C1 - Structure of the insurance industry

What are the three broad types of insurance companies in the UK?

Composite companies, life companies, and general insurance companies.

What is a composite company?

An insurance company that can transact both long-term (life) business and general insurance business.

Give examples of general insurance business offered by a composite company.

Motor, household, aviation, and public liability insurance.

What is a life company?

An insurance and pensions company that can only transact long-term business.

What is a general insurance company?

An insurance company that can only transact general business.

What is the exception to the insurance marketplace not being a physical location?

The London Market, including Lloyd's of London.

Who are the main participants in the insurance market?

• Sellers: Insurance companies

• Buyers: People, businesses, and public authorities

• Distributors: Brokers, comparison sites, agents, and other intermediaries who help buyers find insurance.

What does an insurance broker do?

An insurance broker helps customers find the right insurance, gives advice, and can access policies from many insurers. They are usually paid by fees and/or commission.

What is an appointed representative?

An insurance broker or agent that works under an authorised firm (Principal), which takes responsibility for their activities.

What is a tied agent?

An agent that usually sells insurance products from only one insurer.

What are examples of other insurance intermediaries?

Supermarkets, banks, travel companies, and retailers that help sell insurance products.

What are MGAs and reinsurers?

An MGA acts on behalf of an insurer but does not carry the risk. A reinsurer insures insurance companies against large or unexpected losses.

What is a mutual insurance company?

An insurance company owned by its policyholders, not shareholders. Profits are returned to customers through lower premiums or higher bonuses.

What is Lloyd's of London?

A specialist insurance market where members join syndicates to underwrite insurance. Lloyd's itself does not sell insurance.

What is a captive insurer?

An insurance company created by a business to insure its own risks, giving more control and potentially lower costs.

What is takaful insurance?

An Islamic form of insurance based on cooperation, shared responsibility, and mutual support.

What is self-insurance?

When an organisation sets aside its own money to cover losses instead of buying insurance for all risks.

What is a multinational company?

A company that operates in several countries but has a home base. Local branches can make decisions to meet local needs.

What is a global company?

A company that sees the whole world as one market and is managed centrally under one global brand.

What is the key difference between multinational and global companies?

Multinational companies adapt to local markets, while global companies focus on a consistent worldwide approach.

Who makes up the London Market?

Insurance companies, reinsurance companies, Lloyd's syndicates, P&I clubs, and insurance brokers.

What type of business does the London Market mainly handle?

International non-life insurance and reinsurance, especially marine, aviation, and other high-risk business.

What is the role of the London Market Group (LMG)?

It represents the London Market and helps maintain its position in the global insurance industry.

How is insurance sold to customers?

Through insurers, brokers, agents, websites, price comparison sites, banks, retailers, and InsurTech firms.

What makes a successful international insurance market?

Political and economic stability, skilled workers, a strong financial centre, good transport, and a stable legal system.

What does the FCA require insurers to do?

Pay due regard to customers' interests and treat them fairly.

What is Customer Relationship Management (CRM)?

CRM uses customer information to build stronger relationships and understand customers' needs.

How does CRM help businesses?

It helps them understand buying habits, offer better service, and identify future customer needs.

What are the main benefits of CRM?

Better customer relationships, proactive communication, targeted marketing, and increased sales opportunities.

What is Consumer Duty?

An FCA regulation introduced on 31 July 2023 that requires firms to deliver good outcomes for retail customers.

What are the three Consumer Duty rules?

Firms must:

1. Act in good faith.

2. Avoid foreseeable harm.

3. Support customers in achieving their financial objectives.

What are the four Consumer Duty outcomes?

• Products & Services

• Price & Value

• Consumer Understanding

• Consumer Support

What is a stakeholder?

A person or group that can affect, or be affected by, a business's activities and performance.

Who are the main stakeholders of an insurance company?

Customers, shareholders, employees, regulators/government, intermediaries, and the public.

Why are stakeholders important?

They have an interest in the business and can influence its decisions and success.

What is stakeholder management?

Managing and balancing the needs and interests of different stakeholder groups in a business.

What factors should a company consider when managing stakeholders?

Their importance, influence (power), claims on the business, and any conflicts between stakeholder interests.

What is the goal of stakeholder management?

To balance stakeholder interests while helping the organisation achieve its overall objectives

What is a shareholder focus?

The belief that a company's main responsibility is to look after its shareholders' interests.

What is a stakeholder perspective?

The belief that a company should consider the interests of all stakeholders, including customers, employees, communities, and shareholders.

What does ESG stand for?

Environmental, Social, and Governance. It measures how a company manages its impact on society, the environment, and how it is run.

What are large UK companies required to report on?

ESG information, including sustainability, energy use, and carbon emissions.

What is the CII Code of Ethics?

A set of ethical standards that all Chartered Insurance Institute (CII) members must follow.

What are the key principles of the CII Code of Ethics?

Comply with laws, act with integrity, act in clients' best interests, provide high standards of service, and treat people fairly.

What can happen if a CII member breaches the Code of Ethics?

The CII may take disciplinary action.

What are the advantages of organic growth?

It is often cheaper, more profitable, and helps build a strong business using internal resources.

What are the disadvantages of organic growth?

It takes longer and requires significant effort, innovation, and management focus.

What is the difference between a merger and an acquisition?

A merger is when two companies agree to join together. An acquisition is when one company takes control of another by buying it.

What is a horizontal merger or acquisition?

When two companies in the same market combine to increase market share, reduce costs, and improve competitiveness.