days after the policy inception date. This was a breach of the Contract Certainty Code of Practice because Lija
was a consumer
What is the consequence to an insurer when experiencing a soft market during the traditional underwriting cycle?
rising expense ratios are likely to be in evidence
An underwriter has received two applications for business interruption insurance. Firm X indicates greater availability of alternative suppliers than firm Y, whilst firm X has provided far less detail regarding maintenance of its machinery than firm Y. What is the underwriter most likely to
conclude when considering moral and physical hazard?
Firm X represents a greater moral hazard than firm Y, but a lesser physical hazard.
Rob’s insurance policy includes a clause allowing him to cancel the policy during the term and be allowed a premium rebate in certain circumstances. It is therefore likely that this condition
also allows cancellation by the insurer.
What should an insurance broker be aware of when considering becoming a Managing General Agent?
it will effectively hold the underwriting pen of the insurer.
With regard to the rise in illegal intermediaries, what is the usual role of the Insurance Fraud Enforcement Department?
To identify altered client information and invalid policy documents
An underwriter has determined its exposure for an identified household risk and the risk factors associated with it. In order to assess the risk over time, the underwriter
must clearly define the claim events to be included in the policy.
When considering the probability of claims events, underwriter X is using the relative frequency method and underwriter Y the stochastic model. What does this indicate?
Underwriter X is assuming that historic data will be repeated and underwriter Y is relying on simulated scenarios.
An underwriter is obliged to analyse claims experience based on a large number of claims, rather than a homogeneous database. This is most likely to produce results which are
aligned to the probability of future claims but which are not easily sub-divided.
A key function of an actuary within an insurance company is to
assist in risk pricing both at portfolio level and for large individual risks.
When compared to the burning cost method of premium calculation, the prospective risk analysis method
more appropriately adjusts claims experience in line with current cover and risks.
Underwriter X is required to seek a greater return on capital employed than underwriter Y. In comparison, what does this indicate about the risk class being considered by underwriter X?
It is more volatile than that of underwriter Y.
An underwriter’s assessment of incurred but not reported (IBNR) claims has most impact on the insurer’s ability to
establish the level of reserves required to meet ultimate claims values.
alan, Beth and Clive are an actuary, compliance manager and underwriting manager respectively.
Who would be primarily responsible for a pricing adjustment following an analysis of competitors operating in the same market place?
Clive only.
when comparing the burning cost method of premium calculation with prospective risk analysis, the burning cost method
has a greater need to incorporate claims triangulation adjustments despite an overall more simplistic approach.
What is the primary aim of an insurance provider having effective liaison between its underwriting and claims function regarding the allocation of claims codings?
To ensure risks continue to be appropriately rated.
An insurer has incurred aggregated risk under both its personal accident and travel insurance accounts across a defined geographical area. This situation can reasonably be illustrated by the
occurrence of a
major flood in a popular tourist region.
Underwriter X is concerned about possible fluctuations in claims costs, whilst underwriter Y is looking to increase current capacity in order to accept larger or more unusual risks. Prudent action would be for underwriter X and underwriter Y to both
purchase reinsurance.
Both insurer X and insurer Y have set the same financial limit up to which risks can be accepted in a particular class of business. However, insurer X regularly exceeds this limit. What is this most likely to indicate?
insurer X makes more effective use of reinsurance facilities whereas insurer Y declines cover.
