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Assurance, Insurance and Reinsurance Expertise

by Mr Miles D A Emblin
FBIBA MAE MCIArb MInstPLA
Insurance & Reinsurance Consultant, Accredited Mediator
(More about Mr Emblin)

The principle of insurance is that the premiums of the many go to pay the claims of the few. As a nation, though, we are now more claims conscious. There are more and larger claims being made by the insuring public, with insurance companies perceived as having ‘deep pockets’ and being a soft touch.

Definitions

Assurance: Life assurance – all forms of life cover, critical illness and pensions policies. Life assurance is a contract between the policyholder and the risk carrier that is operative for a specified period of time. The insurance company agrees to pay a sum of money upon the death of the life assured or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay the premium at regular intervals or by lump sums.

As with most insurance policies, life assurance is a contract between the insurer and the policyholder, whereby a benefit is paid to stated beneficiaries in the event of an admitted claim.

The value to the policyholder is not from an actual claim event, but rather from the ‘peace of mind’ and financial security that it provides to others in the event of an unforeseen death or critical illness.

Possible areas of litigation

  • Disputes about what exactly is covered by the serious/critical illness policy
  • Disputes about missed payments
  • Disputes concerning mis-selling of policies

Insurance: policies including property, home buildings or contents, professional, pet, fire and other non-marine classes, marine, motor, aviation, etc. Insurance is a form of risk management used to provide financial protection against the risk of a contingent loss. Insurance is defined as the transfer of the risk from one entity to another, for the payment of a premium. It can be thought of as a small loss payment to prevent a large or devastating loss.

Possible areas of litigation

  • Disputes about what exactly is covered by the policy
  • Disputes about missed payments
  • Disputes concerning the mis-selling of policies
  • Disputes about quantum

Reinsurance
Reinsurance is a means by which an insurance company can protect itself from larger financial insurance losses by buying cover from other insurance companies – rather like a bookmaker hedging some of his bets. Policyholders obtain insurance policies to provide protection for various risks (hurricanes, earthquakes, catastrophe fires and the like). Reinsurance companies, in turn, provide insurance for insurance companies to protect their books of business from catastrophic losses but enabling them to pay their attritional losses

All insurance companies have a responsibility to manage their portfolio of risks. Reinsurance offers them a way of smoothing out and stabilising their business plan exposures.

Possible areas of litigation

  • Disputes about disclosure
  • Disputes about underwriting standards
  • Disputes concerning warranties and conditions
  • Disputes over the interpretations of wordings

When will an Expert be needed?
Along with the burgeoning number of claims will be more disputed claims. For these, the services of an expert may well be required on behalf of an insurer or a solicitor acting for a disgruntled policyholder.

The main types of dispute investigated will include:

  • Failure to disclose material facts – Where the insured has not revealed (whether by accident or design) to the insurer all facts pertinent to the policy
  • Insurance broker negligence – e.g. where the broker has failed to fully inform the insured about the policy details, or the broker has mis-sold a policy
  • Fraudulent claims – e.g. claiming for incidents that never occurred, or the exaggeration of amounts being claimed
  • Arguments over policy scope, wording and interpretation
  • Moral hazards such as criminal record, claims history or integrity issues

Policies can cover anything and everything provided that there is an insurable interest, and may apply to an individual or a business. Cover can be offered for agricultural vehicles, construction sites, fire and special perils, subsidence, goods in transit, pensions, health, pets, business interruption, professional liability, and much more.

Failure to disclose material facts
Most disputes under assurance, insurance and reinsurance contracts (a policy is a contract) arise from alleged fraud, non-disclosure or misrepresentation of material information. All policies are underwritten on the basis of utmost good faith. Thus, generally speaking, the insured is under a duty to disclose to the prudent underwriter any fact material to the underwriter’s consideration of the risk. Every circumstance is material if it would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk.

Negligence of the broker
When an authorised and regulated insurance broker is involved in the arranging or servicing of a policy, allegations of professional negligence may arise. The broker is normally the paid agent of the client. Accordingly, he owes his client a professional duty of skill and care.

Some areas of negligence could be:

  • allegations of a breach of duty
  • failure to use reasonable skill and care
  • improper behaviour
  • failure to maintain adequate client records
  • breaches of FSA principles

In situations such as these, the expert would be asked to comment on what standards would be normally expected within the profession.

Regulation
The authorising body for the insurance profession is the Financial Services Authority (FSA). It regulates the sector based upon 11 specific principles. These include those of Treating Customers Fairly and Insurance Conduct of Business rules which supplement the general duty of skill and care. Furthermore, the FSA has the power to conduct on-the-spot investigations or to move in and close down a business and/or to issue sanctions against individuals.

Qualifications
Some of the main designated qualifications applicable to the insurance professional will have been obtained from:

  • the British Insurance Brokers’ Association, a Fellow being designated FBIBA or an Associate as ABIBA
  • the Chartered Insurance Institute, a Fellow being designated FCII or an Associate as ACII
  • the Chartered Institute Loss Adjusters, a Fellow being designated FCILA or an Associate as ACILA
  • the Institute of Public Loss Assessors, a Fellow being designated FInstPLA or a Member as MInstPLA.
by Mr Miles D A Emblin
FBIBA MAE MCIArb MInstPLA
Insurance & Reinsurance Consultant, Accredited Mediator
(More about Mr Emblin)

 

 
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