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Chapter 2 - The insurance Market

Terms in this set (15)

Composite companies accept several types of business (called classes of business) and represent the major part of the company market.
Specialist Insurers tend to issue policies for only one class of business.

Takaful Insurance has its roots in the Islamic financial services Industry and is based on Sharia law. It works on the principle that any transaction risk and profits (and loss bearing) should be shared between the participants. It also needs to be approved by Islamic scholars to ensure they are compliant, and many providers consult specialist Sharia advisory committees during the development process.

it embraces the Islamic principles of
- Mutuality and cooperation
- Shared responsibility
- Joint indemnity
- Common interest
- Solidarity

The State
In the UK the state acts as an insurer in the areas of welfare benefits and pension provision. It also acts as a guarantor (a kind of reinsurer) to the insurance sector for terrorism risks and flood risks.

Is not an insurer, but an entity providing an infrastructure for the placing of risks in its own market, also acting as a partial regulator

Corporation of Lloyds oversees and supports the wider market, ensuring its efficiency and the maintenance of its reputation.
Syndicates carry the risk and provide financial backing, each syndicate outsources the day-to-day running of the business to a managing agent who may manage one or more syndicates.
Managing agents are dual regulated by the PRA and FCA.
Most risks are not placed using a proposal form but using a Market Reform Contract (MRC) still known as slip.

The London Market is the place where many sizeable or complex industrial risks from all over the world are placed

Contract Certainty is achieved by the complete and final agreement of all terms between the insured and insurers by the time they enter into the contract, with contract documentation provided promptly thereafter.
Main Functions are to:
- Assess the risks that bring people to the pool;
- Decide whether or not to accept the risk (or how much of it to accept;
- Determine the terms, conditions and scope of cover to be offered; and
- Calculate a suitable premium

Claims Personnel
An efficient claims department, staffed by competent and professional claims personal, is vital to ensure the proper management of an insurance company's funds. The role of the claims personnel is to:
- Deal quickly and fairly with all claims submitted;
- Distinguish between real and fraudulent claims;
- Determine the realistic cost of a claim prior to payment (reserving);
- determine whether others, e.g. loss adjusters, need to be involved; and
- settle claims with the minimum of wastage.

Loss adjusters
Loss adjusters are experts in processing claims from start to finish and act for the insurer.

Their aim is to negotiate a settlement, within the terms of the policy, which is fair to both the insurer and the insured. Chartered loss adjusters are members of the Chartered Institute of Loss adjusters (CILA). Loss adjusters are independent, professionally qualified persons. Invariable. their fees are met by the insurers who instruct them.

Loss assessors are experts in dealing with insurance claims and act for the insured/policyholder, preparing and negotiating claims on their behalf.

Surveyors and those providing forensic services

A surveyors role (linked to a claims situation) may involve:
- Giving advice on the immediate action necessary following a loss (e.g. employing a night watchman);
- making recommendations as to any underwriting action necessary (e.g. reduction in theft cover until premises are again adequately protected); and
- Establishing whether previously advised requirements made by the insurer have been complied with.
An actuary applies probability and statistical theory to problems of insurance, investment, financial and risk management, and demography.

Actuaries have for many years been associated with life insurance companies, applying mortality statistics and time value of money techniques to determine the adequacy of funds to meet future liabilities. They are also employed by non-life insurance companies.

Techniques applied by actuaries will include the probability of loss and the prediction of claim numbers and future values.

the company's actuarial function has a key role to play in meeting Solvency II requirements.

Risk managers
The functions of risk managers may be summarised as follows:
- The systematic identification, analysis and economic elimination or control of risks that threaten the business.
- Providing guidance on bets practice in these areas to management.
- The transfer of appropriately identified risks by contract or insurance.

Compliance Officers
Their main role is to ensure that their firm abides by the rules and regulations set down by the regulator.
Their range of functions undertaken by a compliance officer will usually include:
- Communicating the company's policy to members of staff, setting up any associated training.
- Completing regular reports on governance, finance and complaints for the FCA;
- Reviewing all stages of the business processes to ensure that they are appropriate and compliant.
Maintaining the company's compliance manual;
- performing the role of money laundering reporting officer as required by regulation.

Internal auditors
- These work within firms to monitor and evaluate how well risks are being managed, the business is being governed and the internal processes are working.
- They provide an independent and objective assessment of the effectiveness and efficiency of a company's operations, specifically its internal control structure.
- Unlike external auditors also advise management on how to improve systems an processes.

under Solvency II regime internal auditors have a key role to play in assessing the reliability of financial reporting and compliance with laws and regulations.

HMRC and Insurance premium tax
Insurance premium tax (IPT) is levied by the Government on general insurance premiums in the UK. There are two main rates:
- A standard rate of 12%
- A higher rate of 20% for travel insurance and some vehicles, and domestic and electrical appliances.
Association of British Insurers (ABI)
The ABI is the largest of the insurance market associations.

- It is engaged in a variety of work, including the gathering of relevant market statistics, framing of codes of practice and playing a major role in public relations, creating a greater awareness of the role of insurance/ - The ABI also confers with the Government on matters of interest to its members.

International Underwriting Association of London (IUA)
- The IUA is the world's ;largest representative organisation for international wholesale insurance and reinsurance companies.
- The IUA exists to protect and strengthen the business environment for its member companies operating in or through London.

British Insurance Brokers Association (BIBA)
- BIBA is a major non-statutory trade association for insurance intermediaries.
- BIBA seeks to maintain and improve the highest standards of business behaviour and to protect and enhance the interests of its members for the benefit of the general public.

London Market Regional Committee (LMRC)
- The intention of the LMRC is to maintain a lobbying role and represent the sector to the FCA, Europe, the UK Government and other stakeholders.

London and International Insurance Brokers Association (LIIBA)
- LIIBA is an independent trade body, representing the interests of insurance and reinsurance brokers operating in the London and international markets.

Lloyd's market Association (LMA)
The LMA provides representation, information and technical services to underwriting businesses in the Lloyd's market.

Managaing General Agents' Association (MGAA)
- The MGAA was formed with an elected board in February 2012 to give the insurance industry a better understanding of what MGA is and what they contribute to the industry.
Chartered Insurance Institute (CII)
- The CII has been at the forefront of insurance education and professionalism for over 100 years. Since the turn of the 21st century, membership has risen from 65,000 to over 125,000 throughout the UK and overseas.
- The CII's examination programmes and membership services ensure that members are equipped with the knowledge and understanding of insurance needed to perform their roles effectively.

Chartered Institute of Loss adjusters (CILA)
- The CILA was set up under Royal Charter and it is a leading authority on insurance claims issues. The institute is recognised worldwide and embodies core values of education, examination and professional standards.
- The code of conduct states that members must at all times preserve impartiality. To maintain standards, the CILA has its own complaints handling mechanism.

Institute and Faculty of Actuaries (IFoA)
- The IFoA is the Uk's only chartered body dedicated to actuaries and has a membership of more than 12,000 fellows, associates, affiliates and student members. For practical purposes they operate as a single entity.

Institute of Risk Management (IRM)
- The IRM actively works with partner organisations to develop new educational programmes, thought leadership and continuing professional development.

Association of Insurance and Risk Managers in Industry and Commerce (AIRMIC)
- Airmic promotes the interests of corporate insurance buyers and those involved in risk management and insurance for their organisation. Members include company secretaries, finance directors, internal audit, and risk and insurance managers.

Insurtech UK (IUK)
- IUK was newly formed as a trade body in 2019 and aims to position the UK as a leading force in technological innovation in the insurance sector. It represents the interests of a range of business types operating in the sector - in particular, those that describe themselves as 'insurtech' companies.

Motor Insurers' Bureau (MIB)
The MIB's mission is to:
- Significantly reduce the level and impact of uninsured driving in the UK;
- Compensate victims of uninsured and untraced drivers fairly and promptly; and
- Provide first class asset management and specialist claims services.