P81 2009 Oct & April 2010

Front 1

1. (a) (i) State what an MRC is and when its use became mandatory.

Back 1

a) (i) MRC stands for Market Reform Contract.
It became mandatory on 1 November 2007.

Front 2

(ii) List four of its six sections

Back 2

(ii) Any four of the following:
• Risk details.
• Additional information.
• Security details.
• Subscription agreement.
• Fiscal and regulatory issues.
• Broker remuneration and deductions

Front 3

(b) Guidelines have been put in place to ensure that its use is consistent with the principles of contract certainty and the Contract Certainty Code of Practice.
Describe briefly four of these guidelines

Back 3

(b) Any four of the following:
• Monetary amounts should be clear and three letter currency codes should be used
rather than symbols.
• It should not contain any acronyms or ambiguous terms. Trade terms such as
‘TBA’ should not be used.
• Contract terms should be clearly stated with wordings and clauses attached or
referenced as appropriate.
• Subjectivities should be expressed as unambiguous conditions.
• Standard contract provisions must be relevant to the risk or its administration.
• Signing provisions should be used where there is more than one participating
insurer.
• All requirements specified in the Contract Certainty Code of Practice should be
met.

Front 4

2. (a) The Financial Services Authority (FSA) makes a clear distinction between a consumer and a commercial customer. State the FSA’s
definition of each.

Back 4

‘Consumer’ – any natural person who is acting for purposes which are outside his trade or profession.
‘Commercial customer’ – a customer who is not a consumer.

Front 5

b) As the broker of a commercial customer, at your renewal meeting you are required to advise your client regarding the basis on which you have carried out the broking of their risks. On this occasion, you have given advice on the basis of fair analysis of the market.
(i) Describe what is meant by fair analysis in this context.

Back 5

(i) Giving advice on the basis of fair analysis of the market means that a sufficiently large number of insurance contracts have been considered in the relevant sector of the market, to enable a recommendation to be made in
accordance with professional criteria and matched to the customer’s demands and needs.

Front 6

(ii) If you had not given advice on the basis of fair analysis of the market, describe three other ways the broking could be carried out.

Back 6

(ii) • Where the broker is under contractual obligation to conduct insurance mediation business exclusively with one or more insurers.
• Where the risk is being renewed with the holding insurer, i.e. only one insurer has been approached.
• Where a limited panel of insurers has been selected from a number of acceptable markets.

Front 7

(b) Describe briefly why brokers with access to global markets should have an understanding of the different stages of the insurance market cycle.

Back 7

Front 8

4. (a) Self-insurance, through the building up of funds, is a form of active risk retention.
(i) State four reasons for dealing with risk in this manner.

Back 8

(a) (i) • To reduce the cost of risk transfer.
• To obtain greater risk control.
• To reduce administration.
• To increase emphasis and awareness of the need for loss control

Front 9

(ii) Where self-insurance is centrally funded by a company, state a reason why it may be difficult to build up long-term reserves and increase the level of self-insurance.

Back 9

(ii) This is because any profit left in the fund at year end will attract taxation. The funds can be taken and used for other purposes by the company

Front 10

(b) Describe briefly two common types of captive insurance company.

Back 10

(b) Any two of the following:
• Captive insurance companies are either a wholly owned subsidiary of the client’s
business, designed as a tax efficient financial vehicle for transfer of the
company’s risks to a managed ‘pool’;
• or they are a ‘rent-a-captive’, which the business does not own or control. Brokers
may own or manage these.
• Other captive types include jointly owned, single industry or group captives

Front 11

Your company is a leading niche broker for printing companies in the UK. The
British Print Federation has asked you to design an insurance product that can
be offered to all its members. You are considering the operation of a delegated
authority.
(a) While operating a delegated authority, state for whom you are acting as
agent.

Back 11

(a) While operating a delegated authority, the broker is the agent of the insurer, not the
client or the insured.

Front 12

(b) When meeting with the insurer to discuss the terms of the delegated authority, list five guidelines that will need to be agreed prior to
commencement of the scheme.

Back 12

(b) Any five of the following:
• What risks can be covered and what cannot.
• Rates.
• Limits.
• Cover/wording.
• Claims agreements, limits and procedures.
• Commission/fees

Front 13

6. Your company is reviewing the services it offers its clients in order to identify
new ways of adding value to the client/broker relationship and improve retention levels. As claims manager, you have been asked to identify services that you could offer your clients in the event that they suffer a loss. Currently your team are only processing client claims with insurers.
Describe two additional services that you could offer in the event of a loss.

Back 13

Post Loss Control Services. The provision of active assistance in the event of a loss. This
might include quantifying and submitting a claim, halting any further damage and
undertaking detailed negotiation with loss adjusters.
Disaster Recovery Services. The provision of specific assistance in the event of a major loss.
For example, a fatality in the workplace or a product recall incident. Support could include
access to specialist Public Relations assistance or a full crisis management capability.

Front 14

7. In relation to contract certainty, reinforced by the Financial Services Authority, best practice requires policy wordings to be issued to the insured ‘promptly’.
(a) State how the Contract Certainty Code of Practice defines the term
promptly in terms of:
(i) the retail customer;

Back 14

(a) (i) Within seven working days.

Front 15

(ii) all other client classifications.

Back 15

(ii) Within 30 calendar days.

Front 16

(b) Having received instructions from your client to bind cover and confirmed in writing the insurer’s agreement to go on risk, state what
document you would prepare (prior to issuing full documentation) as standard practice in the London market for your client. State three
points that the document should confirm.

Back 16

It is standard practice in the London market to prepare a cover note for the client,
confirming:
• the cover provided;
• terms and conditions;
• insurer details.

Front 17

Insurance: New Conduct of Business Sourcebook (ICOBS) provides a template policy summary to cover the scope of the information that brokers may provide to consumers prior to contract, to enable them to make an informed decision.
List eight of the items that could be found on the key facts policy summary

Back 17

Any eight of the following:
• Statement that the policy summary does not contain the full terms and conditions of the
contract, which can be found in the policy document.
• Name of the insurer.
• Type of insurance and cover.
• Significant features and benefits of the policy.
• Significant and unusual exclusions or limitations.
• Duration of the policy.
• Statement, where relevant, that the consumer may need to review and update their cover
periodically to ensure it remains adequate.
• Price information.
• Right of cancellation.
• Claims procedures.
• How to complain.
• Compensation details.

Front 18

reduce the number of client complaints.
(a) Prepare a memorandum for all your account managers identifying three
steps that may prevent complaints.

Back 18

(a) Memorandum - Steps to Reduce Complaints In The Servicing Team
• Step 1. Do It Right First Time. Complaints arise because something was not done
correctly. Take care when correcting mistakes under pressure. Slow down and take
your time, follow the company’s quality control procedures.
• Step 2. Ask if you don’t know. If the problem is outside your knowledge or
competence, refer to a more experienced member of staff. If you don’t know, say
so. Find out the correct answer and go back to the client/insurer promptly. Do not
make a guess.
• Step 3. Put it in writing. Always record all conversations and instructions in
writing and send a copy to the client or the insurer promptly. In the event of any
confusion, the problem can be identified and remedial action can be taken.
Remember: ‘If it’s not in writing, you can’t prove it happened.’

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(b) Outline for your team three fundamental rules that apply when dealing with a complaint.

Back 19

(b) • Follow to the letter your firm’s procedure for dealing with complaints and Treating Customers Fairly.
• Do not try to conceal the problem.
• Do not lie.

Front 20

10. The Financial Services Authority describes the process of establishing a client’s requirements as assessing the customer’s demands and needs.
(a) Describe three activities a broker should undertake, when assessing the customer’s demands and needs, giving a brief example for each.

Back 20

(a) • The broker should seek information from the customer relating to circumstances,
objectives and, where appropriate, business activities that may be relevant when
identifying their needs. For example their insurance history.
• The broker should take into consideration any relevant details about the customer
that are readily available and accessible to the broker. An example would be
information on other insurances that the broker has previously provided advice or
information on for this customer.
• The broker should explain to the customer their duty to disclose all circumstances
material to the insurance and the consequences of any failure to make such a
disclosure. They should be reminded that this applies both before the insurance commences and throughout the duration of the contract. An example would be previous or recent convictions.

Front 21

(b) Identify three issues a broker must take into account when making an advised sale, when checking that a policy is suitable for the customer’s demands and needs

Back 21

Any three of the following:
• The level of cover.
• The cost of the contract.
• The cover terms.
• Carrier security/reputation

Front 22

(c) State, using an example, what the broker should do if all the customer’s demands and needs are not met by the policy and there is no suitable insurance available to the broker

Back 22

(c) The broker can make a recommendation that does not meet all of the customer’s
demands and needs, provided they identify to the customer the demands and needs
that are not met by the insurance. For example, the customer with a large number of
debtors may demand or need a higher amount of trade credit than any insurer would
be willing to offer.

Front 23

11. The risk manager of NTU Ltd, a long-term commercial customer, has asked
you, as his broker, to look at the design of their insurance programme. One of the issues he wishes to discuss is the programme term.
(a) Explain to the risk manager the two main reasons for looking at a policy term beyond the standard one year, and identify an advantage and a disadvantage for doing this.

Back 23

(a) If it is perceived that the current pricing is low, but that the market is likely to harden
and the current rate to increase, it may be worth considering increasing the term of the
contract to ‘lock’ the insurer and client into a longer pricing commitment. There is a
risk that prices may fall during the term of the policy and the client would not be able
to take advantage of this.
A longer term also has the advantage of providing continuity. Insurers may be more
willing to settle a difficult claim if they have been insuring the risk without loss for
several years. It also provides an element of premium stability, allowing the client to
budget their cash flow over a longer period of time more accurately.

Front 24

(b) State and describe briefly two methods of increasing the policy term beyond one year.

Back 24

(b) A Long Term Agreement (LTA) may be entered into by the insurer and the customer.
The customer agrees to keep their business with the insurer in exchange for a
reduction in the rate. Typical terms would be a 10% premium reduction in exchange
for a three year commitment.
An ‘Evergreen’ policy may be used. These policies do not have renewal dates. The
premium is paid monthly, regularly by direct debit or on an anniversary date for the
next twelve months’ premium. The policy would be subject to a provision that the
insurer must give, say, 60 days’ notice of a change in terms or premium and the client
gives the same notice to cancel the policy

Front 25

12. (a) State the voluntary code of practice which the Association of British Insurers published, in partnership with the Government, in November
1999, aimed at helping employees suffering from disease or injury arising from their employment

Back 25

(a) The Code of Practice for Tracing Employers’ Liability Insurance Policies.

Front 26

(b) Summarise what is set out in the code and state what the insurers who sign up to the code have agreed to.

Back 26

(b) The code sets out the procedures insurers will follow and the standards they will meet,
if they are asked to help trace an employers’ liability (EL) insurance policy.
According to the Code of Practice, insurers will safeguard those EL insurance policy
records that do exist, do their best to search existing EL insurance policy records for
enquirers, and store future policy records in ways that will make it easier to answer
enquiries.

Front 27

13. The Financial Services Authority’s requirement that certain information be
given to the client has led most broking firms to move to more formal written agreements with their clients, including the use of a Terms of Business Agreement (TOBA). Other than the regulatory information that may be provided to clients, state eight topics that would typically be included in a TOBA

Back 27

Any eight of the following:
• Broker information.
• Termination/cancellation.
• Client’s duty of disclosure.
• Insurer security.
• Payment terms.
• Client money.
• Conflicts of interest.
• Claims against the firm/complaints procedure/Financial Ombudsman Service.
• Money laundering/data protection/confidentiality.
• Law and jurisdiction.
• Limitation of liability.
• Fees/commission/charges.
• Services provided/not provided.
• Authority to act.
• Financial Services Compensation Scheme.

Front 28

14. Holiday Leisure Ltd are a UK-based luxury hotel group. They have hotels in the UK, France, Germany, the USA and Australia.
They have a global insurance programme, but each hotel outside the UK has purchased some local policies. There is an excess layer and an umbrella policy in place.
Draw a detailed diagram showing how the global insurance programme might
look.

Back 28

Front 29

15. (a) The Marine Insurance Act 1906 clarified the duties of brokers regarding the provision of ‘material facts’.
(i) According to this Act, state when insurers can avoid an insurance
contract.

Back 29

(a) (i) If the insured or the insured’s agent fails to disclose material circumstances known to them, or misrepresents the facts in a material way.

Front 30

(ii) As listed in Section 19 of the Act, state exactly what brokers must disclose.

Back 30

(ii) Brokers must disclose every material fact known to them, including facts which
in the ordinary course of business ought to have been communicated to them.
They must also disclose every material fact which the insured is bound to
disclose, unless it comes to the insured’s attention too late to communicate to
the brokers

Front 31

(b) The English and Scottish Law Commissions are currently undertaking a review into insurance contract law in the UK. They have published a
number of proposals. Summarise four of their main suggestions

Back 31

(b) • That the materiality test is changed from that of a ‘prudent underwriter’ to that of
a ‘prudent insured’. Under the proposed new materiality test, the insurer would have to show that it would not have entered into the contract on the same terms and that either that the proposer understood that the fact was relevant or that a reasonable proposer would have had such an understanding.
• The remedies open to the insurer would be proportionate and dependent on the
insured’s conduct, rather than the present legal position which is that the contract is void.
• The residual duty of disclosure should be abolished. This would mean that if an insurer does not ask a clear question about an issue, the insurer will be deemed to have waived their right to the information.
• Basis of contract clauses should not be permitted, e.g. a clause that imports the
insured’s declaration on a proposal form into the policy will be inoperative.

Front 32

2010

Back 32

april

Front 33

1. (a) State three key factors an insurance broker must take into account when assessing whether an insurance policy is suitable to meet a customer’s demands and needs.

Back 33

(a) The following should be taken into account:
 Whether the level of cover is sufficient for the risks that the customer wished to
insure.
 The cost of the contract, where this is relevant to the customer’s demands and
needs.
 The relevance of any exclusions, excesses, limitations or conditions in the
contract

Front 34

(b) State two of the three items an insurance broker should record on the suitability statement, following a recommendation.

Back 34

(b) Any two of the following:
 The customer’s demands and needs.
 How the recommendation addresses the demands and needs.
 The reasons for the recommendation

Front 35

2. (a) State four reasons why a company may decide to self-insure when actively retaining a risk.

Back 35

(a) Any four of the following:
 To reduce the cost of risk transfer.
 To obtain greater control of risk.
 To reduce administration.
 To increase emphasis and awareness of the need for loss control.
 Tax efficiency.

Front 36

(b) (i) Define alternative risk transfer (ART).

Back 36

(b) (i) A generic phrase to denote various non-traditional forms of (re)insurance and
techniques where risk is transferred to the capital markets. It refers to the
convergence of (re)insurance, banking and capital markets.

Front 37

(ii) Explain, giving an example, how an insurance broker or a reinsurer can gain extra capacity to transfer the risk of a low frequency, high
severity event, other than from the traditional insurance and reinsurance market place.

Back 37

(ii) Extra capacity for low frequency, high cost events such as earthquakes and hurricanes (where the cost of the event could be more expensive than the premiums in the market), can be sought from capital market investors through catastrophe bonds (cat bonds). Periods for these bonds are usually from three to five years and they make
payments on the occurrence of one event or two events happening during that period.

Front 38

3. (a) Most complaints, errors and omissions (E&O) arise when a policy does not do what the client expected. Describe two main ways in which such problems can be avoided by insurance brokers.

Back 38

(a) -Accurate policy documents should be issued by brokers promptly, evidencing the
client’s agreement with insurers.
- All comments, advice and confirmation about how and in what circumstances the
policy would operate, should be confirmed to the client in writing.

Front 39

(b) The Financial Services Authority (FSA) requires registered intermediaries to have a formal procedure for dealing with complaints.
State the two actions that should be followed by intermediaries in relation to these procedures.

Back 39

(b)  Intermediaries should provide details of the procedures to their clients.
 They should manage complaints in accordance with the stated procedures.

Front 40

(c) The FSA has made E&O insurance compulsory for regulated insurance intermediaries.
(i) Describe what E&O policies are designed for.

Back 40

(c) (i) Errors and omissions (E&O) policies are designed to provide compensation for any customer who suffers a loss as a consequence of their broker’s negligence; covering any damages the customer may be awarded

Front 41

(ii) Identify four occasions when an insurance broker’s E&O policy would not provide cover

Back 41

(ii) Any four of the following:
 Underwriting.
 Valuations.
 Provision of legal advice.
 It would not pay out for a broker’s crimes – such as fraud.
 It would not pay out for insurer insolvency.

Front 42

4. (a) You have been asked to place a large property risk. To gather enough
capacity you are using a subscription market and need to decide who to use as a leader.
(i) Describe the function and role of the leading market.

Back 42

(a) (i) The leading market will offer the best combination of knowledge, capacity and
credibility to attract other underwriters. The leader will establish the terms and conditions, and the premium rate that the ‘following’ markets will adhere to.

Front 43

(ii) State why it is important to find the right leader in this situation

Back 43

(ii) A recognised lead is essential on a subscription risk to attract the support of
other underwriters, who may not have such specialist knowledge of the risk.

Front 44

(b) In addition, you are considering the use of an excess layer.
(i) Describe briefly the operation of a primary and an excess layer when considering the design of your insurance programme.

Back 44

(b) (i) An excess layer, sits over the primary programme. The excess layer usually has its attachment point at the total limit of the primary policy. It usually follows the same terms and conditions as the primary policy.

Front 45

(ii) State the main difference between an umbrella policy and an excess layer.

Back 45

(ii) An umbrella policy is independent of the cover provided underneath. It will
have its own wording and attachment point. There is no ‘drop-down’
provision.

Front 46

5. One of your UK-based clients purchased a composite insurance policy through you; covering buildings, contents, travel and motor risks. Following renewal, he calls to ask you what taxes he is being charged.
Identify two taxes that his insurance premium will attract, state at what level they are set, and to which element(s) of the composite insurance policy they will apply.

Back 46

Insurance premium tax, (IPT) a tax levied against the buildings, contents and motor premium and set at 5% of the premium. Value Added Tax (VAT), charged against the travel section and set at 15%.

Front 47

6. There is a current trend amongst many brokers to change from day-to-day claims processing to a claims advocacy approach.(a) Describe the process of claims advocacy, giving an example of a type of claim where this approach is common.

Back 47

(a) The claim is reported by the client directly to the insurer and the broker only becomes
involved on individual claims if there are problems or issues. The broker acts as a
post box and does not become involved in claims negotiation.
Examples include:
 Motor claims.
 Domestic claims.
 Employer’s Liability claims.

Front 48

(b) Explain two main reasons for this trend.

Back 48

(b) The main reasons for the trend are as follows:
Questionable Value:
Brokers may not be seen to be adding any value to the process and could in fact slow
the process down. Their involvement could increase costs and the possibility of
errors and miss-communication.
Civil Justice Reforms:
Protocols have been established to encourage dialogue between claimant and insurer.
Strict timelines and penalties have been agreed – insurers, therefore wish to control
the process without the involvement of the broker.

Front 49

7. (a) Explain, with an example, the term ‘delegated authority’.

Back 49

(a) Delegated authority is where the insurer has given the broker underwriting
authority – the ‘power of the pen’. This is also known as binding authority and strict
underwriting guidelines are provided by the insurer to the broker.
For example, an underwriter may offer a specific policy wording or scheme for household risks to a broker to accept business on its behalf, within set limits.

Front 50

(b) State what a ‘lineslip’ is, how it operates, and how it differs from standard risk placement.

Back 50

(b) A ‘lineslip’ is the name given to a scheme or facility placed with Lloyd’s underwriters.

Risks are bound under the facility by way of ‘off-slips’. Where there is no delegated
authority, risks are bound by the leader or leading underwriters.

Front 51

(c) (i) State the two main benefits for an insurance broker in arranging a facility or scheme with an underwriter, even if no delegated authority exists.

Back 51

(c) (i)  Broker can establish in advance with the insurer(s) that they can write that class of business, within defined limits and cover.
 Broker may be able to ‘hold-covered’ overnight, or over the weekend, subject to ratification by the underwriter on the following working day.

Front 52

(ii) Identify two types of risk which would particularly suit such a
facility or scheme.

Back 52

(ii)  Miscellaneous, non-hazardous risks (e.g. travel, personal accident, all risks).
 Specific hazardous risks, where the broker has a significant volume of business, e.g. excess liability, offshore employers’ liability.

Front 53

8. Describe briefly six of the Financial Services Authority’s eleven Principles of Business.

Back 53

Any six of the following:
 Integrity – A firm must conduct its business with integrity.
 Skill, care and diligence – A firm must conduct its business with due skill, care and
diligence.
 Management and control – A firm must take reasonable care to organise and control its
affairs responsibly and effectively, with adequate risk management systems.
 Financial prudence – A firm must maintain adequate financial resources.
 Market conduct – A firm must observe proper standards of market conduct.
 Customers’ interests – A firm must pay due regard to the interest of its customers and
treat them fairly.
 Communications with clients – A firm must pay due regard to the information needs of
its clients and communicate information to them in a way which is clear, fair and not
misleading.
 Conflicts of interest – A firm must manage conflicts of interest fairly, both between itself
and its customers and between a customer and another client.
 Customers: relationship of trust – A firm must take reasonable care to ensure the
suitability of its advice and discretionary decisions for any customer who is entitled to
rely upon its judgement.
 Clients’ assets – A firm must arrange adequate protection for clients’ assets when it is
responsible for them.
 Relations with regulators – A firm must deal with its regulators in an open and
co-operative way, and must disclose to the Financial Services’ Authority (FSA)
appropriately anything relating to the firm of which the FSA would reasonably expect
notice.

Front 54

9. You are preparing a submission for a commercial risk and all the prospective
underwriters have asked for a summary in your submission which states clearly the details of cover being requested and the risk itself.
(a) List five details of cover that you will include.

Back 54

(a) Any five of the following:
 The class of insurance.
 The wording.
 The limit/sums insured.
 Excesses and deductibles.
 The deadline by which the quote should be received.
 Attachment date.
 Target premiums.

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(b) List five of the risk details that you will include.

Back 55

(b) Any five of the following:
 Full name and address of the insured.
 An overview of the business.
 Key financials i.e. total values, turnover, payroll.
 Number of locations and their address.
 Claims experience, tabulated with dates and descriptions.
 Summary of risk management strategy.
 Any other key information relevant to a commercial client.

Front 56

10. (a) In terms of an insurance contract, define ‘subjectivity’ and provide an example.

Back 56

(a) Subjectivities can be described as specific terms imposed by the insurer, which must
be complied with either as a pre-condition of the insurance contract or after
inception. They can relate to all or part of the cover. For example, an insurer may
require a central station monitored alarm to be fitted within 30 days of inception of a
home and contents policy.

Front 57

(b) In order to comply with contract certainty, explain what should be made clear to the client in relation to any subjectivity that may be imposed.

Back 57

(b)  Who needs to do what, by when and to what standard?
 The terms and/or cover that apply until it is done.
 The consequences if it is not done.
 Full details of the subjectivity should be provided with an explanation.

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(c) State what you should do if your client informs you that they are unable to comply with the subjectivity imposed.

Back 58

(c) You should tell the insurer immediately and a practical amendment to it should be
agreed.

Front 59

11. The Financial Services Authority (FSA) has published six improved outcomes in an initiative to provide guidance to insurance brokers in relation to treating customers fairly (TCF).
The first outcome states that consumers can be confident that they are dealing with firms, where the fair treatment of customers is central to the
corporate culture.
(a) State four of the remaining five improved outcomes that the FSA is
aiming to achieve through TCF. (4)

Back 59

(a) Any four of the following:
 Products and Services marketed and sold in the retail market are designed to meet
the needs of identified consumer groups and are targeted accordingly.
 Consumers are provided with clear information and are kept appropriately
informed before, during and after point of sale.
 Where consumers receive advice, the advice is suitable and takes account of their
circumstances.
 Consumers are provided with products that perform as firms have led them to
expect, and the associated service is both of an acceptable standard and as they
have been led to expect.
 Consumers do not face unreasonable post-sale barriers imposed by firms to
change product, switch provider, submit a claim or make a complaint.

Front 60

(b) Describe briefly four different ways in which your company could demonstrate that TCF is an integral part of its culture.

Back 60

(b) Any four of the following:
 Agree and communicate a treating customers fairly (TCF) policy internally.
 Include TCF as an agenda item at board level.
 Incorporate TCF into operating procedures at every level.
 Provide training in relation to the TCF operating procedures.
 Improve corporate communication with staff in relation to TCF issues.
 Improve corporate communication with customers, seeking their feedback on a
range of issues.

Front 61

12. (a) You have recently joined a new insurance broking firm with the aim of
developing a specialist risk consultancy service. The company you have joined already offers a motor fleet risk management service.
State six other risk management services you might offer the insurance broker’s commercial clients.

Back 61

(a) Any six from the following:
 Property surveys.
 Business continuity planning.
 Business interruption reviews.
 Health and safety.
 Liability surveys.
 Environmental risk surveys.
 Post loss control services.
 Disaster recovery services.

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(b) Identify and describe four motor fleet risk management activities that
may be offered by the firm or, more likely, contracted out as part of the
motor fleet risk management service.

Back 62

(b)  Review of driver handbook, which should be kept up to date for each employee.
 Fleet risk management procedures, as defined by the company.
 ‘Defensive driving’ training. Advanced driving skills training for fleet drivers,
focusing on how to avoid accidents and safe driving.
 ‘At work’ assessments – part of workplace liability risk management.
 Use of telemetrics. The ‘spy in the cab’ to monitor and improve driving skills.

Front 63

13. (a) Explain how the Financial Services Authority (FSA) defines ‘contract certainty’. (3)

Back 63

(a) Contract Certainty is achieved by the complete and final agreement of all terms
between the insured and the insurer, by the time they enter into contract. Contract
documentation is then provided promptly afterwards.

Front 64

(b) In relation to contract certainty, state how the FSA defines the word ‘promptly’ for both retail consumers and commercial customers.

Back 64

(b) ‘Promptly’ is defined as seven working days for retail consumers and 30 days for commercial customers.

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14. State the five requirements of the general law of agency as they apply to insurance brokers.

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The general law of agency requires a broker to:
 Perform all their principal’s lawful instructions personally and in a timely fashion.
 Exercise reasonable skill and care in the performance of their principal’s instructions.
 Act at all times in the best interests of their principal, to avoid conflicts of interest and to
disclose to their principal in full any circumstances which may give rise to the
appearance of a conflict.
 Make full disclosure to their principal of their personal interest in any transaction.
 Account to their principal for any monies they may have received on their principal’s
behalf.

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15. (a) State four simple ways in which the financial security of a particular insurer could be assessed before deciding to trade with it.

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(a) Any four of the following:
 Whether the insurer is licensed by the Financial Services’ Authority.
 Gather information from the rating agencies.
 Gather information from the financial press or relevant websites.
 Look for any changes in an insurer’s underwriting policy.
 Consider speed at which an insurer pays claims or returns premiums.
 Set a standard for those insurers that the broking firm generally deals with.

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(b) Assuming that your company is happy with the insurer’s security, list four other factors that may be taken into account when assessing which
insurers to trade with.

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(b)  Credit facilities.
 Support and sales literature.
 Reputation and experience.
 Brokerage.