Providing suitable questions to given answers was the retroactive exercise posed last week. Robin Wood supplies some ideas
So how did you get on with the retroactive exercise in last week's issue? Some of the most interesting comments came from the more mature and experienced practitioners. One in particular expressed some dissatisfaction with the current trend for multiple-choice assessment of knowledge and understanding.
This is fair comment and those responsible for measuring and assessing competence must always be on the look out for new and comfortable ways of supplementing existing methods.
The main comment was that the exercise cleared away many cobwebs. That is good. Cobwebs lead to PI Claims.
Here are some ideas in response to the 20 answers we provided last week:
1) Pan Atlantic v Pine Top.*
Case law that introduced the concept of 'inducement' of the underwriter in cases of alleged non-disclosure. Do practitioners have to know the name of the case law as well as the decision? Up to you. It can be helpful and quoting your authority is part of professional acumen.
2) He fell off his bicycle into a puddle, caught pneumonia and died.*
What was the proximate cause of the loss - the accident or the sickness?
3) A motor cover note.
This should have generated many questions, the most important of which are probably those related to the status, effect and content of the motor cover note.
4) Marine Assurance Act [1906].*
The immediate stem is the definition of a material fact, but do not forget that the Act dealt widely with aspects of marine insurance - there is a tendency to ignore most of it.
Anyone who even dabbles in marine insurance (including small craft) should at least consider having a copy of the CII Marine Insurance text books in the office for reference. More sophisticated practitioners will go further.
It is a little known fact that the CII has one of the most comprehensive insurance and financial services book shops in its foyer at Aldermanbury and you do not have to be a member to browse and buy.
5) He/she must be competent to do the job.
Many stems here, but one of the most important is that it is one of the key requirements of the EU Mediation Directive and the FSA.
6) The insured must collect up all rubbish and cigarette ends from the night club at the end of each working day and discard them in a metal container, which must be removed from the premises at the end of each night.*
This is a form of the auditorium clause and a warranty that is causing problems at
present. The key aspect for a practitioner is to recognise it as such and, where appropriate, to bring it to a client's attention and explain the effect of a breach.
7) £25 applied to each and every claim.
Give an example of an excess. A good discussion would have highlighted the need to make sure that customers know when excesses exist and their effects. Did anyone raise the question of a franchise or a service charge? A service charge must be notified to the customer before the contract starts (terms of business).
8) Norwich Union with 40%.
Thoughts of con-insurance here.
9) Any occupation.*
What is the worst definition of total disability under a personal and accident, sickness or PHI policy?
This is a definite disaster area. Always look at the definition of disability when recommending a disability policy and make sure it fits the customer's needs. Also, ensure that they fully understand what it means and what has to happen before a claim will be paid.
10) A Continental scale.
What is the name of the scale of benefits under a disability policy which allocates a percentage of the maximum capital benefit to different parts of the body?
11) Facts which lessen the risk.*
Give an example of a fact which does not need to be disclosed.
This is a true story (with a minor change in the facts to protect the guilty). A builder with a personal accident policy took a full time office job and was killed in an accident. The insurer avoided the policy on the basis that the change of job was a material fact which had not been disclosed. The broker accepted this on behalf of the customer.
12) That information on the proposal is warranted to be true.*
Conversations here about the 'basis clause' would be correct and real brownie points if the subject of the ABI Statements is raised.
13) Is a claims handling activity which is not regulated by the FSA.
Assisting an insurer is an example.
14) 10% of the contents sum insured.
All sorts of stems here but a key one might be internal limits to a contract (for example, valuables under a household policy).
15) You should speak to a member of the Royal Institution of Chartered Surveyors
What response should a broker give when asked to assess the reinstatement costs of a building?
16) "But if you know you dropped the ring on Brighton Beach it is not actually lost and we cannot pay a claim under your worldwide all risks personal possessions extension".*
Give an example of lack of integrity.
17) "Great, drunk driving, more commission".*
Give an example of unprofessionalism. Interestingly, the law and the regulators do not really seek to define professional standards, but professional bodies do.
The biggest development for brokers in this area is likely to be the launch of the Insurance Broker Faculty this September.
18) A weeping willow tree.*
Which tree has roots which are commonly known to destroy underground water pipes?
This is one of those commonly known facts that an insurer can rely on to avoid a policy if not disclosed. There are many of them and the cost lies in the judge announcing that "That fact should have been disclosed".
Whenever you visit a client and it is likely that there will be some fact finding about the risk, it is often an idea to spend five minutes on a preparatory session with a colleague, running over some of the key issues that might arise or might be pertinent.
19) Mere expectation is not sufficient to create insurable interest.
Johnny Bean approaches you to insure his parents' house which he is due to inherit under their will. What is your response?
It is important that every insurance practitioner understands this concept.
20) If the owner of the vehicle charges no more than a sum to cover incidental expenses.
This should have stimulated questions about car-sharing.
Thanks again for the feedback. Remember that any exercise that keeps you alert and up-to-date should reduce risk and improve your service to customers.
