Evaluating risk

Work in small groups. Read the following document which describes the main criteria that are used by UK insurers to define a standard driver who would pay the normal rate for motor insurance cover.

Any exceptions would probably result in the driver paying a higher premium. Would you qualify for the normal rate? If not, how many conditions would you fail on?

The Driver

The person seeking insurance must:

■ be the main user of the car.

■ be between the ages of 25 and 74.

■ have been resident in the UK for at least 3 years.

■ have had a full UK driving licence for the past 12 months.

■ have had no motoring convictions during the past 3 years.

■ have had no suspension of licence during the past 5 years.

■ have had no motor insurance containing special terms or increased
premiums.

■ not have a physical defect, infirmity or suffer from a heart condition or
diabetes.

■ not be engaged in the following businesses or occupations:

Casino, Night Club, Disc Jockey, Musician, Professional sport, Entertainment, Show Business, Student.

Another factor used in determining the premium that will be charged for motor insurance is what is called the 'group rating'. Under this system each model of car is included in one of twenty groups depending on a variety of factors such as:

■ Cost of spare parts

■ Repair times

■ Price of the car

■ Performance

■ Car security and anti-theft features

The classification of a particular model will therefore indicate the risks that the insurer is exposed to. In the UK, for example, a Mini would be included in the lowest group and a Ferrari in the highest.

2 On the opposite page you will find three forms which have been completed by three people who wish to insure their cars. Read these forms carefully and then, using the information you have just studied, discuss what you think are the characteristics of each of these risks, putting yourselves in the position of an underwriter.

WRITING

Write a short report explaining how you evaluated each of the application forms, and stating which of them you would be prepared to accept as an insurance risk and under what conditions.

INSURANCE ■

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