INSURANCE LAW
1
,Contents
Classes of insurance........................................................................................................................................................5
How does insurance work?..........................................................................................................................................5
Premium...................................................................................................................................................................... 5
Insurance and assurance.............................................................................................................................................5
Businesses and insurance............................................................................................................................................6
Five elements of insurance..........................................................................................................................................6
Core principles of insurance........................................................................................................................................6
Types of insurance.......................................................................................................................................................7
Historical development................................................................................................................................................7
Types of insurer...........................................................................................................................................................8
Uk insurance market overview..................................................................................................................................10
INTERMEDIATRIES – BROKERS AND AGENTS.............................................................................................................10
Classes of insurance...................................................................................................................................................11
Common clauses.......................................................................................................................................................16
Heads of terms..........................................................................................................................................................17
formation of the policy..................................................................................................................................................18
Insurers business is divided into two parts................................................................................................................18
Job roles.................................................................................................................................................................... 18
Issuing the policy.......................................................................................................................................................19
The insurance industry..............................................................................................................................................20
The distinction between reinsurance and top-up cover............................................................................................20
Profit.......................................................................................................................................................................... 20
Basic principles of insurance......................................................................................................................................21
What is a contract of insurance?...............................................................................................................................21
INSURABLE INTEREST.............................................................................................................................................21
Warranties.............................................................................................................................................................22
Conditions precedent............................................................................................................................................24
Innominate terms..................................................................................................................................................24
Third party rights.......................................................................................................................................................25
Regulation of insurance in the uk..............................................................................................................................25
The claim....................................................................................................................................................................... 26
aspects of an insurance solicitor’s role......................................................................................................................26
Conduct & Client care................................................................................................................................................27
Progress of the claim from first instructions to settlement.......................................................................................27
2
, Understanding the claim from the insurers point of view.........................................................................................28
claims handling..........................................................................................................................................................28
Overriding principles of panel acting for an insurer...................................................................................................28
Subrogation...............................................................................................................................................................29
How to draft a first letter of acknowledgement instructions to an insurer client......................................................30
Letter example.......................................................................................................................................................32
Draft schedule of action.............................................................................................................................................33
coverage........................................................................................................................................................................ 34
Investigating the claim...............................................................................................................................................34
Solicitor’s role in handling a claim.............................................................................................................................35
Advising on cover (in practice)...................................................................................................................................36
Utmost good faith (duty)...........................................................................................................................................37
How to draft a research note.....................................................................................................................................43
Reserving and mediation...............................................................................................................................................44
Why reserves?...........................................................................................................................................................44
How to calculate a reserve........................................................................................................................................47
NEGOTIATING settlementments................................................................................................................................49
Subrogation and part 20 claims.....................................................................................................................................51
Overview of a claim...................................................................................................................................................51
Subrogation...............................................................................................................................................................51
Morris v Ford Motor Co. [1973].................................................................................................................................54
Part 20 claims............................................................................................................................................................55
How to draft a claim form for a part 20.....................................................................................................................56
.................................................................................................................................................................................. 57
Costs.......................................................................................................................................................................... 58
Reporting................................................................................................................................................................... 58
Group/Market report................................................................................................................................................59
Claims bordereaux.....................................................................................................................................................60
Settlement strategy...................................................................................................................................................61
Reinsurance: Policies and the Law.................................................................................................................................62
Managing risk............................................................................................................................................................62
How reinsurance works.............................................................................................................................................63
Different forms of reinsurance...................................................................................................................................64
PROPORTIONATE REINSURANCE............................................................................................................................64
The reinsurance market.............................................................................................................................................66
Basic principles of reinsurance law............................................................................................................................66
3
, “Follow the settlements” & “Claims co-operation”...................................................................................................67
Follow the..............................................................................................................................................................67
settlements............................................................................................................................................................67
clauses................................................................................................................................................................... 67
Claims.................................................................................................................................................................... 67
co-operation..........................................................................................................................................................67
clauses................................................................................................................................................................... 67
Impact on claims handling.........................................................................................................................................69
The Lloyds market.........................................................................................................................................................70
The key players at Lloyds...........................................................................................................................................71
The subscription market............................................................................................................................................72
The role of lead underwriter.....................................................................................................................................74
4
, CLASSES OF INSURANCE
Common exam question on this workshop - MCQ type question or explain how it is calculated (don’t have to do the actual
calculation): Reserving: how much is the claim worth? (Includes potential PI, solicitors fees etc)
HOW DOES INSURANCE WORK?
1) Insured pays a sum of money (premium) to another party the insurer in return the insurer bears the risk (possibility of loss
or damage arising from a particular event happening)
E.g. Car head lights being smashed this is the damaged, then the damage was caused by another car which is the event.
2) Insured makes a claim to the insurer who then pays out a sum of money to cover the cost of repairs. This sum maybe limited
to a certain amount or it may be unlimited
3) The insurer will keep the premium, even if the event insured doesn’t happen at all
4) All the premiums will be put in a “pot” and any claim paid out of it
5) The insurer will hope and expect that the total premiums and any money made in investing them will exceed the total
amount of claims and the expenses of administrating the business thus leaving them with a profit
PREMIUM
Is paid to the insurer for three purposes:
1. To pay claims
2. To cover own business costs
3. To invest in order to make a greater profit
INSURANCE AND ASSURANCE
The difference between the two is that a general insurance policy may never be claimed against whereas an assurance
policy will have to pay out eventually
ISSUE GENERAL INSURANCE LIFE ASSURANCE
Purpose of car insurance to is to cover the cost Purpose of life insurance: is to pay money to your
of repairing the car if damaged in an accident and relatives or creditors if something happens to you
PURPOSE may also be to pay for damages to other persons (will definitely happen)
car and to pay for hospital bills of the other party
if they are injured (might happen)
Contracts usually made for one year Contracts cover a much longer period
TIME PERIOD Because circumstances change and would be Purpose to payout in the event of the assureds
difficult to assess a risk over a longer period death which is hopefully unlikely to happen in
the year after the policy was taken out
Premium varies on renewal Premium usually set at the beginning of the
The risk and premium will need to be contract
PREMIUM assessed on a regular basis Because the life policy is set to last over a
number of years
Size of the claim on the policy depends on loss Size of claim determined at the beginning
arising Loss is set like a guaranteed return on an
SIZE OF CLAIM Indemnity policies that means they cover the investment
policy holder for a particular identifiable loss
Risk exists at same level throughout contract Risk of claim increases throughout contract
RISK Risk remains the same Death gets closer
Payment arises only if insured risk occurs Payment may be taken early if policy bought out by
the holder.
PAYMENT It has a ‘surrender value’ for which they can be
bought out by the policy holder and the investment
made on the policy collected
AMOUNT OF More than one claim can arise Payment of a claim completes the contract
5
1
,Contents
Classes of insurance........................................................................................................................................................5
How does insurance work?..........................................................................................................................................5
Premium...................................................................................................................................................................... 5
Insurance and assurance.............................................................................................................................................5
Businesses and insurance............................................................................................................................................6
Five elements of insurance..........................................................................................................................................6
Core principles of insurance........................................................................................................................................6
Types of insurance.......................................................................................................................................................7
Historical development................................................................................................................................................7
Types of insurer...........................................................................................................................................................8
Uk insurance market overview..................................................................................................................................10
INTERMEDIATRIES – BROKERS AND AGENTS.............................................................................................................10
Classes of insurance...................................................................................................................................................11
Common clauses.......................................................................................................................................................16
Heads of terms..........................................................................................................................................................17
formation of the policy..................................................................................................................................................18
Insurers business is divided into two parts................................................................................................................18
Job roles.................................................................................................................................................................... 18
Issuing the policy.......................................................................................................................................................19
The insurance industry..............................................................................................................................................20
The distinction between reinsurance and top-up cover............................................................................................20
Profit.......................................................................................................................................................................... 20
Basic principles of insurance......................................................................................................................................21
What is a contract of insurance?...............................................................................................................................21
INSURABLE INTEREST.............................................................................................................................................21
Warranties.............................................................................................................................................................22
Conditions precedent............................................................................................................................................24
Innominate terms..................................................................................................................................................24
Third party rights.......................................................................................................................................................25
Regulation of insurance in the uk..............................................................................................................................25
The claim....................................................................................................................................................................... 26
aspects of an insurance solicitor’s role......................................................................................................................26
Conduct & Client care................................................................................................................................................27
Progress of the claim from first instructions to settlement.......................................................................................27
2
, Understanding the claim from the insurers point of view.........................................................................................28
claims handling..........................................................................................................................................................28
Overriding principles of panel acting for an insurer...................................................................................................28
Subrogation...............................................................................................................................................................29
How to draft a first letter of acknowledgement instructions to an insurer client......................................................30
Letter example.......................................................................................................................................................32
Draft schedule of action.............................................................................................................................................33
coverage........................................................................................................................................................................ 34
Investigating the claim...............................................................................................................................................34
Solicitor’s role in handling a claim.............................................................................................................................35
Advising on cover (in practice)...................................................................................................................................36
Utmost good faith (duty)...........................................................................................................................................37
How to draft a research note.....................................................................................................................................43
Reserving and mediation...............................................................................................................................................44
Why reserves?...........................................................................................................................................................44
How to calculate a reserve........................................................................................................................................47
NEGOTIATING settlementments................................................................................................................................49
Subrogation and part 20 claims.....................................................................................................................................51
Overview of a claim...................................................................................................................................................51
Subrogation...............................................................................................................................................................51
Morris v Ford Motor Co. [1973].................................................................................................................................54
Part 20 claims............................................................................................................................................................55
How to draft a claim form for a part 20.....................................................................................................................56
.................................................................................................................................................................................. 57
Costs.......................................................................................................................................................................... 58
Reporting................................................................................................................................................................... 58
Group/Market report................................................................................................................................................59
Claims bordereaux.....................................................................................................................................................60
Settlement strategy...................................................................................................................................................61
Reinsurance: Policies and the Law.................................................................................................................................62
Managing risk............................................................................................................................................................62
How reinsurance works.............................................................................................................................................63
Different forms of reinsurance...................................................................................................................................64
PROPORTIONATE REINSURANCE............................................................................................................................64
The reinsurance market.............................................................................................................................................66
Basic principles of reinsurance law............................................................................................................................66
3
, “Follow the settlements” & “Claims co-operation”...................................................................................................67
Follow the..............................................................................................................................................................67
settlements............................................................................................................................................................67
clauses................................................................................................................................................................... 67
Claims.................................................................................................................................................................... 67
co-operation..........................................................................................................................................................67
clauses................................................................................................................................................................... 67
Impact on claims handling.........................................................................................................................................69
The Lloyds market.........................................................................................................................................................70
The key players at Lloyds...........................................................................................................................................71
The subscription market............................................................................................................................................72
The role of lead underwriter.....................................................................................................................................74
4
, CLASSES OF INSURANCE
Common exam question on this workshop - MCQ type question or explain how it is calculated (don’t have to do the actual
calculation): Reserving: how much is the claim worth? (Includes potential PI, solicitors fees etc)
HOW DOES INSURANCE WORK?
1) Insured pays a sum of money (premium) to another party the insurer in return the insurer bears the risk (possibility of loss
or damage arising from a particular event happening)
E.g. Car head lights being smashed this is the damaged, then the damage was caused by another car which is the event.
2) Insured makes a claim to the insurer who then pays out a sum of money to cover the cost of repairs. This sum maybe limited
to a certain amount or it may be unlimited
3) The insurer will keep the premium, even if the event insured doesn’t happen at all
4) All the premiums will be put in a “pot” and any claim paid out of it
5) The insurer will hope and expect that the total premiums and any money made in investing them will exceed the total
amount of claims and the expenses of administrating the business thus leaving them with a profit
PREMIUM
Is paid to the insurer for three purposes:
1. To pay claims
2. To cover own business costs
3. To invest in order to make a greater profit
INSURANCE AND ASSURANCE
The difference between the two is that a general insurance policy may never be claimed against whereas an assurance
policy will have to pay out eventually
ISSUE GENERAL INSURANCE LIFE ASSURANCE
Purpose of car insurance to is to cover the cost Purpose of life insurance: is to pay money to your
of repairing the car if damaged in an accident and relatives or creditors if something happens to you
PURPOSE may also be to pay for damages to other persons (will definitely happen)
car and to pay for hospital bills of the other party
if they are injured (might happen)
Contracts usually made for one year Contracts cover a much longer period
TIME PERIOD Because circumstances change and would be Purpose to payout in the event of the assureds
difficult to assess a risk over a longer period death which is hopefully unlikely to happen in
the year after the policy was taken out
Premium varies on renewal Premium usually set at the beginning of the
The risk and premium will need to be contract
PREMIUM assessed on a regular basis Because the life policy is set to last over a
number of years
Size of the claim on the policy depends on loss Size of claim determined at the beginning
arising Loss is set like a guaranteed return on an
SIZE OF CLAIM Indemnity policies that means they cover the investment
policy holder for a particular identifiable loss
Risk exists at same level throughout contract Risk of claim increases throughout contract
RISK Risk remains the same Death gets closer
Payment arises only if insured risk occurs Payment may be taken early if policy bought out by
the holder.
PAYMENT It has a ‘surrender value’ for which they can be
bought out by the policy holder and the investment
made on the policy collected
AMOUNT OF More than one claim can arise Payment of a claim completes the contract
5
