National Certificate in Insurance Administration · Web viewAdditional Notes/Resources 13 Annexure...

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National Certificate in Insurance Administration

NQF Level 3

Unit Standard 9006: Produce written evidence of short term insurance contracts and maintain records of policies and premiums.

Credits: 3

Notional Hours of Learning: 30

Learner Material

This outcomes-based learning material was developed by IISA with funding from INSETA in March 2003.

The material is generic in nature. It’s purpose is to serve as a guide for the further development and

customization of company-specific, learner-specific and situation-specific learning interventions.

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Contents

Topic Page

Unit Standard ...........................................................................................................................3

Learner material ...........................................................................................................................7

Instructions.........................................................................................................7

Process/Activities ...............................................................................................8

Examples: Guide for Assessment of Portfolio ................................................10

Critical Crossfield Outcomes.......................................................................................................11

Oral Assessment .........................................................................................................................12

Additional Notes/Resources .......................................................................................................13

Annexure A......................................................................................................17

Annexure B......................................................................................................18

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1.TITLE: Produce written evidence of short term insurance contracts and maintain records of policies and premiums

2. UNIT STANDARD NUMBER: 9006

3. LEVEL ON NQF: 3

4. CREDITS: 3

5. FIELD: Business, Commerce and Management StudiesSUB FIELD: Finance, Economics and Accounting

6. ISSUE DATE:

7. REVIEW DATE:

8. PURPOSE: This unit standard deals with the processing of insurance policies and making administrative changes.

The qualifying learner is capable of:

Preparing data for processing using prepared information within any one line of business. Processing the data using an electronic system to capture new business details and update

existing records including amendments, cancellations, receipts, payments against policies and financial transactions for receipts on bordereaux, cheques.

Issuing expense commissions and reinsurance. Performing electronic payments, cash and reconcile the Automatic Clearing Bureau (ACB); Resolving financial queries of a general nature and queries related to unallocated or

unreconciled payments.

9. LEARNING ASSUMED TO BE IN PLACE:

There is open access to this unit standard. Learners should be competent in Communication and Mathematical literacy at Level 2.

10. SPECIFIC OUTCOMES AND ASSESSMENT CRITERIA:

SO Description Assessment Criteria1. Prepare data for processing in

short term insurance 1.1 Documents required for processing data are identified and

collated as required for the specified line of business.1.2 The data to be processed is verified and where necessary

additional data is obtained from data source in accordance with organisation specific requirements.

1.3 The need to maintain confidentiality of data is known and explained with reference to organisation and industry confidentiality and authorisation requirements and/or codes of conduct.

1.4 Procedures required for the processing of data are known and followed to produce the required data.

1.5 Limits of authority are understood, a decision is made to refer to a higher authority according to organisation specific requirements.

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2. Capture short term policy data using an electronic system

2.1 Data is captured in the correct fields as required by the system, using correct terminology and coding.

2.2 Captured data is verified as complete and consistent with supplied information.

2.3 The integrity of the data and system is maintained at all times as per organisation specific requirements.

2.4 The implications of incomplete data capture are explained for both customers and the organisation.

2.5 The purpose of keeping accurate records is understood and redundant records are purged from the system after the legislated period.

3. Issue and distribute policy documentation and endorsements

3.1 Documentation is checked for accuracy, neatness, completeness and the correct use of terminology.

3.2 Ambiguities in the document are identified and corrected and an indication is given of the possible implications of issuing a document with wording that is ambiguous.

3.3 Attachments and endorsements required by a policy are indicated using an actual policy as an example.

3.4 The process to be followed in issuing an endorsement is explained in terms of the responsibility of the policy holder and the organization.

3.5 The parties who have the right to receive a policy are indicated with reference to an actual policy.

4. Demonstrate knowledge and understanding of contracts in short term insurance

4.1 The concept of a contract is explained with reference to contracts used in short term insurance.

4.2 The difference between insurance contracts and all other contracts is explained with reference to an insurance contract and another contract.

4.3 The importance of accuracy in recording and maintaining records is explained from the point of view of the organization.

4.4 The difference between annual, monthly and short period policies is explained with reference to examples of each.

4.5 The process to be followed by a policyholder who wishes to change a policy are explained and an indication is given of the kind of changes that should be made annually.

5. Resolve financial queries 5.1 Internal and external client interactions are in line with company code of conduct and/or service standards.

5.2 All information pertinent to the query is gathered and is verified to be correct, relevant, current and complete prior to resolution.

5.3 Outstanding and/or unreconciled payments are identified and corrected in accordance with organisation specific requirements.

5.4 Payment allocations are made based on corroborating evidence.5.5 Queries are resolved, wherever possible, to the satisfaction of all

affected parties and consistent with scope of authority and/or responsibility. Unresolved queries are referred to designated personnel for further action and/or instructions. Progress in such cases is monitored and recorded and follow-up is carried out effectively.

5.6 A range of common problems, the limits and scope of responsibility and/or authority are described, with examples and/or case-study anecdotes.

5.7 The nature of the query, steps taken and results are recorded and records are maintained in accordance with organisation specific requirements.

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11. ACCREDITATION AND MODERATION:This unit standard will be internally assessed by the provider and moderated by a moderator registered by INSQA or a relevant accredited ETQA. The mechanisms and requirements for moderation are contained in the document obtainable from INSQA, INSQA framework for assessment and moderation.

12. RANGE STATEMENT:

The typical scope of this unit standard is: Data preparation within any one line of business of the learner’s choice such as preparation

for new business, endorsements, alterations, premium changes, premium adjustments post-loss endorsements, amendments, declarations where applicable, renewals, cancellations, reinstatements and general adjustments.

Transactions for all of: bordereaux, cheques, electronic payments, and cash and any one of: issuing expense commissions, reinsurance, reconciling automatic clearing bureau statements.

Checks relating only to data that has been captured, and excluding policy wording.

Relevant parties could include any or all of clients, intermediaries, insurers, re-insurers, co-insurers and financial institutions.

Financial queries are of a general nature, but specifically include queries related to unallocated or unreconciled payments. Information should cover at least: the period of payment query, policy and history of payments.

Referred queries may only be considered irresolvable when the nature of the query clearly falls outside the scope of responsibility of the role holder.

The lines of business refer to Personal, Commercial, Corporate and Specialist lines of business.

Classes of business refer to:

Fire or Interruption, Engineering, Liability, Motor, Transit, Marine, Breakdown, Personal Accident, Professional Indemnity, Aviation, Crime Classes. Integrity means accuracy, confidentiality and security.

CRITICAL CROSS-FIELD OUTCOMES:

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This Unit Standard supports in particular, the following critical cross field outcomes at unit standard level:

1. This unit standard supports in particular, the following critical cross field outcomes at unit standard level:

2. The learner can identify and solve problems relating to the procedures required for processing data in relation to an insurance policy by deciding when to refer to a higher authority.

3. The learners can collect, organise and evaluate information when captured data is verified as complete and consistent with the information supplied and when collating documentation for processing data for the specified line of business.

4. The learner can communicate effectively using language skills when explaining the implications of incomplete data for customers and the organisation and describing a range of common problems with case study anecdotes.

5. A learner is able to use science and technology effectively when capturing policy data onto an electronic system.

6. A learner is able to participate as a responsible citizen in the work of the community by demonstrating an understanding of the implications of incomplete data for both the customer and the organisation.

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INSTRUCTIONS

This task is expected to require 30 hours of reading, research and response by you Your notes, summaries, written feedback, and transcribed oral feedback (where applicable)

must be collected and stored in a portfolio. The portfolio can be a flip file, scrapbook or exercise book. Each article / notes or summary should be neatly pasted, dated and headed “Specific

Outcome 1, 2, 3, 4 or 5” depending on what aspect it covers. Your portfolio will be assessed at the end of the twelve-week period. During the twelve weeks, you should have regular contact and discussion sessions with

your trainer / facilitator. During these sessions the progress of your portfolio will be checked. Should you live in a rural / distant area, your contact session can be telephonic / via fax or via e-mail.

At these contact sessions you will be asked to comment on some of the articles you selected and this oral input will form part of your assessment for this unit standard.

After three months you will also need to fill in a questionnaire as part of the assessment of this unit standard.

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ACTIVITIES

Number Aspect of task Done

Specific Outcome 1:

Prepare data for processing in short term insurance.

Action 1

Read the additional information we have provided for you, labelled Annexure 1 in your guide. Once you have understood this information, write down (or type) on a piece of paper the answers to the following questions: (The answers to the questions below need not be longer than half a page each.)

Write a paragraph describing when you may be asked for information about data to be processed. Name the people from whom request may come and state which information may be freely given, and which must remain confidential.

Describe the potential negative outcomes of going beyond mandates when preparing data for processing, with regard to rating, extensions to cover and reinsurance procedures.

Once you have answered these questions, paste the answers into your portfolio of evidence, and number them clearly : Specific Outcome 1 Number 1

Specific Outcome 2:

Capture short term policy data using an electronic system

Action 2

Read the additional information we have provided for you, labelled Annexure 2 in your guide. Once you have understood this information, write down (or type) on a piece of paper the answers to the following questions (the answers to the questions below need not be longer than half a page each):

Write down the information you think will be specific to the Theft section of Multimark III at risk detail level.

Describe the manner in which a Business Interruption section requires the insured to provide declarations at the end of each period of insurance.

Discuss the condition of average, stating which classes it applies to, and give an example of how a claim will be settled where average applies.

Describe five sets of information which, if incorrectly or incompletely captured, could affect the effectiveness of the policy cover.

Once you have answered these questions, paste the answers into your portfolio of evidence, and number them clearly : Specific Outcome 2 Number 2

Specific Outcome 3:

Issue and distribute policy documentation and endorsements.

Action 3

Read the additional information we have provided for you, labelled Annexure 3 in your guide. Once you have understood this information, write down (or type) on a piece of paper the answer to the following question (the answer to the question below need not be longer than a page):

Describe four ways in which policy documentation must be checked and describe to whom copies of documentation may be sent.

After you have answered the above question paste it into your portfolio and number it clearly: Specific Outcome 3 Number 3

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Number Aspect of task Done

Specific Outcome 4:

Demonstrate knowledge and understanding of contracts in short term insurance

Action 4

Read the additional information we have provided for you, labelled Annexure 4 in your guide. Once you have understood this information, write down (or type) on a piece of paper the answer to the following questions (the answers to the question below need not be longer than one page):

Explain the concept of a contract with reference to policy contracts used in short term insurance.

Describe the process that insurers follow when offering a renewal to a client. Discuss the activities undertaken, and what the client’s duties are in the process.

Describe the types of records that are maintained by each of the following :

1. The insured2. The insurer3. The broker

Once you have answered these questions, paste the answers into your portfolio of evidence, and number it clearly: Specific Outcome4

Specific Outcome 5:

Resolve financial queries

Action 5

Do PERSONAL RESEARCH to obtain information on how to resolve financial queries. Once you have this information, write down (or type) on a piece of paper the answers to the following questions (the answers to the questions below need not be longer than a paragraph each):

Describe a company code of conduct and/or service standards in respect of internal and external client interactions.

Gather information to do with a client query and checkit to make sure it is correct, relevant, current and complete.

Identify and correct outstanding and/or unreconciled payments in accordance with organisation specific requirements.

Make payment allocations based on corroborating evidence. Resolve queries to the satisfaction of all affected parties and

consistent with scope of authority and/or responsibility and refer unresolved queries to designated personnel for further action and/or instructions.

Describe a range of common problems that could occur in the financial transactions , with special attention to the limits and scope of responsibility and/or authority that apply, using examples and/or a case-study .

Record the nature of queries, steps taken and results and maintain records in accordance with organisation specific requirements.

Once you have answered these questions, paste the answers into your portfolio of evidence, and number them clearly : Specific Outcome 1, Number 5

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GUIDE FOR ASSESSMENT OF PORTFOLIOS

Assessment Criteria Learner is Competent Learner is not yet Competent

Specific Outcome 1:


Action 1

The questions i.r.o. disclosure of information are answered correctly.

Answers to questions are written down and placed into portfolio

Specific Outcome 2:


Action 2

The questions i.r.o. accurate capture of information are answered correctly.

Questions are answered in paragraphs and responses placed into portfolio

Specific Outcome 3:


Action 3

The questions i.r.o. issue and distribution of documents are answered correctly.

The transcribed notes are pasted into portfolio

Specific Outcome 4:

Demonstrate knowledge and understanding of contracts in short term insurance.

Action 4

The questions i.r.o. concept of contract and maintenance of records are answered correctly.


Specific Outcome 5:


Action 5

The questions i.r.o. resolution of financial queries are answered correctly.


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CRITICAL CROSSFIELD OUTCOMES MATRIX FOR ACTIVITIES RELATED TO UNIT STANDARD

Demonstrate knowledge and understanding of the production of written evidence of short-term insurance contracts and maintenance of records of policies and premiums.

Activity

Solve problems /

Make Decisions

Teamwork Organisation Information Communicate Technology Related Systems

Personal Development

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10 √ √ √ √ √ √ √ √11 √ √ √ √ √ √ √12 √ √ √ √ √13 √ √ √ √ √

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ORAL ASSESSMENT

The trainer will use this table to monitor your participation during the discussions at your contact sessions. You are expected to contribute during each of the contact sessions.

Action Yes No

The learner brought summaries and notes made to the session for discussion. The learner makes notes during the discussion, where notes are required to be transcribed.

The learner demonstrates his / her knowledge and understanding by being able to discuss:

Preparing data for processing using prepared information within any one line of business.

Processing the data using an electronic system to capture new business details and update existing records including amendments, cancellations, receipts, payments against policies and financial transactions for receipts on bordereaux, cheques.

Issuing expense commissions and reinsurance. Performing electronic payments, cash and reconcile the Automatic

Clearing Bureau (ACB); Resolving financial queries of a general nature and queries related to

unallocated or unreconciled payments.

The learner can take part in group discussions by talking about other learner’s feedback and reports.

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ADDITIONAL NOTES

The specific objectives of this programme are:

Introduce this unit standard with a general discussion about the production of written evidence of short-term insurance contracts and maintenance of records of policies and premiums.

Explain and go through the unit standard with the learners so that they can understand fully what is expected of them

Provide articles or other information relating to the production of written evidence of short-term insurance contracts and maintenance of records of policies and premiums. Hand out some articles you have sourced to the learners, so that they can see that it is not so difficult to find information

Advise learners of the importance to keep their portfolio of evidence intact and complete. Advise learners that oral / written feedback will be conducted during the contact

sessions, which will form part of their formative assessment. Explain to learners what Formative and Summative assessments are and the relevant

ratio. Hand out to learners:

A schedule of contact lessons, i.e. dates and times A copy of the list of terms. Explain the terms very clearly. A copy of the Company Retirement Fund booklet (rules, etc.) NOT APPLICABLE The table used for oral assessment (part of portfolio) Annexure A. The guide used for assessment of the portfolio (learners must submit it for

completion at each contact session) Annexure B. Other resources that may come in handy in the learner’s research Internet – provide copies of articles if used Marketing material, company intranet, actuarial department, Human Resources

department long term – N/A The financial planning institute (FPI) The institute of retirement funds (IRF) Tell the learners that after three months they will be required to complete a

questionnaire as part of the assessment of this unit standard. Tell them of the duration of this summative assessment and come to an

agreement with the learners on where and when the assessments will take place. The content of the questionnaire must include the Critical Cross-field outcomes.

Note to trainers:You can give the learners articles or notes to assist them

During the discussions you can adapt the content of the text material to suit your company needs and products. Use the company as a “provider” example to provide the learner with knowledge and understanding of the role.

Each learner should then be able to answer the following question: How well do I understand the production of written evidence of short-term insurance contracts and maintenance of records of policies and premiums?

The learner’s research and learning during this course will equip the learner with the knowledge and skills to empower them to understand the production of written evidence of short-term insurance contracts and maintenance of records of policies and premiums.

2. EXPLANATION OF TASK

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The following terms must be clearly explained to the learners when they are given the portfolio task. It would be advisable to provide them with a copy of these terms to which they can refer when necessary.See general comments on this “dictionary”

Term Explanation

Assets Property and possessions that are regarded as having value.

Claim An application for compensation under the terms of an insurance contract.

Acceptance A willingness to accept the terms and conditions of a contract/circumstance etc.

Cover Funds used in insurance to meet a liability or to protect against loss.

Disclosure Revealing all the facts relevant to the insurance proposal. If either party fails to do this, the contract may be declared invalid.

Good faith When both the insurer and the insured provide all the relevant facts and do not try to hide anything.

Disclosure The act of telling the truth about the risk that is to be covered.

Liability Responsibility for debt or financial obligations.

Liabilities When used in the financial sense, the word liabilities refers to the money that you owe or your debts.

Offer A proposal of business, a plan for insurance for example.

Insurable Interest The legally recognised relationship between the insured and the financial loss that s/he suffers following a loss. This must exist for an insurance contract to be considered valid.

Interest The money paid for the use of money that has been lent. When you deposit money in the bank, the bank will pay you interest on your deposit. Similarly, when you borrow money from the bank through a credit card or home loan, you have to pay the bank interest on the money that the bank lent you.

Exclusions Situations under which insurance cover is no longer valid. For example exclusion on a household might be that the insurer would not meet your claim if you went away for two weeks, leaving the alarm off and a door open, and then you were burgled.

Policy A contract of insurance

Premium An amount to be paid for a policy of insurance. This is usually paid on a monthly basis.

Risk Either the possibility of a loss against which insurance is taken out, or the item that is being insured.

Proposal A document which suggests the terms and conditions of an insurance contract.

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Subject matter The items to be insured in an insurance contract.

Portfolio A collection of work, which in this instance, will be compiled over six months, regularly monitored and which will contain information from the media and analysis by the learner.

Long term insurance Insurance such as life, retirement funding, etc. where the client places a value on the person insured.

Contact sessions These are times when learners meet with the trainer as a group. Contact session should be held at least once a month. At the contact session, portfolios will be checked and learners will participate in discussion about items they have found.

Retirement fund A special type of savings fund that companies set up with their workers, to help them save money for retirement or illness.

Trustees People who are chosen to represent the employees. Employees ‘trust’ them to do a good job and to look after the retirement fund.

Claim To ask for something, to say that something belongs to you.

Tax deduction An amount of money that a person does not have to pay income tax on.

Equal All are the same

Preserving To preserve something is the same as saving something.

Deduct Means to take or withdraw. Your company deducts money from your salary. This means that your company takes money from your salary each month.

Contributions What the company gives to the fund.

Withdrawal Take some or all of the money out of fund.

Ready to exit fund To go on retirement

Elected Chosen people who vote for them

Fund managers Experts who look after the fund or its investments.

Literacy Able to read well

Written request To write down instead of asking orally

Query Means to ask questions about something.

It is important when explaining the task that the assessment tools for both the oral participation and completed portfolio are given to the learners. They will be able to use these tools to assess their progress.

Emphasize that the portfolio must contain articles, notes and summaries covering the twelve-week period and that the portfolios will be monitored at each contact session.3. CONTROL

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At each contact session spend a few minutes reviewing the items, notes and summaries that each learner has brought.

Assess whether the learner is able to demonstrate knowledge and understanding of:

Preparing data for processing using prepared information within any one line of business.

Processing the data using an electronic system to capture new business details and update existing records including amendments, cancellations, receipts, payments against policies and financial transactions for receipts on bordereaux, cheques.

Issuing expense commissions and reinsurance. Performing electronic payments, cash and reconcile the Automatic Clearing

Bureau (ACB); Resolving financial queries of a general nature and queries related to unallocated

or unreconciled payments.

This is the important aspect of the task and learners may require help in making these links at first.

Record the date of the contact session and a brief comment on the state of the portfolio at the back of the document:

This will make the learner aware of the progress that has been made or corrective steps that need to be taken

4. ASSESSMENT

This task involves two types of assessment: formative, continuous assessment of oral participation and research from the retirement fund booklet and various resources within the company, and summative assessment of the portfolio.

Assess each learner’s participation in the oral discussion at each contact session by filling in the table provided.

The learner should be shown his / her assessment so that they know what they need to improve at the next contact session.

After a careful review of the completed portfolio, it can be assessed by completing the table in Annexure B. This table indicates to the learner which of the specific outcomes has been met by assessing the work submitted against the assessment criteria in the guide they were given. If the outcome has not been met, the trainer should indicate what steps should be taken by the learner to meet the criteria. These comments can be made in the “learner is not yet competent” block next to the relevant specific outcome.

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Annexure A

Learner Name : _______________________________________

Learner Number : _______________________________________

Unit Standard : _______________________________________

Oral Assessment

Action Yes No

The learner has brought a variety of articles / summaries and a draft copy of workplace guidelines to the session

The learner is able to discuss topics researched and explains he relationship to the insurance industry

The learner is able to participate in a discussion about other learner’s articles

The learner displays a general knowledge of events and circumstances that are not necessarily covered in the articles brought to the contact session

Date : ___________________ Signature : __________________________

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Annexure B

Learner Name : _______________________________________

Learner Number : _______________________________________

Unit Standard : _______________________________________

Rubric for Assessment of portfolio

Assessment Criteria Learner is competent Learner is not yet competentSpecific Outcome 1:


Specific Outcome 2:


Specific Outcome 3:


Specific Outcome 4:

Demonstrate knowledge and understanding of contracts in short term insurance.

Specific Outcome 5:


Date : ___________________ Signature : __________________________

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Annexure 1 : Specific Outcome 1

Prepare data for processing in short term insurance

The sources of data for processing are many and varied. These sources range from the direct client (the actual insured party); his broker or agent; banks or finance houses requiring confirmation of or changes to cover; own company needs, such as general increases or general endorsements; statutory or governmental agencies; and other departments within own organisation, such as Claims or Accounts. The preparation of data may be required for any or all of the following purposes:

- New policies to be issued

- Endorsements or alterations

- Premium changes

- Premium adjustments

- Post loss endorsements

- Declaration adjustments

- Deletion of items that have been subject of a total loss claim

- Renewals

- Cancellations and policies not taken up (NTU)

- Reinstatement of cover after a loss

- General endorsements and adjustments

In order to process information as required, the following documentation will be needed:

In respect of new business:

The appropriate policy form or wording. These can be any of many lines of short-term business such as Personal Lines, Commercial, Corporate Assets, and any Specialist lines.

These are further broken down into specific classes of business:

Commercial Business:

The Fire classes: Fire, Buildings Combined, Office Contents, Accidental Damage, Accounts Receivable and Business Interruption

The Accident classes: Electronic Equipment, Business all risks, Glass, Goods in Transit.

The Crime classes: Theft, Money and Fidelity

The Liability classes: General Liability, Tenants and Property Owners’ Liability, Products Liability and Defective Workmanship, Employer’s Liability

The Motor classes: Individual motor, motor fleet, and motor traders (internal and external).

The Personal Accident classes: Group Personal accident and Stated Benefits.

Corporate Business:

Corporate business may incorporate all of the above, but may have a specific Assets wording, where a number of classes are combined under a variety of sums insured, such as total fire assets, and then separate limits for Money and Glass.

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Specialist Business:

Engineering and contracting classes: Builders and Engineering Contractors insure their work in progress under an appropriate policy. The classes available include Contractors’ all Risks, Erection All Risks, Plant all Risks (in respect of machinery and equipment), Machinery Breakdown and Profits, Works Damage, Dismantling Transit and Erection.

Liability classes: Many professional organisations and individuals are at risk in terms of liability arising from advice given or work undertaken on behalf of others. They need Professional Indemnity cover, and this is available to many different professions: attorneys, healthcare providers, bankers, insurance brokers, loss adjusters, engineers and architects.

Marine and aviation: Organisations that undertake import and export or transportation of their own or customers’ goods purchase marine cargo insurance. The vessels themselves can be covered by hull insurance. Similar circumstances exist in aviation, where the aircraft, freight and liabilities arising therefrom can be covered under aviation covers.

Suretyships and guarantees: Insurers offer cover in respect of payment guarantees, for export credit, contractors’ performance guarantees, bankers’ bonds, liquidation bonds, or curatorships.

Personal Insurance:

This policy includes cover in respect of Buildings, Contents, Motor vehicles, liability, personal accident and All Risks.

The Policy Schedule: Once data has been processed a policy schedule detailing the classes of business selected, and the related sums insured, and premiums and the client’s details, will be generated. Ensure that the data required to be processed is adequate for the schedule to be correctly generated. The schedule is an integral part of the policy and contract and it must be checked in every instance for accuracy.

Manuals and Guides: These need to be checked to ensure that premium rating, business acceptance rules, mandates, reinsurance capacities, sums insured, policy issue rules, and the own organisations data capture rules are complied with.

The Original Quotation: Whether the quotation was done electronically or by means of memorandum or facsimile, it is important that you ensure conformity between the quotation given and the proposal or closing instructions received. This is vital, as any errors in the actual processing of the data arising from incongruence between these documents will result in lost time, efficiency and effort, as repairs have to be undertaken at a later stage.

Proposals and closing instructions: These form the fundamental core of the insurance contract, as any information contained herein becomes material information. Check to make sure that that quotations and these documents contain equal information to enable the data to be processed. Information contained in the proposal or closing instructions will include:

o Client details, including Name, Address and Occupation. Also important are financial details – banking accounts, method of payment of premium, and any Associated or Subsidiary companies.

o Risk details: sums insured and limits, perils to be insured against, premium rating, deductibles and excesses, warranties, premises and other information relevant to the risk itself are required.

o Broker or agent details: To determine commissions, and to ensure ongoing service levels to the client, these details need to be processes.

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o Reinsurance details: to correctly the data in terms of the organisations requirements, you must make sure that the risk to be added or amended conforms to reinsurance requirements as well. This entails checking the maximum acceptance limits, estimated maximum loss limits, the involvement of any co-insurers, and the need for facultative reinsurance beyond the limits of the treaty applicable to the risk class.

Survey reports:

Many insurers do not undertake surveys in respect of every risk they are asked to accommodate. This is foolhardy and can be costly in the long run. Once a policy or endorsement has been issued, the cover thereby is in place. You cannot then say you were not aware of information that was material to the risk, if it would have been available in a survey report. Always ensure that you have read carefully through a survey report before commencing to process the data. Check that the information contained in the closing instructions or proposal and in the original quotation conforms to that contained in the survey. If there is any recommendation to improve the risk, or any warranties imposed, report these to the appropriate authority (marketer or management) before processing the data. Also ensure that the broker is made aware of these before processing. Obtain written agreement that it is acceptable for the processing to proceed.

Amendment Request:

Before processing amendments always ensure that the request is received in writing. Verification and investigation as above must then be carried out before proceeding.

If the amendment impacts on limits or mandates, obtain the appropriate authorisation before commencing.

Ask for a re-survey if necessary.

Financial Information:

Many classes of short-term insurance require some form of declaration at the end of a policy period.

Examples are:

Motor fleet, where the number of vehicles at the end of each period is declared and the premium adjusted accordingly.

Stated Benefits, which is adjusted according to the total wage and salary roll for the previous period

Liability, often adjustable, on turnover of the insured company in the previous period.

Business Interruption insurance is adjustable on the declared gross profit or wages or turnover of the insured company.

Specialist policies are sometimes issued on the basis of an anticipated turnover or the intended amount of goods to be carried.

It is a policy condition that where the policy is subject to declaration adjustment these declarations must be provided by the insured.

Example:

Motor fleet policies are issued to clients who have many vehicles in their fleet.

One of the benefits of the fleet arrangement is that the client does not need to advise the insurer every time the client buys or sells a vehicle falling within the insured categories, however the client is required to advise the insurer at the commencement and end of the insurance period how many vehicles per determined category the client has in it’s fleet.

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The profile of a motor fleet may appear as follows on day one of the policy:

10 Private Cars valued at no more than R 100 000 each

20 Commercial vehicles valued up to R 150 000 each

5 Motorcycles valued up to R 10 000 each

The insurer determine the annual premium per vehicle within the determined category, say:

Private Cars up to R 100,000 R 5 000 premium each

Commercial Vehicles up to R 150,000 R 7 500 premium each

Motor Cycles up to R 10,000 R 1 500 premium each

The commencement (deposit) premium payable for the insured fleet will thus be:

Private Cars up to R 100,000 (10 X R 5 000 each) R 50 000

Commercial up to R 150,000 (20 X R 7 500 each) R 150 000

Motor Cycles up to R 10,000 ( 5 X R 1 500 each) R 7 500

Premium payable by the insured at the start of the period Total R 207 500.

During the year the insured may freely acquire or dispose of vehicles falling within the insured vehicle categories. A vehicle falling outside the insured vehicle categories are NOT insured and shall remain so until the insurer issues a policy (amendment) schedule to cover it’s insurance.

i.e. Client may not add a commercial vehicle for more than R 150 000, nor may client add a new category of vehicle say a bus, without prior consultation with the insurer.

Motor fleet policies usually contain a 50% either way premium adjustment clause based on the number difference within vehicle category, declared at the start and end of the insured period.

Initial Declared 50% PremiumPremium Start End DifferencePremium Adjustment

Private Cars up to R 100,000 R5,00010 15 + 5 R2,500 + R12,500

Commercial up to R 150,000 R7,50020 18 - 2 R3,750 - R 7,500

Motor Cycles up to R 10,000 R1,500 5 5 Nil R 750 Nil

TOTAL + R 5,000

The client therefore needs to pay the insurer an additional R5 000,00 insurance premium for the past insured period to cover the difference between it’s declared vehicles per category in it’s fleet at the start and end of the insured period.

Total Premium for the insured period is R212 500,00 (initial R207 500,00 + R5 000,00).

Renewal documentation:

Prior to processing renewals at the end of each period of insurance, ensure that you have enough information about the specific policy to perform the renewal correctly. Information is needed in the following forms:

Loss ratio and full loss history. Check the amount paid in claims in the current and previous period, showing net claims after deduction of the applicable excesses. This will assist in taking corrective measures on the policy, or cancelling particularly poor risks. Conversely, better terms may be offered on well-performing risks, or you may wish to renew with terms unaltered. As with new business processing, renewals processing must be done in accordance with organisation specific procedures and rules.

Renewal Survey: Where the loss ratio displays a number of similar claims in any class of business, request a renewal survey report. This will assist you in determining renewal terms.

Renewal quotation: Ensure you are thoroughly acquainted with terms put forward to the broker or insured by your underwriters. Your organisation may have decided that every

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policy in a certain class or line must be amended at renewal to cater for standard endorsements (a new excess structure) reduction or deletion of cover (millennium risk or riot wrap around) or for a general rate increase.

Post loss endorsements and reinstatements:

After a claim is settled, the sum insured is often automatically reinstated, subject to the payment of an appropriate premium. Ensure that you comply with your organisation’s regulations regarding the reporting of loss settlements, and that the appropriate additional premium is raised, and documentation issued.

Example

Reinstatement of sum assured.

An insured purchases fire cover on a warehouse in Durban for a new replacement value of R 2 000 000.

The rate on this risk is 0,2%, giving an annual premium of R 4 000. The insured suffers a loss on 1st July, during an insurance period of 1 January to 31 December –i.e. exactly halfway through the period.

The total amount of the loss is R 295 000. After the loss is settled, the insured received R 295 000 cover paid out and technically his sum insured should be reduced by this amount, leaving R 1 705 000 to be insured.

The policy allows for this amount to be reinstated to R 2 000 000,00, but the insured must pay an additional premium to have the sum insured put back at R 2 000 000,00.

The insured would then pay R 295 000 (amount of loss) X 0.2% (the rate) X 6/12ths (the time remaining in the policy period) = R 295 reinstatement premium.

If the repairs to the property are only completed on 31 August in the same year, the calculation for the additional reinstatement premium will be R 295 000 X 0,2% X 4/12ths (the four months being the time left in the insurance period, until renewal.

NOTE:

It is estimated that insurance companies in the short-term markets lose up to

R 200 million per annum by not actively seeking declarations, and reinstatement premiums.

The data to be processed is verified and where necessary additional data is obtained from data source in accordance with organisation specific requirements.

Insurance policies and schedules are evidence that a legally binding contract exists between the insured and the insurer. In return for a premium by the insured, the insurer offers protection of the insured'’ assets against the risk of any of the perils insured against happening or arising. The data that is processed must be accurate and correctly represented, as the documentation issued by insurers forms part of a legal document that cannot be altered other than by way of endorsement or amendment.

NOTE:No spelling or grammar errors will be allowed.

Also typographical errors cannot be amended once the policy and schedule have been submitted to the insured, other than by endorsement.

Example

If the rate agreed is 10% of value, and you incorrectly process the rate as 1%, the latter is the rate that will stand, once the data has been processed and the policy despatched.

A number of court actions brought by insured’s have succeeded based on the fact that the insurer sent out a policy that was incorrectly processed, but the errors had gone unnoticed. When claims arise, and the policy document wrongly reflects the details of the contract, there is

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very little that insurers can do, other than pay in accordance with the details reflected in the policy.

The following documentation must be verified for conformity with each other, and with standard operating procedures of the organisation:

The proposal and brokers’ closings must conform to the quotation offered.

The quotation must conform to the rating manual and guides, and business acceptance rules of the organisation. Where minima are applied these must be verified, such as sums insured, premium levels, deductibles and risk acceptance criteria, such as protections and risk improvement.

The policy limits and premium levels must be aligned with the reinsurance limits and specifications of the treaty reinsurance support

Where any deviations from standards are noted, these must be reported to the appropriate authority in terms of organisational standards and criteria.

If any discrepancy exists between any of the documentation, contact must be made with the parties to the contract, underwriter, broker or insured to ensure clarification, before documentation is readied for processing.

The need to maintain confidentiality of data is known and explained with reference to organisation and industry confidentiality and authorisation requirements and/or codes of conduct.

As stated above, the parties to an insurance contract are the insured and the insurance company. There are other interested parties involved such as the broker, a surveyor, assessors or loss adjusters, banks and finance houses, co-insurers and re-insurers, third party administrators, attorneys, and associated or subsidiary companies, or the family of the insured.

In terms of confidentiality, only those parties directly involved in the contract at the time of the processing of the data may be advised of information pertinent to the risk. In the same way information regarding rating methods, acceptance limits, treaty information and other information relating specifically for the use of the insurer only, may not be disclosed to any other party.

NOTE:

Insurers build into their rating structure a factor for taking care of direct expenses. This has nothing to do with any of the other parties involved, and may not be disclosed. Nor may this information be disclosed to other brokers or insurers.

In the event that you are asked for information regarding a policy, you may only offer information relating to claims history or loss ratios, to brokers or other insurers who may have been asked to offer a quotation.

Activity

Write a paragraph on when you may be asked for information about data to be processed. Name potential interested parties, and state which information may be freely given, and which must remain confidential.

Procedures required for the processing of data are known and followed to produce the required data.

Every company involved in the processing of data in the short-term industry will have its own set of procedural regulations, and these must be adhered to.

Information regarding these regulations may be found in the following ways:

By referral to specific systems manuals,

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By interaction with other data processors,

During specific learning programmes focused on the operation of the system.

By referral to the Information Technology department within own organisation,

In discussion with, or referral to, underwriters or claims and accounts staff,

By involvement of the Organisation and Methods experts of the organisation, if any, or business development department,

Continued effective use of the system, and referral to appropriate authority where problems are encountered.

As the organisation will have business-aligned systems, it is imperative that procedural regulations are followed to the letter.

Do not seek shortcuts or ‘work around’ routes as these may impact on the system’s ability to convert data into statistical analysis tools.

This may also result in the breaking of the system line to other departments, which rely on your input to perform their functions, such as reinsurance, claims, audit and accounts.

The potential for costly effects is enormous.

Imagine the potential losses to the organisation if, instead of inputting ‘10% of insured value with a minimum of R 2 500’, someone were to put in ‘10% minimum R 2 500’.

A claim on an item valued at R 2 000 000,00 would in the latter instance attract a deductible of R 2 500 on a claim of R 25 000, rather than the required R 200 000. This would mean that instead of paying nothing (as the claim would fall with the deductible amount,) the insurer would have to pay an amount of R 22 500.

Limits of Authority are understood, a decision is made to refer to a higher authority according to organisation specific requirements.

Another term for a Limit of Authority is a Mandate.

A mandate is a restriction that can be used to limit the scope of activity of individuals, teams, or departments/branches, depending on their levels of authority and experience.

User profiles determine the limit of sums insured, premiums, classes of business, types of policies, claims authority, premium write-off, rating levels, or reinsurance calculations (for example EML – estimated loss calculations) and many other limitations related to the processing of data. Certain staff may need the authority of a supervisor or manager before they are allowed to finally file a set of data onto the system.

In the pre-processing stage, the values of the mandates will have been set up in a section file. The maximum mandated values for the company, branches teams and individuals will be available from either the manager or Information Technology (IT) department within the organisation. Levels are normally broken down, to cater for experience and ability of data processing staff.

A level one user would have reduced mandates at the lowest level, while a level 10 user, say, would be able to process data up to the company’s limits.

If at any time you exceed your mandate, ensure that referral is made to the appropriate authority and in the required format. Most processing systems have mandate levels, driven by a user code or login password, set up within the systems.

Activity

Describe the potential negative outcomes of exceeding mandates when preparing data for processing, with regard to rating, extensions to cover and reinsurance procedures.

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Annexure 2 : Specific Outcome 2

Capture short term policy data using an electronic systemData is captured in the correct fields as required by the system, using correct terminology and coding.

Processing systems will generally make provision for the capture and management of commercial, corporate, personal and specialist classes of business.

The following documentation will generally be inputted within a system:

- New policy entries

- Policy periods

- Transaction types

- Multiple or split premises per policy or risk

- Rating structure

- Endorsements amendments and cancellations

- Coinsurance and reinsurance

- Declarations and aggregates

- Renewals

Users will also need to be aware of account specific information such as:

- Different policy types

- Diary programmes

- Month end run dates

New Policy Entries:

Policies are loaded on a system by means of a series of input screens. These screens require input of data in a number of sectors, chiefly:

- Client information

- Policy details

- Accounting details

- Premises details

- Applicable section or risk details

The first page of a system generally acts as an index or summary of all information that is entered for a policy.

The details loaded at this general policy level is the data that the system will generally default to all other levels so the user does not continually have to re-enter it.

An example of this would be information entered at Situation Details.

This information will be kept as a mini library of addresses for the different premises, which are covered by the policy.

The process of capturing data will in general require the completion of a number of stages until the document can be printed and despatched.

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Client details:

A client number must be requested, either directly off the system or from a register of new client numbers. When loading a new policy the following details will be required to be entered in the appropriate field.

Most systems will default to the fields that are compulsorily to be filled.

Client number:

The effective date (commencement date) of the policy. This requires day, month and year to be entered. This must be the date on which the policy must become active. The dates can be in the past, or in the future, depending on the workload. This date will have an effect on the debit amount to be raised. (see later).

The policy number:

Most systems will default the next file or policy number in this field.

The transaction type:

This will be a new debit, as it will be the first entry under the policy.

The client details:

Ensure that you enter the exact title of the insured, for example ADF Consultants (Pty) Limited. The policy is a legal document, and it must reflect the correct legal identity of the insured and the insurer, and other parties to the contract.

For private individuals use the full title, for example – Mr G J Jonker.

The address details:

Use the full physical address and postcode. Most systems provide for both physical and postal addresses. Complete both fully, remembering to include the postal code fields.

The business description:

Make sure that you enter details of the client’s occupation as fully as possible, including subsidiary activities. An example would, manufacturers, importers, suppliers and repairers of electronic equipment, such as computers, printers, cabling, scanners and ancillary equipment. This helps the underwriters and claims staff to quickly check against the occupation for information relating to the risk.

The banking details:

These details display the method of premium payment chosen by the client. Be especially careful to check these details, especially when the client opts to by debit order directly from his bank via the Automated Clearing Bureau (ACB). In the event that even one digit is incorrectly entered, the debits will not be raised or paid, resulting in further administrative work to you.

There are various options that may be offered to clients to pay premiums:

Annual policies: These run for 12 months, or part thereof. The insured pays a single premium for the entire first period.

If the first period is less than one year, the premium must be pro-rated to allow for this. If the client requests a policy period of 1 February to 31 December, his premium will be for eleven months, (or more correctly 334 days {335 in a leap year}).

The next period (after renewal) will then be for a full calendar year.

Annual policies paid monthly.

The policy period is for a full year, but the premium is divided into 12 payments over the year.

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Annual policies paid quarterly or half-yearly.

The policy period is for a full year, but the premium is payable either in 4 (quarterly) instalments or in 2 (half-yearly) instalments.

Monthly policies.

The insurance period is for a month at a time, and effectively renewed every month.

Quarterly policies.

The policy is renewable every three months.

BI-annual policies.

The policy period is for 6 months and is renewed every six months.

Open policies.

These are marine policies, which are not renewable, but are reviewed upon declaration by the insured.

Other policies.

These are specific policies, which can run for a few weeks or months, or for several years.

They are not subject to renewal.

The premiums are not based on annual rates but on specially negotiated terms. The policy is issued to an agreed limit for an agreed period.

The Team or Branch details.

You must enter the appropriate code for your team or branch, and ensure you have correctly identified your self by your user log in password.

Policy Type

Load the details of the type of policy you wish to enter, by choosing the correct code allocated by the system:

Multimark III, Assets All Risks, Personal Protector, or any other branded policy within own organisation.

In most systems, these codes allow the user to move directly to the appropriate specification, and, more importantly, the system will default the linked reinsurance treaty that supports the product.

Coinsurance Details:

If there are multiple insurers, they must be listed and the percentage of the risk that each holds must be noted.

Capture the information regarding the insurers, the percentage held and the handling fee related to each of them, together with their reference or policy number.

Agent Details

Enter details about the broker using own organisation procedures.

These will generally include a broker code or number, and details of the responsible person.

Situation Details

In the screen relating to situation details you will be required to complete information on the premises referred to in the proposal. All premises applicable to the policy will be specified in the Situation Details of the system. When you load a section or risk, all the premises attaching

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must be defined in the system. These premises will be covered to the sums insured specified unless specified differently.

This could result in the following type of information being printed on the schedule, for example of a fire risk:

Buildings Premises 1 R 1 000 000

Premises 2 R 2 000 000


Rental Premises 1 R 250 000


Plant Premises 2 R 500 000

Section Details

On these screens you will input all information relevant across the class of business, such as SASRIA, standard deductibles and endorsements, such as Millennium Risk Exclusion and any memoranda relating to all premises.

Possible classes of business are as outlined in 1.1 above.

If for example the insured is a farmer with multiple premises, and he is required to bear the first R 1 000 of any damage in respect of fire to stock, you will load this information at section details.

Risk Details

In this section, data concerning the individual classes of business and perils insured against, will be loaded. This information will conform to the information contained in the proposal and closing instructions, as well as the survey report and quotation.

Information pertinent to the risk will include:

Sums insured

Premium rates

Premises and situations

Excesses and deductibles

Extensions to cover

Memoranda specific to the risk

A fidelity policy, you will capture data about the following:

Whether the policy is to be on a blanket basis or named or position basis. If the policy is on a blanket basis how many staff are to be covered. If on a named basis, what are the names of the insured persons?

The premium to be raised.

The amount to be insured for.

Which extensions and clauses are required for example: retroactive cover or superseded cover; any further additional deductibles; if reinstatements are required; costs of recovery extension; losses by computer fraud; extended discovery option; audit extension option.

Activity

What information do you think will be specific to the Theft section of Multimark III at risk details level?

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Filing the details

Ensure that you check all information captured before you finally file the policy. This includes checking for correctness of information as well as premiums raised, banking details, sums insured, and all other information you have captured. Cross check against the proposal, closing instructions, quotation, company processing regulations, and survey report to verify your input. Double check to make sure!

Endorsements, Renewals and Cancellations:

Endorsements:

An endorsement is any change made to policy details within an active cycle.

Examples include:

Adding a new risk or section

Deleting an item from the schedule

Amending an address

Changing the sum insured

Reducing the amount of an excess or deductible

Cancellation of a policy entirely

An endorsement overrides the policy wording.

Example

If the policy wording under a Houseowners Buildings section of a Personal Lines policy excludes cover in respect of subsidence and landslide, but you add this cover by endorsement (including the sum insured premium and deductible) then the endorsement is the factor that governs the cover.

A renewal is effectively an endorsement to the policy, because you are factually amending the period of the cover for another agreed period.

At renewal stage you may also need to effect a number of changes to the sums insured, perils covered, excess or deductible structure, or you may add or delete sections and risks.

To process endorsements, you need to enter the system via the client number and policy number generated when issuing the new policy. All information currently captured against these numbers will then be brought up by the system, enabling you to attend to the changes.

General processing rules depending on own organisation requirements will include:

From the main section, enter the Policy Details screen, and enter the appropriate client and policy number.

In the Effective Date field enter the date from which the change to the policy is to be effective.

Select the type of accounts transaction required. For an endorsement this will be a debit or credit endorsement, depending on whether sums insured or premiums are increased or decreased. Where no premium change will occur, such as for a change of address, the system will not raise any debits or credits unless you amend other details simultaneously.

Ensure that you capture an endorsement number. This will be either system generated or will need to be obtained from an endorsement register.

Go to the section or risk that you wish to amend, and do the required alteration. Most systems will generate the appropriate additional or refund premiums automatically. If not, ensure you have calculated the amount of the premium beforehand. Check your

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figures and check again!

Cross check the information to be captured against the request for the endorsement from the broker or from own organisation needs.

File the endorsement only when you are satisfied that every bit of data captured is correct and verified.

Deletions:

Ensure you use the correct computer keys to clear information from a field. You may be required to delete items, premises, sections or entire risks from a policy. Organisation specific processes will guide in these processes.

Cancellations

Enter the system again via the Policy Details screen. Use the client and policy numbers to enter.

Choose the appropriate effective date of the cancellation, and then cancel the policy by selecting the correct transaction type.

Use your organisation code for Cancellation.

Ensure that you enter a legend where required describing the reason for the endorsement or cancellation.

File your endorsement only when you are certain you have checked all captured data and have verified the correctness of the process undertaken.

Renewals

Prior to the policy renewal or review date, a renewals pre-list will be generated during the month end run. This period will be specified by your company, but is normally three months.

Example

December a list will be generated of policies due for renewal during February the next year.

NOTE:

Cancelled or lapsed policies will not be listed.

You will be required to use these lists to check on the renewability of the policy.

This will entail drawing a full loss history, and determining the total amount of claims paid by you to the insured throughout the year.

Use these figures to recommend the renewal offering to the client.

Check for repeat classes of claims, for example many Money claims or several large losses across all classes.

Prepare your renewal documentation, and be ready to process the data as soon as renewal has been agreed with the broker and client.

Enter through the Policy Details screen and choose the date of renewal as the effective date.

Process all the changes using the same process rules as for issuing a new policy and doing an endorsement.

Select the correct transactions code for renewal and verify the information before filing the procedure.

The following is a list of transaction types. Codes will vary according to organisation, but you must be aware of the different types of transactions that will be needed when processing documentation.

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Description Function

New debit Used for a new policy, or first debit

Renewal debit Used to raise annual renewal premium, and to update effective dates on the policy.

Debit endorsement Used to adjust pro rata premium on a policy in respect of endorsements that will result in the insured having to pay additional premium – increase, rating adjustments.

New credit Used to reverse a new debit, it results in a full credit on a new policy and uses the original inception date.

Renewal credit Used to reverse a renewal debit, when further changes at renewal may be necessary, or where the client elects not to accept renewal terms, which have already been raised.

Credit endorsement Used to reverse a debit endorsement in its entirety, or used when the net monetary effect of an endorsement is that the client will be due a refund by the insurer.

Cancellation Policies are cancelled for a number of reasons, premium not paid, non-competitive terms. This would generally be for a cancellation during the term of the policy.

When a policy is not accepted form inception or when it is lapsed at renewal, Lapse or Not Taken Up (NTU) procedures will be used.

Coinsurance

Coinsurance refers to a situation where two or more insurers underwrite cover under a policy, one of whom is nominated as the Leading Insurer. This is usually the insurer that carries the largest share, but occasionally one of the other co-insurers may act as Leading Insurer.

The lead insurer issues the policy on behalf of the other insurers:

Each insurer is named in the policy, and their proportionate interests recorded.

The lead insurer negotiates claims and policy amendments, but only after the other insurers has agreed.

The other insurers pay the lead insurer a handling fee for doing the administrative processing.

You must be very careful to load coinsurance information absolutely correctly:

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Here follows an example:

Company A Lead insurer

Sum Insured R 6 000 000

Premium R 100 000

Handling Fee 5%

Participating Insurers Company A 40%

Company B 30%

Company C 20%

Company D 10%

Company % Sum Insured Premium Handling fee payable

A 40 2 400 000 40 000 0

B 30 1 800 000 30 000 5% R 1 500

C 20 1 200 000 20 000 5% R 1 000

D 10 1 000 000 10 000 5% R 500

When loading a collective policy, which you will do only when you act as lead insurer, the sums insured, EML and premium must always be loaded at 100% of the insured value.

Also ensure that the lead insurer, your company, is loaded on the first line item. The system will pass only the required portion of the premium and sum insured through to the own accounting module, but will raise the debit in full to the client, and process the policy details at 100% of the risk.

Declaration Adjustments

In many instances, the initial premium on a policy is a provisional one based on an estimate of value, numbers of items such as vehicles, wages, turnover, output or profit. This provisional or deposit premium is subject to adjustment at the end of the stated period when the actual values are known.

Such a policy is made subject to Declaration Conditions, which set out the manner in which the insured is to declare the required information and how the premium is to be adjusted.

At the initial stage of capturing the data, ensure that you enter the declaration frequency details on the applicable screen, against the applicable section. In raising the additional or refund premiums due on declarations, the sum insured must be corrected against the item concerned. The system will generally default the declaration due dates, depending on the period selected.

Activity

Describe the manner in which a Business Interruption section requires the insured to provide declarations at the end of each period of insurance.

Captured data is verified as complete and consistent with supplied information

We have already seen how important it is to ensure that data processed onto a system is checked at each stage to ensure that it has been captured in accordance with the requirements of:

The quotation

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The proposal or brokers’ closing instructions

Own organisation’s regulations for data capture

The survey report

Data processing mandates and referral procedures

The policy wording.

In addition to the above, most systems will provide a series of Enquiries and Reports that enable the user to check the completeness of information captured, many by way of look-up.

Legend Enquiries:

Whenever a transaction is completed, the user should complete a meaningful legend. These legends are essentially the history of a policy and of any amendments made to a section or a policy in total.

These legends can be printed on the schedule, if required. They can also provide a useful tool when doing enquiries. They are in fact a history of the amendments made to the policy, and include who, how much and when.

Policy Enquiries:

You may enter the system at the Policy Details section to view details of policy done on a specific date.

Be careful only to enter in the Enquiry mode, so as not to inadvertently amend the policy.

The cover in force at the time of the specified enquiry date should be available.

Declaration Enquiries:

On line reports will detail declarations due per policy, within any date period specified.

Declaration reports will detail all declarations that have not been raised although they are due.

Renewal Reports:

These will list all policies due for renewal, but not yet renewed.

Mandate Enquiries:

These allow you to check your mandate limit, per section from within the policy.

Premium Enquiries:

Before you file any amendment or the capture of a new policy, always first go into the premium enquiry screen, to ensure that the correct premiums have been raised.

Lapsed Report:

These will show all monthly or annual policies lapsed for a given period.

Commission Listings:

Shows detail of commission amounts for all active policies.

The integrity of the data and system is maintained at all times as per organisation specific requirements.The parties to an insurance contract are the insured and the insurance company.

There are other interested parties involved such as the broker, a surveyor, assessors or loss adjusters, banks and finance houses, co-insurers and re-insurers, third party administrators, attorneys, and associated or subsidiary companies, or the family of the insured.

In terms of confidentiality, only those parties directly involved in the contract at the time of the

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processing of the data may be advised of information pertinent to the risk.

In the same way information regarding rating methods, acceptance limits, treaty information and other information relating specifically for the use of the insurer only, may not be disclosed to any other party.

Example

Insurers build into their rating structure a factor for taking care of direct expenses. This has nothing to do with any of the other parties involved, and may not be disclosed. Nor may this information be disclosed to other brokers or insurers.

In the event that you are asked for information regarding a policy, you may only offer information relating to claims history or loss ratios, to brokers or other insurers, who may have been asked to offer a quotation.

The implications of incomplete data capture are explained for both customers and the organisation.An insurance policy, including the wording, specifications and the schedule constitute a legal document, and evidence that a contract exists between the insured party and the insurers.

Aside from service issues and the accent on professionalism, no policy may be sent out with any errors, amendments or other incomplete data, as this will affect the legality of the document.

In the event that an insurance discord leads to litigation, the actual policy documents issued and despatched will form the basis of the contract.

Any mistakes in the document or any incompleteness will be in the favour of the insured.

Insurers cannot hope to defend any action on the basis that the policy should have read in one way, but does not because a mistake was made!

The implications of incomplete data capture range from potentially relatively minor implications to matters of possibly catastrophic effect.

Potential impacts arising from documentation which has been despatched incorrectly include:

An incorrect postal address:

The client will not receive his documentation.

Extra work will be required form the data capturer to amend the address when the policy is returned.

The worst possible outcome may be that a client will not wish to deal with a company that cannot even get a simple address right on its documentation. As a minimum, extra effort will be involved in correcting the address, as well as printing and mailing costs.

Client or broker name incorrect:

The registered name of the client forms a legal entity and different types of titles carry different implications in terms of ability to enter into contracts.

These do not have an effect on the cover granted under a policy, except in certain circumstances where minors may not insure beyond certain limits.

Also certain types of marriage contracts preclude the wife from signing contracts without the written assistance of the husband.

Far more important in terms of correct naming of the insured is in the matter of insurable interest and for claims payments. A claim agreed and payable to an insured company cannot be banked unless the correct name and bank details are used. If the insured and the bank account carry different titles, say the policy is in the name of Professor Jones, and the policy is in the name of Mr Jones, cheques in respect of claims settlements will

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be returned.

Using the incorrect broker organisation name may result in the non-payment of commission to the correct broker. When loading broker information, ensure that the correct branch code is used. Failure to do this will result at least in extra credit control duties having to be performed.

Incorrect bank details:

Aside from the matter of claim payments shown above, the capture of incorrect banking details will result in the premium on a monthly or monthly paid policy be unmet.

The least result of this will be in additional work in recapturing the correct details.

Worse is that the policy cover will cease in terms of the wording, and any claims arising will be declined.

This will cause problems in service provision, and in performing the insurers duties in terms of the contract.

Loading premium details incorrectly:

Rating structures, loss histories and excess structures are determined by the ongoing collection of statistical information over a number of years from policy information of the insured. Insurance company results and the attendant need for the correct application of rating structures will be negatively influenced where incorrect rating and premium are captured.

Example:

An insurer may decide that the based on the loss results of its overall commercial motor portfolio that a 10% increase in rating is needed. This 10% will be based on its current rating structure. If the structure is not being adhered to, then this 10% may not be enough to correct the results effectively. If data regarding premium has been incorrectly captured, underwriters base figures for determining an appropriate increase will be skewed, and the proposed new structure will be incorrectly assessed.

Incorrect capture of values and sums insured:

Short-term policies pay claim amounts based on one of the new replacement value (Fire, combined, all risks, household and office contents, for example) market value (Motor) or actual liability amount (Liability).

When assessing the values and capturing data, the sums insured or limits must reflect these values. Insuring for values greater than these results in the insured having to may needless extra premium for cover they cannot have.

Example

If for example, you capture a motor vehicle value of R 150 000 for a vehicle whose market value is actually R 105 000, the premium will be based on R 150 000. However, the insured cannot be paid more than R 105 000 in the event of a total loss. The premium charged on the higher value will be wasted.

Similarly, sums insured on other classes cannot be higher than the actual value at risk. Another effect of insuring for too great value is on the application of reinsurance treaties.

Most systems will have an automatic allocation of reinsurance treaties, based on sums insured and Estimated Maximum Loss (EML’s) calculations.

If these are loaded at values higher than the actual value, there might be a presumed need for facultative reinsurance when none exists. Even at the lower end of the value scale, the capture of a value that is in fact higher than the actual value, may mean that premiums and shares may be ceded to a treaty when in fact the insurer may be able to keep the entire actual amount at risk for net account.

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Example:

Your company’s fire class treaty may be a 20 line surplus treaty above a net line of R 2 million, giving a total maximum acceptance – net and treaty – of R 42 million. On a sum insured of R 1 500 000, the entire value should be allocated to the net line, as it is lower than the R 2 million net line. However, if you capture a value of R 15 000 000, this will require the cession of R 13 million to the treaty. You will then be required to cede the similar portion of the premium to the reinsurers when this is not necessary. You should be keeping the entire premium for net account.

Remember that all policies operate on the principle of indemnity. The insured can never be paid for a claim for more than the actual value of an item. There are no benefits to be had by insuring for a value greater than the actual value.

Similarly, there can be no benefit to the insured to insure for a value lower than the actual value. In motor insurance, if a vehicle has a market value of R 100 000, but is insured for only R 80 000, then the latter figure is the maximum amount payable by insurers in the event of total loss.

In many other classes, the Fire classes particularly, but including glass, electronic equipment, householders, and all risks, the condition of average will also apply when the sum insured selected is lower than the actual value. This condition causes more dissatisfaction than most, especially in personal insurances.

For policies where specified values are chosen by the insured, such as Personal Accident and Liability, incorrect capture can result in wasted premiums, or in reduced benefits payable in respect of claims.

Activity

Discuss the condition of average, stating which classes it applies to, and give an example of how a claim will be settled where average applies.

Incorrect processing of Situation information:

All short term policies use in their rating structures an area rating mechanisms of some form. This varies from a relatively simple application of postal code to determine the area of use of a motor vehicle – strictly speaking this incorrect as the area should be where the vehicle is used in the main rather than where it is kept overnight, - to regional and geographical areas in which certain perils are more likely to occur.

Example

Earthquake perils. It is important that the correct Situation details are loaded to assist underwriters in planning their activities. Ensure that if you are capturing a risk address for Middelburg, for example, that you select the correct one, as there are two Middelburgs in South Africa, one in Mpumalanga and one in Eastern Cape. Geographically, meteorologically and sociologically, the areas of the country have different underwriting effects on the business.

These effects range across:

Physical environment risks, such as earthquake, storm and hail areas, flood risks, wind, fire and malicious damage perils and others.

Social environment risks resulting from unemployment and associated crime rates, the disintegration of the family unit in certain segments of the population, poverty and disease and others.

Economic environment risks, such as inflation, joblessness, and currency fluctuations. These affect different industries in different situations, in different ways.

Incorrect construction information. In the same way as Situation and Occupation impact the underwriting contract, so does Construction of any property. This affects reinsurance retention, rating, and protection requirements. Thatch is an example of a construction material that needs to be specifically noted on the policy.

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Occupation details. Policies are rated with a very strict focus on the Occupation of the Insured. Always make sure that you state the occupation or business description as fully as possible. Be sure to add all aspects of the Insured’s occupation to the policy, as this can again impact on rating, acceptance limits and reinsurance support necessary. If for an example an insured is described as a building contractor, the description could include standard building contracts, earthworks, demolition and blasting, civil works (concrete structures for use by the public) and a whole range of associated activities. Be sure to specify exactly which types of contracts he is engaged in to reduce wasted premium and to ensure correctness of cover.

General information. We have already seen that the information used to process data on a system is obtained from a variety of sources. All this information may be considered as possibly material to the risk. Always ensure that you do not inadvertently change the information and affect the completeness of the cover.

Activity

Describe five sets of information, which if incorrectly or incompletely captured could have an effect on the effectiveness of the policy cover.

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Annexure 3 : Specific Outcome 3Issue and distribute policy documentation and endorsements.

Ambiguities in the document are identified and corrected and an indication is given of the possible implications of issuing a document with wording that is ambiguous.One of the biggest problems faced by the insurance industry at claim time is resolving claims when the appropriate wording used contains ambiguities. This means there are a number of interpretations that may be placed on any word or phrase.

Check the information at all stages, and where any phrase or term is ambiguous, refer the matter to your superior in terms of organisation specific regulations.

Examples of ambiguity in schedules or specifications often result from the lack of standard clauses and conditions or extensions that need to be added. Never make up your own wording for excess, warranty or any other non-compulsory free form wording.

Always ensure conformity with your organisation’s regulations.

Example

An excess description of 10% min R 500 is ambiguous. Does this mean 10% of gross claim amount, of loss, or of item value? There is also no meaning in English for ‘min’.

The initials SL on a fire schedule could mean either Subsidence and Landslip, or Sprinkler Leakage. You may be granting cover not required and not paid for.

NOTE:

One way of reducing ambiguity in processed data is to always make sure that any addenda to the default information in a system is completed in full, without abbreviations, acronyms, or other wordings not immediately understood by anyone who may read and interpret this information.

Attachments and endorsements required by a policy are indicated using an actual policy as an example.In South Africa, commercial policies are standard under the banner of Multimark III.

These are despatched as complete booklets with every available section included in the wording. The schedule to the policy shows which sections of the policy are included for cover.

Insurers print many copies of this wording under their own logo. This helps with administration and printing costs. Difficulties arise when covers need to be extended or educed by endorsement. When individual insurers decide on these endorsements, they need to attach all different endorsements that they wish to have applying to all or any number of the insured’s.

Where possible, it is always desirable to add the endorsements to the system-generated documents as defaults. This is not always possible, and often these endorsements are then printed in separate batches for attachment to despatched documents.

It is important that a list of required endorsements be maintained so as not to overlook any. These lists will conform to organisation specific regulations.

There also is currently a market agreed assets policy, called AssetMark. The same would apply. It is only in the area of Personal Lines that policy wording and schedules are specific to individual insurers, although much of the cover granted by each is similar in scope and cover.

There are no standard wordings among insurers in these lines of business. The policies are however printed often in booklet form, for the same reasons as given. Any across the spectrum changes still have to be publicised by endorsement. These attachments or endorsements will

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only be sent where the policy itself is endorsed.

Changes to commission limits or claims settling authorities, which are essentially the business of the intermediary would be sent as a separate circular to the intermediary direct, and would not constitute a policy attachment.

Some examples of general attachments or endorsements over the past few years include:

The Millennium Risk exclusion, whereby any losses attributable to year 2000 compliance issues were excluded

The reduction of war and terrorism covers in the wake of the attacks on the world Trade Centre in September 2001. The classes most affected were Marine and Aviation and personal accident.

Documentation relating to the Policyholders Protection Rules, currently only in force in respect of Personal insurance, but soon to be for commercial risks as well.

Any amendments to general excess structures, specifically within the motor line. These include theft and hijack, unprotected vehicles, and other cumulative excesses in respect of young drivers, no claim bonus rewards, and length of time of possession of driver’s licence.

Vehicle protection rules for Motor insurance. This involves the minimum standards of protection required on the part of the insured in installing anti-theft devices, gearlocks, tracking devices, window etching and others.

General endorsements for changes in insurance processes brought about by the new Short Term Insurance Act 1999. A chief example is of changes to rules for premium payment, now section 45, previously section 20 Bis.

Changes to Electronic Equipment policies where the insured is made responsible for separate excesses in respect of lightning surges, and theft. Recently, an endorsement was drawn up adding the words ‘.and violent’ to the theft exclusion. Previously the theft requirement was for forcible entry only. The very act of opening a closed but unlocked door was deemed to constitute a forcible act.

Minimum safe and strongroom protection requirements for the safekeeping of Money.

The incorporation of general non-political riot into SASRIA. The policy wording was amended to include only riot and strike occurring outside South Africa and Namibia, but within the territorial limits.

Changes to the claims basis of Liability policies, either on claims made or occurrence basis. This has now been incorporated into the full policy wording.

The process to be followed in issuing an endorsement is explained in terms of the responsibility of the policyholder and the organisation.As with a new policy, any endorsements are issued in accordance with set of rules, specific to the insured and the organisation. In effect, each time an insured requests an amendment to the policy he re-proposes this portion of the risk.

All policies are very definite in their rules for endorsements. Requests for amendments must be made in writing, before than will be attended to. There is no effect on a policy unless an endorsement request is received in a written form from the insured or his broker.

This request may be made by:

Letter

Facsimile message

Electronic mail

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Telegram or telegraphic message

A hand written note, delivered by hand or left for collection

It is the responsibility of the insured to ensure that he advises insurers of changes needed to the policy as soon as possible after he becomes aware of these. This time is based on reasonable expectations. A client who buys a new truck must tell the insurer as soon as he has received the vehicle, or as soon as possible thereafter. In this instance a month is not a reasonable period of time. But an insured need not advise insurers at the time of order of a new item. The risk only attaches once the item is in his possession or in transit to him. As with proposals, the insured must offer all information about the change required to the policy as can be considered material.

This includes such changes as:

Change of risk address

Increase or decreases in sums insured

Any additional hazards arising from the change

Amendments to the occupation, in the fullest detail

Change of situation

Change in construction

New banking details

New or amended partnerships, trading names, or company registration details

Declaration adjustment details. As previously stated it is a condition of many policies that the insured declare any details relevant to a deposit-premium policy.

The parties who have the right to receive a policy are indicated with reference to an actual policyWe have seen repeatedly that there are strict regulations in general and particularly within own organisation regulations concerning the verification, confidentiality and accuracy of documentation.

Only parties to a contract or those who have an interest in the insurance transaction may have sight of the information contained in any documentation. In general, insurers issue three copies of policy and endorsement documentation. One copy is for their own records on file, one is for the broker, if any, and the original is for the client or insured.

In other instances, information captured for a policy or endorsement may only be submitted to parties whose assistance or expertise may be required in the underwriting or claims processes, or for noting of interest. No one other than the following may receive information regarding a policy, including a copy of the policy itself:

The client or insured party

The intermediary or broker. These terms include agents or advisors

The issuing insurer

Any co-insurers. The policy is issued by the lead insurer (see above) and it is really only if the wording of the policy is not standard or market agreed that co-insurers might request copies.

Reinsurers. Again, in most instances, the reinsurers agree a wording format with insurers at commencement of the risk. When there is dispute regarding intent or interpretation of the wording reinsurers may request wordings, but in the ordinary sequence of events, they will not be copied wordings or documentation, unless the agreement is for facultative rather than treaty reinsurance support.

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When there is a need for assessors or loss adjusters to assist insurers in settling a claim, they will be offered a copy of the appropriate policy wording to assist them in effectively resolving the claim. At suing time there is no need for them to be in possession of a copy.

In the event of a dispute regarding the extent of cover, or the intent of the insurance cover, legal advice may be required. In this event, attorneys will be afforded a copy of the policy and schedule.

At claims stage, the ombudsman will be in possession of the policy and schedule.

Where any items subject to the insurance cover are financed by a third party institution such as a bank or finance house, or via the dealer or provider, they will ask for a copy of the policy and also for their interests to be noted. This may in respect of housing mortgages, vehicles or office machinery or any other transaction where loans or hire purchase or lease finance is arranged by the insured.

These other parties will be required to receive a copy irrespective of the type of short-term policy in force. The policy may a personal, commercial, corporate or specialist type policy.

Activity

Describe four ways in which policy documentation must be checked, and also describe to whom copies of documentation may be sent.

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Annexure 4 : Specific Outcome 4Demonstrate knowledge and understanding of contracts in short term insurance.

The concept of a contract is explained with reference to contracts used in short term insurance.An insurance contract is concluded when the parties agree to be bound in accordance with certain terms. As with all contracts, insurance contracts consist of an offer and acceptance of that offer.

The insured makes an offer to purchase an insurer's product. The offer is made by proposal or the request for insurance.

This request is for the issue of a policy on its usual or specific terms and conditions, in return for the payment of a premium.

The insurance contract is complete when the insurer accepts the proposal unconditionally, as is required in all contracts. This means that if the insurer offers a quotation subject to certain terms or provisions, it is only when those terms are complied with that the contract is deemed to be in place.

Once a policy is issued, the contract is immediately enforceable at law. Payment of a premium by the insured, either to his broker or agent, is deemed to be a specific performance of the terms of the policy.

Insurance is contract of good faith between the insurer and insured, whereby each party agrees to make available all information necessary to the other that may influence the terms of the contract.

Each insurance contract must have the following in place to be of effect:

There must be an item or property or interest that must give rise to the creation of a legal liability or loss of legal right.

An insurable interest by the insured in the subject matter specified. There must some property, rights or interest or potential liability capable of being insured. Such property, right or interest must be the subject matter of the insurance. The insured must stand in a relationship with this subject matter whereby he benefits from its safety wellbeing or freedom from liability, and would be prejudiced by its damage, or the existence of liability. This interest must exist when the policy is purchase as well as at the time of any loss in short-term insurance.

The nature of the subject matter of insurance is facts, which the insured knows. Insurers generally are not aware of facts unless the insured tells them. While the insured may examine a copy of the policy before accepting the insurer’s terms, the insurer cannot examine all aspects of the insurance offer which may be material to his decision on terms and conditions. The questions set out in a proposal form do not only define the limits of what is material information. The duty of full disclosure of all relevant or material facts rests with both parties.

Facts which are material, and must be disclosed, include:

Those which would indicate that the risk is greater than would be expected from its class

Those which may tend to make the amount of any loss greater than normal

Previous loss and claims history

Penalty terms or restricted cover applied by previous insurers

The fact that the insured had absolved a third party form normal legal liabilities, which would effect subrogation rights

Facts which are not material and do not need to be disclosed include:

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Facts which are known under any law

Facts which reduce the risk or hazard

Facts which are advised but which the insurer does not further investigate

Facts which all insurers should know from his normal business operations

Facts, which a survey would reveal.

Warranties:

Warranties form an integral part of the insurance contract. It is an undertaken that some act shall be undertaken or not.

Example

If the contract includes a warranty that two staff members will accompany all cash transits of money to the bank, then this must be complied with in every instance of cash transits.

Compliance with a warranty is fundamental to the liability of the insurer. The only time when such a warranty is of no effect is where a breach of the warranty was immaterial to a loss or the assessment of a risk.

Warranties are used when:

The insured must comply with some requirement to make the risk more acceptable, such as sweeping waste products daily in a factory, which is subject of a fire policy.

When fixing the rate, and requiring a permanent provision of something that improves the risk or the removal of a hazard that adversely affects the risk.

Indemnity:

Indemnity is also a fundamental principle of the insurance contract. This is the exact compensation payable by the insurer sufficient to place the insured in the same financial position after a loss as he enjoyed immediately before the loss occurred. Indemnity payment requires that the insured demonstrate an insurable interest in the item subject of the loss.

Subrogation:

Subrogation is the right of one person to take the place of another and avail himself of the legal right of the other. In insurance, this means that where insurers have paid the claims of the insured, they are entitled by the condition of subrogation to take over the Insured’s legal rights and seek recovery from any third party of their outlay.

Contribution:

Contribution is the right of the insurers to share the costs of any claims where the insured has entered into a contract with any other insurer. The insurers will pay or contribute to the loss in proportion to the amount insured for and for the number of insures involved.

Proximate cause:

Proximate cause is the active and efficient cause that sets in motion a chain of events, which brings about loss or damage, without the intervention of any force started and working actively from a new and independent source.

Example

If an insured purchases a fire policy with fire, lightning and explosion cover only, and there is an earthquake in the area, which causes the building adjacent to fall onto his building and in the process set his property on fire, he will have no cover, as the proximate cause of the loss was an earthquake. He was not insured for earthquake damage.

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Activity

Describe the activities needed on behalf of each of the parties to an insurance contract.

The difference between insurance contracts and all other contracts is explained with reference to an insurance contract and another contract.Aside from the insurance contract, insurers enter into a number of other contracts with interested parties.

These contracts include:

The agency contract between insurer and broker. The law of agency differs substantially from the insurance contract law, but is not relevant here. Nonetheless a contract on behalf of each party to perform certain functions and tasks within this agreement is enforceable at law.

Obviously, a variety of contracts for consultancy and employment services are also entered into between insurers and other parties, such as assessors, surveyors and staff members.

The importance of accuracy in recording and maintaining record is explained from the point of view of the organisation.Within each organisation it is necessary to maintain records of all transactions generated by the process of data capture.

These records are required for:

Statistical purposes to manage the risk, and to provide a foundation for rating, reinsurance and other activities.

Service provision. Records of numbers of policies, loss histories, policy and sequence numbers, client details, all assist in providing speedy and efficient service for enquires and general day to day account management.

As a process of tracking the history of the policy. Records, in the form of correspondence, policy and amendment copies, and system information allow the organisation and the insured to check this history at any time. Written evidence of changes and requests for cover form the basis of the development of the conditions and agreements under the contract.

Without these numerous records, insurers would be unable to provide an ongoing focus on its core business activities.

The importance of the policyholder retaining evidence of correspondence about a policy is explained with examples of what could happen if a policyholder loses policy documents.

In the same way that an insurer uses correspondence and policy records to ensure that a permanent record of the policy’s history, so must an insured maintain a complete record of all activities and transactions. In many instances this record keeping on behalf of the client is doubled, as the broker will maintain copies of policies, amendments and endorsements and policy records.

While the insured employs the services of brokers to assist him in ensuring correct risk transfer, and insurers to accept that risk, he is in effect the only one who knows precisely what the extent of his risk his.

While the other parties are experts in insurance, he is the acknowledged expert in the risks inherent in his business. For this reason alone, it is imperative that the insured ensures that his records of the insurance cover he has are maintained in correct order and safety.

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With the numbers of providers of the information relating to any risk, it is not too much of a problem for the insured to obtain updated information at any stage, should documents go astray. Unlike life assurance, where no claim can be attended to in the absence of the original policy document, in short term, premium payment on the part of the insured, and the fact that a policy was issued, constitute proof of the existence of the cover.

In the event that the original policy documents are mislaid, the insured can merely request a further signed and dated document from the insurer.

Problems may arise, as a new copy of the document will display the information current at that date.

That is, the history of the changes will not be recorded for amendments done throughout the history of the policy. But there is no effect on the cover granted under any policy if the insured loses his original document. He may ask for replacements or updated versions of the policy at any time.

Activity

Describe the types of records that are maintained by each of the following parties to the insurance contract:

The insured

The insurer

The broker

Banks and Financial Institutions

The process to be followed by a policyholder who wishes to change a policy are explained and an indication is given of the kind of changes that should be made annually.We have already seen the processes that must be followed by the insured to effect amendments to policy cover.

These must be in writing, and they must be advised to insurers as soon as possible after the insured becomes aware of the need for amendments.

In certain classes of policies where declarations must be made, it is not necessary for the insured to advise the insurers of every change that is made.

Example

Motor Fleet policies: The insured need only declare changes to the fleet profile at the end of the policy term, unless any amendments fall outside the scope of cover or terms granted. If a type of vehicle is purchased for which no category exists on the policy, then the insured must advise insurers immediately of this fact.

At each policy year-end the insured must effect changes that will affect the risk throughout the next term. The insured must in fact use the renewal as if it were an entirely new policy, and effect the same activities as at inception.

At each policy renewal, the insured must be sure to:

Reassess the values of all items and property insured.

Provide declarations in respect of all policies requiring declaration adjustment (see above).

Determine alternative methods of risk transfer if practicable – examples would be aggregate excesses or self-funding of certain classes.

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Provide details of any material changes he is aware of at the time of renewal. Of course, this must be done at any time that they occur and not only at renewal.

Make available to insurers an opportunity to re-survey any portion of the risk.

Advise of any new risks that have arisen and for which cover may be required.

Offer details of any acquisitions or mergers that have occurred or are likely to occur in the next twelve months. This is especially important in respect of liability, property, and fidelity covers.

Activity

Describe the process that insurers follow when offering renewal to a client. Discuss the activities undertaken, and what the client’s duties are in the process.

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National Certificate in Insurance Administration · Web viewAdditional Notes/Resources 13 Annexure...

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