IF1.2 - The Insurance Market Flashcards
(149 cards)
1
Q
What are the 5 main types of buyers of insurance
A
- Private Individuals
- Partnerships
- Companies
- Public bodies e.g. schools, councils
- charities, Associations and Clubs
2
Q
What is an Intermediary
A
A link between customers & insurers e.g. an agent or a broker
3
Q
What are the two categories of intermediary
A
- Those who must be authorised
- Those who are exempt from authorisation
4
Q
What are the main types of intermediary
A
- Appointed Representative
- Independent Intermediary
- Introducer AR
- Ancillary Insurance Intermediary
- Lloyds Brokers
5
Q
What is an appointed representative?
A
An individual or company appointed by a directly authorised person under contract that specifies the scope of its role. (may act for more than one company)
I.e. someone to sell and give advice.
6
Q
What is an independent Intermediary (broker)
A
A person who acts on behalf of clients, advises fairly & recommends based on the market
7
Q
What is an introducer authorised representative
A
they cannot give advice but can only introduce their principal to customers and supply things such as brochures.
8
Q
What is a Lloyds broker
A
an Independent intermediary who is registered by the council of Lloyds
9
Q
What is an ancillary insurance intermediary
A
those who can sell insurance but not as the main part of their business e.g. travel operators
10
Q
What is a consolidator
A
a company that buys independent small brokers
11
Q
What is a broker network
A
An organisation that can offer AR status to those joining the network.
12
Q
What are the 8 types of insurers?
A
- Proprietary Companies
- Mutual Companies
- Mutual Indemnity Associations (P&I club)
- Captive Insurers
- Protected cell companies
- takaful insurers
- the state
- Bancassurance
13
Q
Define Proprietary insurance company
A
those that are owned by shareholders (PLC).
Shareholders contribute a capital, which is money for expansion (not for claims)
14
Q
Define a mutual insurance company
A
those that are owned by the policyholders
15
Q
What is a benefit of a mutual insurance company
A
if a company profits => lower premiums
16
Q
Define a mutual indemnity association (P&I Club)
A
a mutual company that focusses of marine hull liability markets
17
Q
Benefits of a captive insurer
A
A tax efficient and cost effective risk transfer mechanism for large international organisations.
18
Q
Define a captive insurer
A
An insurance company that is wholly owned by its insured (e.g. a parent company sets up a subsidiary company to underwrite some of the parent companies insurable risk)
19
Q
Define a protected cell company
A
A type of captive insurer who ‘rents’ their captive insurance company to other companies with similar needs.
20
Q
Define a Takaful insurance company
A
An Islamic insurer within the Islamic financial services (any risk and profit should be shared among the participants)
21
Q
Define how the state acts as an insurance company
A
e.g. for social welfare and pension provision
Or alternatively, it acts as a guarantor to the insurance sector in relation to terrorism risk and flood risks.
22
Q
Define Bancassurance
A
An arrangement between a bank and an insurance company e.g. insurance products sold to banking customers.
23
Q
What is Lloyds?
A
An insurance and reinsurance marketplace
24
Q
How does Lloyds work?
A
members form syndicates to accept risks . Then they employ a managing agent who in turn appoints an underwriter for the syndicate.
25
What is a managing agent responsible for in the lloyds market?
The day-to-day running of a syndicate, including employing underwriters & claims adjustors.
26
What happens with a Market reform Contract (MRC) / Slip
Brokers approach as many syndicates (their underwriters) as are required until their slip is full. (scratching the slip)
27
What is the london market
A group that represents a variety of insurers including:
- Lloyds syndicates
- insurance and reinsurance companies
- protection and indemnity clubs
28
What is contract certainty
Makes all parties fully aware of the coverage of the policy before a risk starts to be covered.
29
What is reinsurance?
An insurer can pass any or all of a risk it holds to another insurer with the purpose to share losses.
30
What are the 3 categories of reinsurers?
1. Lloyds
2. specialist reinsurers
3. insurance companies
31
What is a treaty?
An arrangement of reinsurance to place a range of risks that fall within an agreed set of criteria.
32
What is a facultative reinsurance?
A reinsurance on a single risk.
33
What does marketing risk involve decisions on?
1. the product
2. the price of the product
3. promotion
4. place to promote
34
define direct distribution
contracts arranged directly between the insured and the insurer.
34
Which of the two marketing mix decisions are related to distrubution?
promotion & place
35
Define indirect distribution
An intermediary is involved in the sales process.
36
examples of indirect marketing distrubution
- agents
- brokers
- consultants or advisors
37
positives of direct marketing distrubution
- competitive premiums (saving on commision)
- immediate cover
- insurers can control customer experience
38
negatives of direct marketing distrubution
- only one companies product is on offer (cover may not be obtainable)
- there may be no independent advice
- advertising costs may increase premiums
39
Positives of indirect distribution channels
- independent advice
- a range of services available
- prices and cover can be compared
40
Negatives of indirect distribution channels
- no quotes direct from insurers
- some intermediaries can only advise on one insurance product
- danger of churning
41
What is churning
replacing policies to frequently (a danger of indirect distribution channels)
42
What do Schemes and delegated authority (binders allow?
allow intermediaries to issue cover within defined parameters
43
What are the advantages of schemes and delegated authorities
- insurers benefit from an increased flow of business
- intermediaries give better service and can benefit from profit sharing provision.
44
What is another name for a price comparison site
aggregators
45
What is a disadvantage of an aggregator (price comparison site)
the quotes provided may not accurately represent the cost and specifics of cover.
46
What is an actuary
A professionally qualified person who applies statistical and probability theory to problems of insurance, investment, financial & risk management and demography.
47
What is an underwriter?
A person who decides how much premium to charge for insurance cover.
48
What are claims personnel
Those who deal with all claims quickly, fairly and cost effectively.
They must distinguish between real and fraudulent claims.
49
What are some experts who may be involved in claims?
- loss adjustor
- loss assessor
- forensic investigators
- surveyor
50
Who is a loss assessor hire by?
the insured
51
A loss adjustor and loss assessor are...
independent of the insurance company
52
What is a risk manager
a person who manages, controls and transfers risk. They also provide guidance for senior management.
53
what is a surveyor
someone who:
- give advice of immediate action after a loss
- makes sure recommendations as to any underwriting action necessary
- checks if advised requirements from the insurer are complied with
54
What is a loss adjustor
they investigate and negotiate a settlement which is fair to both the insurer and the insured
55
What is a loss assessor?
they present and negotiate settlement of a claim under the insurance policy
56
what is a forensic investigator?
Someone who in specific circumstances investigates fraud, deliberate acts or collusion by employees.
57
What is internal audit?
someone who provides independent and objective assessment of how well risk are being managed by a firm.
58
what are compliance officers?
someone who ensure the firm abides by the rules and regulations set out by the FCA
59
What is the Association of British Insurers (ABI)?
Largest Insurance market association which is the voice of the insurance industry.
60
What are the objectives of the Association of British Insurers (ABI)?
- create beneficial debates between groups
- public voice of the sector
- encourage consumer understanding
- support a competitive insurance industry
61
What does the International Underwriting Association of London (IUA) do?
protects and strengthens the business environment for its member companies.
62
What are the objectives of the International Underwriting Association of London (IUA)?
- modernising, digitising and automating business processes
- deliver knowledge for underwriting and claims handling
- represent members of matters of public policy and regulation.
63
What is the British Insurance Brokers' Association (BIBA)?
The trade association that represents the interests of brokers and improves business conduct.
64
What is the London Market regional Comittee (LMRC)?
An arm of BIBA specifically for London market brokers
65
What is the London and International Insurance Brokers Association (LIIBA)?
an independent trade body representing the interest of brokers in the London and worldwide markets.
66
What is the Lloyds market Association (LMA)?
The voice of syndicates: they represent, provide information and provide technical services to businesses in the Lloyds market.
67
Chartered Institute of Loss Adjusters
Represents loss adjusters: provides training and a code of conduct.
68
Institute and Faculty of Actuaries IFoA
Chartered body for actuaries: education, standards of conduct & public awareness.
69
Institute of Risk Management (IRM)
Qualifications & training in risk management
70
Association of Insurance and Risk Managers in Industry AIRMIC
Transform risk management through networking, professional development and leadership
71
IUK is an organisation for what?
Trade body to push tech innovations to improve the insurance industry.
72
CII is an organisation for what?
professional development within the insurance industry (education, code of conduct, resources & development)
73
What is the Motor Insurance Bureau (MIB)
an organisation to protect victims of road accidents where there is an uninsured or an untraced driver.
74
Objectives of the Motor Insurance Bureau (MIB)
- reduce the level and impact of uninsured driving in the UK
- compensate victims of uninsured and untraced drivers fairly and promptly.
- provide 1st class data asset management and specialist claims services.
75
What are 2 agreements from the Motor Insurance Bureau (MIB)
1. untraced drivers' agreement
2. uninsured drivers agreement
76
What are 2 lines of insurance?
personal and commercial
77
What is personal insurance
insurance that protects the policyholder from loss or damage to personal property or from damages for which the policy holder may be held responsible.
78
Types of personal insurance
- Motor
- Home
- Travel
- Pet
- Health (personal accident, sickness, private medical, critical illness, payment protection)
79
Types of Commercial Insurance
- liability
- property
- Pecuniary
- Marine
- Aviation (+satellite)
- Cyber
79
types of health insurance
- personal accident
-sickness
- private medical
-critical illness
-payment protection
80
What is pecuniary Insurance?
Insurance of intangibles e.g. loosing money or stock due to dishonesty of others, legal expenses, non-payment by creditors, business interruption, political risk & guaranteed asset protection.
81
What is insurance tax premium (ITP)
tax collected by insurers on all general insurance premiums and passed to HMRC
82
What is the standard rate of ITP
12%
83
What does the higher rate of 20% for ITP apply to
travel insurance, some cars and domestic appliances.
84
what is exempt from ITP?
long term insurance, reinsurance, ships, aircraft, goods in transit & risk outside of the UK.
85
Remuneration
Commission paid by the insurer to the agent for selling their insurance products.
86
LTD, PLC =>
Companies
87
LLP =>
Partnerships
88
What is particular about a partnership
Partnerships do not have a separate legal existence, each of the partners are jointly liable for the company.
89
What does MRC stand for?
market reform contract
90
5 Main components of the insurance market
1. Buyers
2. Insurers
3. Intermediaries
4. Comparison Websites
5. Reinsurers
91
Commercial Buyers of Insurance
2. Partnerships
3. Companies
4. Public bodies e.g. schools, councils
5. charities, Associations and Clubs
92
Insurance for partnerships tend to be...
catered for by specialist schemes
92
Public bodies will insure in which two ways?
1. Setting up their own insurance fund (self insurance)
2. using the insurance market for certain bigger risks.
93
What does it mean if a company is limited?
Shareholders/ Members liability for the company's debts is limited to the nominal value of the shares they own/ the premium they paid.
If they company goes bankrupt you don't loose more than you put it.
93
How do mutual companies share profits with members?
Lower premiums for returning customers.
94
Positives of a captive insurance company
- tax efficiency (avoids tax on 'profits' as they've been paid to the captive company as a 'premium'.
- Smaller premiums (don't have to pay for another companies overhead costs/profit margins)
- Very well understood risks
95
Can captive insurance be offered to the general public?
No
96
What are the two parts of a protected cell company?
core & cells (unlimited number)
97
benefits of a protected cell company
- minimises admin costs
- favourable tax rates
98
What is a composite insurance company
companies which accept several types of business (most insurance companies)
99
What is a specialist insurance company?
One which issues policies for only one class of business.
99
What is a Name
investors in syndicates.
100
What do syndicates provide?
financial backing
101
what types of risks do syndicates deal with?
Low frequency high severity.
102
How is risk taken on in the Lloyds market?
Risk is split between syndicates (which in turn is shared among investors)
103
What is a members agent in the lloyds market?
advises potential Names on the advantages and disadvantages of investing in the lloyds market. (including syndicate selection & performance, reserve requirements and compliance issues)
104
What is the Subscription Market
The sharing of the risk between a number of insurers in the Lloyds market.
105
What happens when the MRC/slip is fully placed?
the risk is submitted electronically to XChanging Ins-Sure Services (XIS)
106
What type of risk is placed on the London Market?
sizeable and complex industrial risks from all over the world.
107
How does the London market work?
In the same way as lloyds except Insurance companies are approached instead of syndicates (e.g. Aviva)
108
What is an agent?
someone who is authorised by one party (the principal) to bring that principal into a contractual relationship with another (the third party)
108
Intermediaries that are exempt from authorisation from the FCA
- appointed representatives (AR)
- Introducer appointed representatives (IAR)
109
Define Authorised Person
An individual or firm authorised by the FCA to engage in regulated activities.
109
Examples of appointed reprenresentatives
- full time insurance agents who are tied to one or more insurers
- employees at motor garages who sell relevant insurance products.
110
Services intermediaries provide for clients
- deciding the best markets to place risks
- negotiate initial terms and conditions
- provide advice to the client in relation to policy wording
- review clients needs
- negotiate renewals
- advise the client on the validity of claims
111
What does TOBA stand for?
terms of business agreement
112
Services intermediaries provide for insurers
- collecting premium
- committing the insurer to cover the risk
- settling claims on behalf of the insurer
- issuing motor & giving evidence of cover.A
113
ARs can only...
give advice in elation to a specific insurers product.
114
What is a consolidator
An insurance company that buys small independent brokers
115
Examples of direct marketing channels
- telephone calls
- social media
- direct mailing
- company sales staff
116
What are schemes and delegated authorities
A product that is unique to a specific trade which are pre-written and fall within specified criteria.
117
Advantages of Bancassurance
- benefits that both companies have for operating at a large scale
- lower risk to the business
- access to previously unavailable resources
- opportunities for joint product development
- Access to each others brands and reputations in their respective sectors
Market development (more customers)
118
2 main ways of reinsurance
facultative (on a single risk) & treaty (on multiple risks)
119
What is reinsurance?
A company may reinsure a risk because the financial loss of a claims payment may be too great. hence, the insurer is able to pay any (or all) of the risk to another insurer.
120
Does the insured need to know about reinsurance?
no
121
Is there a contractual relationship between the insured and the reinsurer/
no
122
Why bother with reinsurance?
- Smooths peaks and troughs (trading results remain as gradual trends which investors prefer)
- Protecting the portfolio (keeps the pool working)
- improve customer service & allows to enter new business areas (due to increased capacity)
123
What are the 3 types of reinsurer?
1. specialist reinsurance companies
2. Lloyds syndicates
3. Insurance companies
124
What is retroceding
reinsuring something that is already reinsured.
125
What are the main functions of an underwriter?
- assess the risks that people bring to the pool
- decide whether or not to accept a risk
- determine the terms & conditions of the cover
- calculate suitable premiums
126
What is personal accident cover
cover in the event of accidental death or injury
126
what is Sickness cover
Cover for an inability to work due to sickness
127
What is Private medical insurance
cover for individuals who seek medical treatment outside the NHS when they are ill
128
What is Short-term income protection
payment of an agreed monthly amount when an individual can't work because of accident sickness or redundancy.
129
What is critical illness cover
cover in the even of the diagnosis of a serious illness
130
Many insurance and reinsurance companies are members of what?
IUA
131
Key roles of British Insurance Brokers Association (BIBA)
- promoting members views
- encourage training
- encourage networking
- liaising with outside bodies
- members committees
132
What is an MGA
Managing General Agent - similar to brokers but purely there to deal with products which a group of insurers have delegated their authority to them.
133
What does BIBA do?
- maintain and improve high standards of business behaviour
- protect and enhance the interests of its members for the benefit of the general public.
134
What is MGAA4
Association to represent MGAs and give the insurance industry a better understanding of what an MGA is.
135
What does the LMRC do?
represents the sector to the FCA & governments
136
What is the IUA
An organisation for UK based (not Lloyds) insurance and reinsurance companies which represents them internationally.
137
What does the CII provide
education, code of conduct, resources & development
138
Who has overall responsibility for the control of self regulation at lloyds
Council of Lloyds
139
What type of organisation is the ABI?
A trade association
140
Insurers must be authorised by the
PRA & FCA
141
Authorised Person
An individual regulated by the FCA to engage in regulated activities
