I am writing to compliment my portfolio of evidence for my Insurance Practitioner Apprenticeship; to showcase some more of my knowledge and understanding in relation to the work I carry out and the industry I am part of.
Main Products and Services commonly available in the insurance market
There are many products and services available in the UK market. These can first of all be broken down between Personal and Commercial insurances in the first instance, although there is commonality between the two in broad headings such as motor insurance.
Personal Insurances
Motor Insurance – This insurance is mandatory in the UK for all vehicles that are on public roads. There are four different levels of insurance available:
ROAD TRAFFIC ACT ONLY – This is the minimum level of cover available and provides unlimited cover for 3rd party bodily injury or death but limited cover, £1m, for loss or damage to 3rd party property, legal costs & emergency hospital treatment.
THIRD PARTY ONLY – Similar to the above but with £20m cover for loss or damage to 3rd party property and additional extensions such as driving other vehicles cover for the insured only.
THIRD PARTY FIRE & THEFT – Cover as per Third Party above but also provides cover for the cost of repair or compensation of the insured vehicle in the event of theft, damage by fire, lightning or explosion.
COMPREHENSIVE – This is an ‘all-risks’ policy that covers all of the above including accidental and malicious damage to the insured vehicle. This cover will but subject to certain ‘exclusions’ such as wear & tear, depreciation, loss of use etc.
These polices can often have extensions to cover such as Personal Accident, Legal Assistance, Medical Expenses, Foreign use Cover and Breakdown Cover.
Health Insurance – This is available to assist financially in the event of death, unemployment, accidental injury, sickness or disability. The covers can be broken down as follows:
PERSONAL ACCIDENT – Covers death or loss of limbs, eyesight, speech and hearing.
SICKNESS – Provides benefits if the Insured is unable to perform any part of their normal job.
MEDICAL EXPENSES – Provides cover for the insured who seeks medical treatment outside of the NHS.
Household Insurance – This provides insurance for private houses, the buildings, and their contents. I will cover this in more detail below.
Pet Insurance – This covers the insured against Vet costs for their domestic pets, usually cats and dogs in the event of accidents and some illnesses.
Travel Insurance – Provides cover for personal accident, medical and associated expenses, loss of travel deposits, loss of or damage to baggage, personal effects and money, personal liability, hospital cash benefits, travel interruption and travel delay.
Extended warranties – These are generally taken out by buyers of mechanical and electrical goods and cover the cost of repairs should the item malfunction.
All of the above policies have general cover extensions, limitations and exclusions as evidenced in the below relating to the home insurance products I deal with on a daily basis.
Commercial insurances
Commercial Vehicles – Similar to Personal Motor Vehicles but particular to the following classes of vehicle:
• Goods carrying vehicles
• Vehicles for carriage of passengers for hire and reward (taxis)
• Passenger carrying vehicles such as buses
• Agricultural and forestry vehicles such as tractors
• Vehicles of special construction or special types such as cranes, forklifts & ambulances
Property Insurance – Similar in essence to the household cover available to consumers, this is tailored to covering the assets of a business under ‘fire and special perils’ insurance which cover loss or damage caused by:.
The ‘standard’ fire cover is as follows:
• Fire
• Lightening
• Explosion – restricted to explosion of boilers or gas used for domestic purposes
To this cover may be extended to include ‘special’ perils as follows:
• Explosion – broader definition
• Aircraft
• Riot & Civil commotion
• Malicious damage
• Earthquake
• Subterranean fire
• Storm and flood
• Escape of water
• Impact
• Subsidence, ground heave and landslip
As with other policies there are standard and specific exclusions which again I will evidence below relating to Home Insurance. The above can also be enhanced to provide wider cover by the addition of cover for:
• Theft
• Glass insurance
• Money
Pecuniary Insurance – This provides businesses with cover not for loss or damage to property but for direct financial loss as a consequence of running the business, to include:
BUSINESS INTERRUPTION INSURANCE – This covers any loss of earnings and additional expenses incurred as a result of a material loss covered under the property insurance as above. This can be tailor made to suit the business.
LEGAL EXPENSES INSURANCE – These cover the costs of defending or taking court actions for instances such as:
• Employment disputes
• Criminal prosecution cover, such as for alleged health & safety breach, cost only, no cover for any fines imposed
• Property disputes cover
• Patents, registered designs, copyright and trademarks cover
• Taxation proceedings
Liability Insurance – We all owe a duty in law to each other to ensure that our actions do not injure others or damage their property, i.e. a duty of care. In the event of a breach of this duty, i.e. someone is injured; there may be a liability to pay damages to that person. Liability insurance provides cover for this possibility, examples of which are as follows:
EMPLOYERS LIABILITY INSURANCE – There is a legal requirement for every business to have this to cover any loss incurred by an employee due to the negligence of their employer, such negligence has to be proven for any action to succeed.
PUBLIC LIABILITY INSURANCE – provides indemnity to the insured for legal liability to third parties for damages in respect of bodily injury, death, disease or illness, and for any loss of or damage to property which happens in connection with the business insured under the policy and occurring during the period of insurance. Negligence must again been proven for any action to succeed.
PROFESSIONAL INDEMINITY INSURANCE – This covers professional people’s liability for injury, damage or financial loss to clients or the public as a result of breach of professional duty, or negligent acts, errors and omissions in their professional capacity.
All of the above can be enhanced with additional levels of cover and cover can be limited or excluded due to specific limitations and or exclusions.
Reinsurance – This is available to all Insurers. In accepting a premium for covering a ‘risk’ an insurer exposes them to having to pay out for the total sum insured in the event of a total loss, or unlimited sums in the case of some liability claims. In order to cover their potential losses, they may in turn look to other insurers to cover their losses. This is called Reinsurance and protects insurers in the event of catastrophic events such as major weather events.
Services
To compliment the above there are many other services that are provided to compliment an insurers policy cover. They are value-added services rather than add-ons to policy cover, such as:
HELP LINES – These often operate 24 hours a day providing emergency assistance and expert advice to insurance policyholders, examples of which are:
• Private motor insurance – 24 hour access in the event of breakdown, if cover is available on the policy
• Household Insurance – Emergency services such as plumbers, roofers and glazing services, again if cover available, not necessarily related to a claim under their main insurance policy
• Travel Insurance – For a medical emergency whilst abroad
AUTHORISED REPAIRERS – These are companies that Insurers use as their preferred suppliers and can benefit both insurer and insured. The insurer audits the work carried out by these suppliers so can be confident the service and quality they are offering, and the price they are being charged, is good. They often give these suppliers Delegated Authority to commence repairs/replacement up to a certain amount speeding up the claims process for both parties. For the Insured they have the convenience of being able to use the one supplier, not having to source and submit estimates and the assurance of a guarantee backed by the Insurer.
RISK CONTROL AND ADVICE – This can be made available by the Insurer to advise the insured. They will undertake risk identification, risk analysis and then advise on risk control, which could include physical control measures (requiring approved locks to be fitted) or financial control measures (imposing an excess), all of which is to mitigate the potential risk to the insurer and in turn the insured.
Policy cover and extensions
Since completing my formal Cert CII studies I have now been doing the role of Home Claims Loss Adjuster for 3 months, dealing with larger losses. My correct assessment and interpretation of the level of cover, extensions, limitations and exclusions held by claimants is therefore essential for both our customer, to ensure that we treat them fairly, and for RSA, ensuring that claim costs are managed and leakage (payment over and above policy cover) is minimised.
I deal with consumer household policies. The base level of these provides cover for loss or damage to domestic buildings and contents. I do also deal with bespoke policies for Private Landlords to insure their property whilst the property is let. All of our policies cover new for old but some do have a provision for us to deduct for wear and tear for clothing and linen.
All policies have a basic level of cover which typically includes cover for loss or damage due to the following perils:
• Fire, lightning, explosion
• Storm, flood
• Theft or attempted theft
• Water escaping from washing machines, dishwashers, fixed water or fixed heating systems. Oil escaping from a fixed heating system
• Riot, malicious persons and vandalism
• Subsidence, heave or landslip
• Falling trees, branches, TV and satellite aerials
• Collision involving vehicles, animals or aircraft
Added to this there is generally additional cover provided at no extra cost. Examples of which are as follows:
• Accidental breakage of drains and pipes
• Accidental breakage of glass, ceramic hobs or sanitary ware
• Accidental damage to the locks of, or loss of the keys
• The cost of alternative accommodation for your family if the home is uninhabitable
• Cover when selling the buildings
• Trace and access
• Accidental damage to TV, satellite, video, audio entertainment equipment and computer equipment
• Accidental loss of metered water, liquid petroleum gas or oil
• Freezer food
• Legal liability
• Tenants liability
• Tenants improvements
The above is representative and by no means an exhaustive list of standard covers available/provided on the hundreds of policies we currently underwrite or legacy policies still in force. To the above level of standard cover customers can then add cover to protect themselves for loss or damage by or to, for example:
• Accidental damage to all buildings or contents whilst in the home
• Cover for personal possessions away from the home
• Student Cover whilst away
• Pedal Cycle cover
• Garden cover i.e. for trees and shrubs etc.
• Contents in the garden
• Special events cover – provides additional cover one month before specified events
It is also very common for Home Emergency cover and Legal Expenses cover to be ‘packaged’ with the above at the point of sale but are not dealt with by me in home claims.
Policy Limitations
All of the above detailed cover is limited to defined items as per the policy definitions and restricted to defined sum insured. There will be an overall sum insured under the policy but within the policy schedule and/or policy book there will be specific inner limits of cover for specified ‘events’ and/or items lost. An example of this is that High Risk Items such as jewellery are often given a Single Article Limit and a limit to the total sum insured for these items that will be less that the overall contents sum insured.
An example of limitations to items covered is the following definition of contents from one of our policy books:
‘By contents we mean household goods, high risk items and personal effects which belong to or are the legal responsibility of the insured or of resident domestic employees, including money and credit cards up to £500, clerical business equipment up to £7,500 and lawful visitors’ personal possessions up to £2,500 for each visitor.’
This would then be further defined and clarified by the following that are excluded from the definition of contents for this policy:
• Motor vehicles and children’s motor vehicles whether licensed for road use or not, go-karts, mechanically propelled or assisted vehicles (other than gardening machinery and pedestrian controlled vehicles), caravans, trailers, aircraft, hovercraft, boats or parts or accessories for any of them whether attached or detached, other than removable entertainment equipment whilst removed
• Mechanically propelled or assisted watercraft
• Swimming pool covers
• Pets and livestock
• Securities and documents of any kind
• Landlords’ fixtures and fittings
• Anything used for trade, professional or business purposes except clerical business equipment
Policy Exclusions
The policy covers loss or damage to the items by the perils; as defined and specified in the policy. All policies then have general exclusions that would apply to the whole policy. These exclusions would result in no cover under the policy even if an insured peril had occurred. Examples of general policy exclusions include:
• Radioactive contamination
• War risks – Any loss, damage, liability, cost or expense of any kind caused directly or indirectly by war, invasion or revolution.
• Sonic bangs – Any loss, damage, liability, cost or expense of any kind caused directly or indirectly by pressure waves from aircraft
• Pollution or contamination
• Rot
• Terrorism
• Wear and tear
Finally there may be exclusions that are specific to a peril. A common one that often arises is that under cover for theft; cover is limited to £3,000 for theft of contents from a garage or outbuilding. This exclusion would override any other levels of cover or applicable limits.
Consumers must satisfy themselves that the cover they are purchasing provides adequate protection under the terms and limitations of the policy. In turn I must ensure that cover is only given within the confines of a particular policy as defined by the policy schedule and accompanying policy book. It is the job of a Claims Professional to apply the policy terms as favourably as they can without incurring leakage.
Regulatory bodies relevant to my role
The Insurance Industry saw the introduction of Statutory Regulation in January 2005 under the control of the Financial Services Authority (FSA). The Financial Services and Markets Act 2000 gave the FSA regulatory control over:
• General Insurance Companies
• Intermediaries
• Lloyd’s
This was then superseded by the Financial Services Act 2012. On 1st April 2013 the FSA was disbanded with responsibility for regulation being split between three bodies as follows:
• FINANCIAL POLICY COMMITTEE (FPC) – This is a committee within the Bank of England and is responsible for watching emerging risks to the financial system as a whole and providing strategic direction for the entire regulatory regime.
• PRUDENTIAL REGULATION AUTHORITY (PRA) – Again sits within the Bank of England and is responsible for the stability and resolvability of systemically important financial institutions such as banks, building societies and insurers (such as my employer). It does not seek to prevent all firm failures but seeks to ensure that firms can fail without bringing down the entire financial system.
• FINANCIAL CONDUCT AUTHORITY (FCA) – An independent regulator responsible for conduct of business and market issues for all firms including insurers (such as my employer), and prudential regulation of small firms (e.g. insurance brokerages and financial advisory firms).
The FCA is focused on taking action early before consumer detriment occurs. It uses thematic reviews and market-wide analysis to identify potential problems in areas like financial incentives. The FCA will also review the full product life cycle from design to distribution with the power to ban products where necessary.
It can be seen that as an employee of a major insurer, RSA and in turn I, are directly regulated and controlled by the PRA and the FCA and must therefore act within their guidelines and requirements as discussed in evidence ‘Personal Statement (1)’.
Whilst the PRA is concerned at a high level in ensuring the continued integrity of the financial market as a whole, the FCA is more directly focused on my day to day activities. Notably by virtue of their three operational objectives:
• CONSUMER PROTECTION – Securing an appropriate degree of protection for consumers
• INTEGRITY – Protecting and enhancing the integrity of the UK financial system
• COMPETITION – Promoting effective competition in the interests of consumers in the market for regulated financial services and services provided by a recognised investment exchange
The powers of the FCA are many but include product intervention and governance, dealing with super-complaints submitted by consumer groups and competition powers to promote effective competition in the interests of consumers. A fundamental requirement of any firm under the control of the FCA is to ensure that they are ‘Treating Customers Fairly’ TCF), which is at the heart of what I do as a claims professional.
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