Motor Insurance

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• The total marks available are 200. You need to obtain 120 marks to pass this assignment.
• Your answer must be submitted on the correct answer template in Arial font, size 11.
• Answers to a coursework assignment should be a maximum of 10,000 words. The word count does not include diagrams however, it does include text contained within any tables you choose to use. The word count does not include referencing or supplementary material in appendices. Please be aware that at the point an assignment exceeds the word count by more than 10% the examiner will stop marking.
Top tips for answering coursework assignments
• Read the Specimen coursework assignment and answer for this unit, available on RevisionMate.
• Read the Learning Outcome(s) and related study text chapter for each question before answering it.
• Ensure your answer reflects the context of the question. Your answer must be based on the figures and/or information used in the question.
• Ensure you answer all questions.
• Address all the issues raised in each question.
• Do not group question parts together in your answer. If there are parts (a) and (b), answer them separately.
• Where a question requires you to address several items, the marks available for each item are equally weighted. For example, if 4 items are required and the question is worth 12 marks, each item is worth 3 marks.
• Ensure that the length and breadth of each answer matches the maximum marks available. For example, a 30-mark question requires more breadth than a 10 or 20-mark question.

Question 1 – Learning Outcome 1 (10 marks)
You are an insurance broker for NX plc. A long-standing client of NX plc, Mrs Shipton, insures her private car through NX plc on a third party, fire and theft basis.
Mrs Shipton informs you of the following:
• Two days ago, she was sitting in her parked car on a public road.
• Her parked car was struck by a third party vehicle.
• Her vehicle was damaged and she suffered personal injury.
• The third party vehicle continued along the road and crashed into a wall.
• The two occupants of the third party vehicle ran away from the scene.
• The police attended the scene of the accident.
Mrs Shipton seeks your advice.
Discuss the potential options for Mrs Shipton to obtain compensation for her personal injury and the
damage to her car. (10)
Question 2 – Learning Outcome 2 (10 marks)
You are a claims handler for ULQ plc, a motor insurer. A policyholder of ULQ plc, Mr Lucas, has a comprehensive motor insurance policy for his private car.
Mr Lucas telephones you to report a claim. The circumstances are as follows:
• Prior to leaving on an overnight business trip, Mr Lucas parked and locked his car on his private driveway, leaving the car keys inside his house.
• When he returned to his house, following his business trip, he discovered the car was missing.
• He telephoned the police who advised him that his car had been found abandoned. The car had been badly damaged.
• The police were unable to detect any sign of forcible entry to the car.
• His son, Matthew, had been at the house while Mr Lucas was away.
• Matthew displayed signs of physical injuries, but denied any involvement in the damage to his father’s car.
You are to assess the extent of ULQ plc’s liability under Mr Lucas’ motor insurance policy.
Identify, with justification, five insurance policy considerations that may be relevant to Mr Lucas’ claim
for the damage caused to his car. (10)

Question 3 – Learning Outcome 2 (20 marks)
You are a claims handler for QR plc, a motor insurer. A policyholder of QR plc, Ms Rafiq, insures her car on a comprehensive private car insurance policy.
You received notification of a claim from Ms Rafiq following a recent accident.
One evening when she was driving her car, when a third party car collided with the rear of her car at a junction.
The emergency services attended the scene of the accident. Ms Rafiq was taken to hospital for medical treatment. Her car was transported to a motor repairer, who subsequently declared it beyond economic repair.
Upon investigation, it is discovered that Ms Rafiq’s car’s MOT certificate was not valid at the time of the accident and the car’s side lights did not work.
Ms Rafiq has claimed for the following six items:
• The total loss of her car.
• Personal injuries, for which she received private physiotherapy treatment for a period of four weeks.
• Loss of two weeks’ salary, while she recuperated from her injuries.
• Damage to her watch, which had to be repaired.
• Costs for the transportation of her car from the scene of the accident to the motor repairer.
• A laptop that was in her car before the accident, but which is now missing.
(a) Explain, with justification, two policy considerations that are relevant to this claim. (8)
(b) Explain briefly, the extent of cover that may be provided under Ms Rafiq’s private car insurance
policy for each of the six items listed above. (12)
Question 4 – Learning Outcome 3 (20 marks)
You are an insurance broker. Last week you sold a comprehensive private car insurance policy to a new client, Mr Vardy. You placed this insurance with AKX Ltd, a motor insurer.
Mr Vardy advises you that AKX Ltd has queried the risk information provided when he purchased this private car insurance policy.
Mr Vardy seeks your advice about the following issues:
• AKX Ltd has asked him to explain why a motoring conviction was not disclosed in the risk information.
• This motoring conviction had resulted in an endorsement of three penalty points being added to his driving licence.
• He believes that this endorsement had expired.
You are to provide advice to Mr Vardy.
(a) Explain, with justification, two appropriate obligations that Mr Vardy should have met at the time of
the proposal for insurance to AKX Ltd. (8)
(b) Identify, with justification, three possible actions AKX Ltd may take in response to the issues Mr
Vardy raised. (6)
(c) Outline one option for Mr Vardy for each of the possible actions you have identified in (b) above. (6)

Question 5 – Learning Outcome 4 (10 marks)
You are a senior underwriter for DBY Ltd, an insurer of UK-based motor risks.
DBY Ltd’s pricing for risks based in rural areas is not competitive. Therefore, DBY Ltd does not underwrite many risks in rural areas.
It has been established by the UK Government that road traffic accidents in rural areas comprise approximately one third of all road traffic accidents. However, rural accidents result in nearly two thirds of all UK fatalities.
The Board of DBY Ltd wants the pricing for risks based in rural areas to become more competitive.
You are to consider the competitive underwriting acceptance criteria for risks based in rural areas, whilst minimising the exposure to fatalities.
Identify, with justification, five appropriate underwriting acceptance criteria you would suggest for DBY
Ltd’s for risks based in rural areas. (10)
Question 6 – Learning Outcome 4 (30 marks)
You are the Motor Underwriting Manager for PXQ Ltd, an insurer. PXQ Ltd has a motor fleet insurance portfolio and a self-drive hire portfolio.
PXQ Ltd’s Board has expressed an intention to expand either the motor fleet portfolio or the self-drive hire portfolio. The Board has asked you to prepare a report, which will help inform its decision.
You obtain the following information to assist you in this task:

Features of the portfolios
Motor fleet Self-drive hire
Gross written premium per annum £85 million £120 million
Number of insured vehicles 190,000 160,000
Driving restrictions by age No drivers under 21 No drivers under 25
Retention level Any claim up to £1 million Any claim up to £1 million
Type of vehicles Any excluding passenger-carrying commercial vehicles Vans and private cars
Risk management Delivered by PXQ Ltd’s internal risk management function Delivered by external risk management consultants
Loss ratio 62% 68%
Expense ratio 30% 35%
Gross claims cost £58 million £119 million
Net claims cost £51 million £101 million

(a) Identify, with justification, two potential reasons for expanding the motor fleet portfolio. (6)
(b) Identify, with justification, two potential reasons for expanding the self-drive hire portfolio. (6)
(c) Identify, with justification, two underwriting actions you would take to improve underwriting
profitability if PXQ Ltd was to expand the motor fleet portfolio. (6)
(d) Identify, with justification, two underwriting actions you would take to improve underwriting
profitability if PXQ Ltd was to expand the self-drive hire portfolio. (6)
(e) Recommend, with reasons, based on what you have identified in (a) to (d) above, which one of the portfolios should be expanded by PXQ Ltd. (6)

Question 7 – Learning Outcome 5 (20 marks)
You are a senior claims handler for NDX Ltd, a motor insurer.
A policyholder of NDX Ltd is Hodgson Tools. Hodgson Tools has a comprehensive motor fleet insurance policy.
Mrs Hodgson, a director of Hodgson Tools, is a named driver on this motor fleet policy. Mrs Hodgson has notified you of the following incident:
• She was due to make a delivery of tools, in one of the company fleet vehicles, to a customer of Hodgson Tools.
• However, a car had been parked across the exit of the car park. Mrs Hodgson could not exit the car park in the company vehicle.
• The parked car, which is owned by a fellow employee, was unattended and unlocked.
• Mrs Hodgson got into the car and released the handbrake, while a few employees of Hodgson Tools pushed the car clear of the exit.
• One of the employees, while pushing the car, tripped and suffered a minor injury to their leg.
• The steering wheel on the car locked, causing it to hit another vehicle on the public road.
• Both the car and the other vehicle sustained damage.
Mrs Hodgson asks whether the motor fleet policy will cover the personal injury to the employee, together with the damage caused to the employee’s car and the other vehicle.
(a) Identify, with justification, four appropriate claims handling actions you will take to investigate the circumstances of this incident. (8)
(b) Explain, with justification, the extent of indemnity under the motor fleet policy for the personal
injury to the employee. (6)
(c) Explain, with justification, the extent of indemnity under the motor fleet policy for both the damage
to the employee’s car and the damage to the vehicle. (6)

Question 8 – Across more than one Learning Outcome (30 marks)
You are a senior claims handler for SWO plc, a motor insurer. One of SWO plc’s longstanding policyholders is RO Farms Ltd, who is based in the UK. RO Farms Ltd has a comprehensively insured motor fleet policy.
Mr Russell is the principal director of RO Farms Ltd. He telephones you to report a recent claim with the following circumstances:
• A tractor, belonging to RO Farms Ltd, was being used to transport agricultural chemicals to a field owned by RO Farms Ltd.
• The tractor, towing a trailer, was travelling along a farm track when it skidded on soft ground and went into a neighbour’s field. It collided with one of the neighbour’s tractors, damaging both vehicles.
• This collision caused the RO Farms Ltd tractor and trailer to overturn, spilling the chemicals into a river.
• Mr Russell immediately notified the Environment Agency, who appointed specialist contractors to clean up the river.
• After six hours of extensive clean up work, the Environment Agency advised that the river was clean.
• Subsequently, it was found that the spillage of the chemicals into the river killed a large number of fish.
• The river is fished by the members of an angling club.
Mr Russell subsequently submitted the following six items of claim:
• Damage to RO Farms Ltd’s tractor.
• Damage to RO Farms Ltd’s trailer.
• Damage to the neighbour’s tractor.
• Loss of RO Farms Ltd’s chemicals.
• An amount of £25,000 from the Environment Agency, representing the work undertaken by its contractors and the Environment Agency’s own costs.
• An amount of £15,000 from the angling club for replacement of fish in the river, which included £2,000 for loss of angling club membership fees for the forthcoming year.
(a) Identify, with justification, one claims handling action for each of the six items of claim required to investigate liability for the accident. (12)
(b) Discuss the likely extent of cover under the motor fleet policy for each of the six items of claim. (18)
Question 9 – Across more than one Learning Outcome (30 marks)
You are a senior underwriter for OEL plc, a motor insurer. OEL plc has a portfolio of motor business across all types of risks for consumers and commercial customers.
An audit has been completed on underwriting and claims practices within OEL plc. The audit has established that some of its practices may be adversely affecting OEL plc’s competitiveness.
The audit findings are:
• Vehicles no longer owned by policyholders are still shown as insured on OEL plc’s database.
• Risk information has not been correctly recorded at inception or renewal.
• Delays in processing both additional premium charges and refunds of premium.
• Over reserving for all types of third party claims.
• Inadequate claims recovery processes.
You have been asked by the Underwriting Manager to advise how competitiveness could be improved.
(a) Explain, with justification, how OEL plc’s competitiveness may be adversely affected by each of
the five audit findings. (15)
(b) Discuss one operational change, for each of the five audit findings, which OEL plc should make to improve its competitiveness. (15)

Question 10 – Across more than one Learning Outcome (20 marks)
You are the Underwriting Manager for SFU plc, a motor insurer.
SFU plc’s motor insurance portfolio includes a worldwide scheme for specialist motor traders. These motor traders hire out prestige and specialist vehicles to clients in the film and television industry, in addition to repairing and servicing these vehicles. The prestige vehicles are used for the transportation of high profile actors and the specialist vehicles are used in the making of films and television programmes.
Over the last ten years, this scheme has had a good claims history. However, you are aware that there is now an increase in frequency and severity of accidents involving both prestigious and specialist vehicles. These accidents have included injuries to high profile actors.
The scheme’s profitability has recently reduced due to these accidents. You are to address the declining profitability.
Explain, with justification, five significant underwriting actions that could be taken to improve the
profitability of this scheme.

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