EXAM
2 weeks prior – reading in advance of exam
5 x MCQ = 15 marks
5 – 6 x LFQ = 85 marks
BIG QUESTION SGS 8 – Report to Client formulaic
Write out 2 – 3 page letter
, SGS 1 – INTRODUCTION TO INSURANCE LAW (2)
WHAT IS INSURANCE?
• Transfers RISK from insured to insurer for price to provide SECURITY in the event of loss
• Contractual relationship
o Policy holder (‘insured’) pays sum (‘premium’) to another (‘insurer’) who in turn agrees to
pay sum / benefit on occurrence of specific event (‘insured event’)
• Spreading Loss
o Multiple parties pay ‘premium’ into insurers ‘pool’ which is then used to pay out on claims
HOW DO INSURERS OPERATE?
(Premiums + Investment Income)
–
(Running Costs + Claims Payment)
Administration / Employees / Brokers Commission etc.
=
PROFIT
Shareholders / Mutual Insures (owned by policy holders
resulting in discounted premiums)
PURPOSE OF INSURANCE
• Transfers risk / Spreads loss
• Provides security to insured
o Peace of mind (Business + Customers)
o Financial security
o Renting capital – in exchange for a premium to meet unexpected cost
• Risk management – to reduce frequency + severity of claims = reduced premium
PURPOSE OF PREMIUM
• Consideration for contract
• Principal source of income for insurer
• To ensure sufficient ‘pool’ to pay claims + generate profit
INSURANCE MARKET (PARTIES)
• Insured = Buyer
o Companies / Private individuals / Trade Unions / Professionals
• Intermediary
o Broker = typically have specialist knowledge of specific risks + relationship with
specialised insurers (e.g. aviation)
o Agent = representative of insurers
• Insurer = Seller
o Lloyd’s Syndicates (Corporate Members / Individuals)
, o Companies (Owned / Controlled by shareholders)
o Mutuals
▪ Owned by policyholders that take share of any profit made payment /
deducted premiums
▪ Mutual Indemnity Association – trade members with specialist policies
o Captives
▪ subsidiaries of large multinational corporation that exclusively write
insurance needs of parent company
• Reinsurer = Can have reinsurance policy sellers only (1/3 of Lloyds Market)
CONTRACT OF INSURANCE (Based on principles of contract)
1) Proposer completes proposal form
• Specific questions to enable insurer to assess risk
2) U/W assesses risk
• historical evidence on claims / perceived risks (underwriters)
o likelihood (frequency) of the event occurring; AND
o associated costs of that event (severity)
• Insurer must quantify risk correctly to charge premiums that are sufficient (but
competitive) to cover claims of the few
3) Quote / Decline
4) Premium payment
CLASSES OF INSURANCE
• Property = General term to describe all ins. that covers loss or damage to property
o Fire / Home / Contents / Car / Aviation / Marine
• Business Interruption
• Liability (Negligence / Statutory Duties / Breach of Contract)
o Directors & Officers
o Employers Liability
o Professional Indemnity (Errors & Omissions Insurance)
o Public Liability (Legal costs + compensation for property damage / personal injury
suffered by members of public as a result of a business’ activities)
o Product Liability
• Fidelity = to protect employers from fraud by their staff
• Personal
o Accident
o Motor (5%)
▪ s143 RTA 1988: requires drivers to have insurance against 3rd party risks
▪ 3rd Party / Fire / Theft / Comprehensive
o Life (illness / loss of employment)
Negative consequences of not having insurance
• Lack of investor interest
• Poor risk management
• Clients nervous of doing business
2 weeks prior – reading in advance of exam
5 x MCQ = 15 marks
5 – 6 x LFQ = 85 marks
BIG QUESTION SGS 8 – Report to Client formulaic
Write out 2 – 3 page letter
, SGS 1 – INTRODUCTION TO INSURANCE LAW (2)
WHAT IS INSURANCE?
• Transfers RISK from insured to insurer for price to provide SECURITY in the event of loss
• Contractual relationship
o Policy holder (‘insured’) pays sum (‘premium’) to another (‘insurer’) who in turn agrees to
pay sum / benefit on occurrence of specific event (‘insured event’)
• Spreading Loss
o Multiple parties pay ‘premium’ into insurers ‘pool’ which is then used to pay out on claims
HOW DO INSURERS OPERATE?
(Premiums + Investment Income)
–
(Running Costs + Claims Payment)
Administration / Employees / Brokers Commission etc.
=
PROFIT
Shareholders / Mutual Insures (owned by policy holders
resulting in discounted premiums)
PURPOSE OF INSURANCE
• Transfers risk / Spreads loss
• Provides security to insured
o Peace of mind (Business + Customers)
o Financial security
o Renting capital – in exchange for a premium to meet unexpected cost
• Risk management – to reduce frequency + severity of claims = reduced premium
PURPOSE OF PREMIUM
• Consideration for contract
• Principal source of income for insurer
• To ensure sufficient ‘pool’ to pay claims + generate profit
INSURANCE MARKET (PARTIES)
• Insured = Buyer
o Companies / Private individuals / Trade Unions / Professionals
• Intermediary
o Broker = typically have specialist knowledge of specific risks + relationship with
specialised insurers (e.g. aviation)
o Agent = representative of insurers
• Insurer = Seller
o Lloyd’s Syndicates (Corporate Members / Individuals)
, o Companies (Owned / Controlled by shareholders)
o Mutuals
▪ Owned by policyholders that take share of any profit made payment /
deducted premiums
▪ Mutual Indemnity Association – trade members with specialist policies
o Captives
▪ subsidiaries of large multinational corporation that exclusively write
insurance needs of parent company
• Reinsurer = Can have reinsurance policy sellers only (1/3 of Lloyds Market)
CONTRACT OF INSURANCE (Based on principles of contract)
1) Proposer completes proposal form
• Specific questions to enable insurer to assess risk
2) U/W assesses risk
• historical evidence on claims / perceived risks (underwriters)
o likelihood (frequency) of the event occurring; AND
o associated costs of that event (severity)
• Insurer must quantify risk correctly to charge premiums that are sufficient (but
competitive) to cover claims of the few
3) Quote / Decline
4) Premium payment
CLASSES OF INSURANCE
• Property = General term to describe all ins. that covers loss or damage to property
o Fire / Home / Contents / Car / Aviation / Marine
• Business Interruption
• Liability (Negligence / Statutory Duties / Breach of Contract)
o Directors & Officers
o Employers Liability
o Professional Indemnity (Errors & Omissions Insurance)
o Public Liability (Legal costs + compensation for property damage / personal injury
suffered by members of public as a result of a business’ activities)
o Product Liability
• Fidelity = to protect employers from fraud by their staff
• Personal
o Accident
o Motor (5%)
▪ s143 RTA 1988: requires drivers to have insurance against 3rd party risks
▪ 3rd Party / Fire / Theft / Comprehensive
o Life (illness / loss of employment)
Negative consequences of not having insurance
• Lack of investor interest
• Poor risk management
• Clients nervous of doing business
