Underwriting procedures

Question 1

Outline the key underwriting procedures.

Answer 1

• Quotations
• Proposal forms
• Premium calculation
• Policies
• Cover notes
• Certificates of insurance

Question 2

State the rules procedures in the quotation process of underwriting.

Answer 2

1) Cover is not effective unless the quotation states otherwise
2) The quotation normally remains valid for the number of days stated (e.g. 7, 14 or 30 days)
3) If the insurer does not specify a time, the quotation remains valid for a ‘ reasonable’ period.
4) The insurer is legally bound to honour the quotation if the proposer accepts it within the specified timescale, unless it has been withdrawn, or the material facts on which it was based have changed.
5) If the proposer has not taken up the quotation at the end of the set period, it is no longer valid.

Question 3

What is a proposal form?

Answer 3

A form completed by a party seeking insurance.

It enables the insurer to assess the risk, prepare the policy, and set up the administration.

Question 4

What ‘warning’ is presented at the end of a proposal form?

Answer 4

The warning or important notice at the end of a proposal form informs of the need to disclose material facts and the dangers if these are not disclosed.

Question 5

In premium calculation, what is the rate per cent?

Answer 5

Price in pounds for each hundred pounds of insurance. e.g.
a rate of 1.5% means an insurer would charge £1.50 for every £100 insured.

The rate is sometimes expressed as per mille rather than per cent (e.g. on larger sums anf ro some liability premium calculations).

Rate per mille is the price in pounds for each thousand pounds of insurance.

Question 6

Who produced the Contract Certainty code?

Answer 6

The Association of British Insurers (ABI).

Question 7

Wha is the normal reason for issuing a temporary cover note?

Answer 7

Immediate cover is required. The temporary cover note is a means of giving immediate proof of cover.

Question 8

What are the characteristics of cover notes?

Answer 8

• commencement date
• a statement that the policy follows the normal terms and conditions of the insurer for that class of insurance
• risk-specific information that identifies the property or liability that is covered
• any special terms that apply
• expiry date of the cover.

Question 9

For which 2 types of insurance must a certificate of insurance legally be issued as an evidence of cover?

Answer 9

Motor Insurance & Employers’ Liability Insurance.

Question 10

What must a Motor Insurance Certificate contain?

Answer 10

• name of the policyholder
• registration number of the vehicle
• commencement and expiry date of cover
• persons or classes of persons entitled to drive
• limitations as to use
• statutory declaration that the policy cover complies with UK statutory requirements
• signature of the authorised insurer

Question 11

What must a Employers’ Liability Insurance contain?

Answer 11

• name of the policyholder
• commencement and expiry date of cover
• name of the insurer
• authorised signature of behalf of the insurer
• level of cover, as the certificate must that insurance cover is provided for at least the minimum level required by law (currently £5 million any one occurrence including costs).