IF3 - Chapter 8: Underwriting Considerations

What is the main purpose of underwriting?

To assess risk, decide whether to accept it, determine the terms of cover and charge an appropriate premium.

What are the main decisions an underwriter can make about a risk?

Accept it, reject it, or accept it subject to particular terms, conditions or premium.

What information is important when underwriting a risk?

The physical and moral hazards, claims history, nature of the risk and potential frequency and severity of losses.

What methods can insurers use to discourage fraudulent claims?

Excesses, policy limits, clear policy wordings, fraud warnings and verification of information.

How can insurers detect potentially fraudulent claims?

By checking claims history, databases, inconsistencies in information, supporting evidence and unusual claim patterns.

What are the consequences of insurance fraud for the fraudulent claimant?

The claim may be rejected, the policy may be affected or terminated, and serious cases can lead to civil or criminal consequences.

Why is data protection important to insurers?

Insurers hold significant amounts of personal information, so it must be collected, processed, stored and shared appropriately.

What is the purpose of the Equality Act 2010 in insurance?

It protects people from unlawful discrimination, although insurers can make certain distinctions where these are permitted and appropriately supported by risk information.

What is the FCA Consumer Duty designed to achieve?

Higher and clearer standards of consumer protection and good outcomes for retail customers.

What are the four Consumer Duty outcomes?

• Products and services

• Price and value

• Consumer understanding

• Consumer support