Unit 35 Insurance Principles and Policies Assessment Brief 2026 | BTEC

Unit 35 Insurance Principles and Policies Assessment Brief

Unit in Brief

Learners will develop their understanding of the main principles of insurance and the organisations that make up the industry to identify suitable insurance policies for given situations.

Unit Introduction

Insurance is an essential part of the UK economy. Insurance protects our assets, such as cars, houses and businesses. The UK insurance industry employs over 300,000 people and gives those who want to progress in the industry a clear, professional career pathway.

In this unit, you will learn about risk and its management through the use of insurance. You will also learn about some of the basic legal principles that underpin insurance. You will investigate the different types of organisations that make up the insurance industry, the job roles within them, and the various insurance policies that companies provide. This will enable you to identify the correct insurance policies needed for given customer situations.

This unit will give you a good foundation if you want to progress to further study in higher education in business with financial studies or to industry-recognised professional qualifications. Completing this unit will give you the knowledge and skills you need to support your progression to an apprenticeship in financial services and to employment with either an insurance company or an insurance broker.

Learning aims

In this unit, you will:

A. Explore the main principles relating to insurance contracts

B. Investigate different insurance providers and job roles within the insurance industry

C. Review insurance policies to meet ‘customers’ needs.

Summary of unit

Content

Learning aim A: Explore the main principles relating to insurance contracts

A1 Principles of risk management and risk measurement
Learners will gain an understanding of risk and how risk can be measured and managed by making physical changes or by taking out insurance to financially control risk.

• Choices made depending on whether individuals are risk seeking or risk averse.
• Risk management steps:
  o identification
  o analysis
  o control.
• Risk measurement:
  o high-frequency, low-severity risks, e.g. low-impact motor collisions
  o low-frequency, high-severity risks, e.g. aircraft crashes.
• The definition in insurance terms of peril and hazard:
  o peril – an event that gives rise to a claim
  o hazard – anything that has an effect on that peril.
• The difference between physical and moral hazard:
  o physical hazard – one that is concrete in the environment
  o a moral hazard – results from the attitude and behaviour of individuals.

A2 Principles of contract law
Learners will understand that an insurance policy is a contract and must therefore meet with all requirements of contract law for it to be valid, and that an agent can bring parties together into a contract.

• Definition of a contract:
  o a legal and binding agreement between two or more parties.
• The legal requirements for all contracts:
  o the intention of all parties to create a legal agreement
  o offer and acceptance
  o consideration – which, for insurance policies, is the premium paid.
• The role of an agent:
  o acting on behalf of a principal – their client
  o insurance brokers.
• Creating an agency relationship by:
  o agreement – the most usual way to create the relationship
  o necessity – an agent acting on behalf of a client to mitigate loss
  o ratification – an agent acting without consent and this being later ratified (agreed to) by the client.

A3 The main principles underpinning all insurance contracts
Learners will understand the basic common law principles applicable to all insurance policies and will be able to explain them using relevant examples.

• The pooling of risk:
  o everyone with the same type of risk paying into a common pool.
• Equitable premiums:
  o everyone paying a fair premium for the level of risk they bring to the common pool.
• Underinsurance and averaging calculations:
  o underinsurance will result in full claims not being paid
  o an individual who does not contribute equitably to the pool should not be able to fully benefit in the event of a claim
  o averaging principle formula: sum insured × loss = claim
  value of goods at risk
• Indemnity:
  o the principle of putting someone back into the financial position they were in before the loss
  o benefit policies, e.g. critical illness, are not policies of indemnity.
• Subrogation:
  o applies to policies of indemnity and not benefit policies
  o in paying out a claim to a policyholder, the insurer then assumes their right of recourse against a third party.

Learning aim B: Investigate different insurance providers and job roles within the insurance industry

B1 Insurance providers
Learners will understand the different types of providers that operate in the insurance sector of the financial services industry, how they are structured and owned, and the types of insurance product they offer.

• Composite and specialist insurers:
  o large, composite insurers that offer a range of general and life insurance products, e.g. large insurers that offer many different types of policy, including motor insurance, household insurance, employer liability, commercial property, life and critical illness cover
  o specialist insurers who offer only a very limited range of insurance products, e.g. a small insurer such as Petplan®, which offers insurance only for veterinary cover for pets and horses.
• Classification of insurance companies by ownership:
  o proprietary companies owned by shareholders
  o mutual companies owned by policyholders.
• Lloyd’s of London:
  o provider of specialist insurance in the market place
  o investment by names who form syndicates
  o reinsurance
  o syndicates appoint managing agents
  o managing agents appoint underwriters.
• Insurance intermediaries and brokers:
  o independent insurance brokers who offer the products of many insurers
  o appointed representatives who offer the products of one or a limited number of insurers.
• Different insurance products:
  o motor
  o personal
  o commercial.

B2 Job roles within the insurance industry
Learners will understand the wide range of job roles available with insurance companies and intermediaries, and the skills and responsibilities appropriate to these job roles.

• Policy sales and servicing:
  o working in a call-centre environment
  o client-facing roles working for high-street intermediaries
  o back-office functions processing applications and other documentation
  o skills in communicating with members of the public and colleagues, being personable and good team players.
• Underwriting:
  o reviewing applications and what risks an insurer can accept up to set authorisation levels
  o deciding any relevant terms and conditions that should be attached to a policy
  o skills in making decisions under pressure, analytical skills and good attention to detail.
• Claims handling:
  o dealing with first notification of loss
  o gathering information and investigating claims
  o settling claims up to set authorisation levels
  o investigating potentially fraudulent claims
  o must be skilled in communicating with members of the public who may be upset either with their situation or the claims decision
  o able to work as part of a team.
• Actuarial − actuaries and actuarial assistants:
  o dealing with statistics and predictions
  o technical pricing of insurance products
  o calculating reserves
  o calculating solvency capital requirements
  o must have strong mathematical, analytical and IT skills and the ability to produce reports that can be understood by others in the company.
• Insurance brokers:
  o specialist in insurance and risk management
  o key role to negotiate for client with the insurance company for the best deal.
• Loss adjusters:
  o appointed by insurers to carry out independent investigation of claims
  o often work on their own outside of the office
  o must be self-reliant and confident to deal with potentially difficult policyholders, must be able to produce timely and accurate reports for their clients.

Learning aim C: Review insurance policies to meet customers’ needs

Learners will consider insurance customer needs and insurance policies available to allow customers to make informed choices about their policies.
C1 Motor insurance policies
Learners will understand the legal requirement for motor insurance, the different levels of cover available and the special insurance requirements for a range of commercial vehicles.

• Road Traffic Act 1988:
  o scope of the act and requirement for all motorized vehicles on public road to be insured.
• Levels of insurance cover available for personal vehicles:
  o third party only insurance
  o third party fire and theft insurance
  o comprehensive insurance.
• Insurance for commercial vehicles and the specific insurance requirements according to function of vehicle:
  o passenger-carrying vehicles
  o load-carrying vehicles
  o agricultural vehicles
  o specialist commercial vehicles.
• Motor Insurers’ Bureau:
  o uninsured drivers’ agreement
  o untraced drivers’ agreement.

C2 Personal insurance policies
Learners will understand the range of personal insurance policies available to individuals that can be used to protect their assets in the event of damage to property, illness or death.

• Household cover:
  o buildings, including risk of fire, flood, subsidence, malicious damage and other risks
  o contents insurance, including risk of fire, theft, flood, accidental damage and other risks.
• Travel insurance cover:
  o medical expenses cover
  o cancellation and delay cover
  o theft and loss of property.
• Life insurance cover:
  o level term insurance for family protection
  o decreasing term insurance for mortgage protection
  o whole of life assurance for family and inheritance tax protection
  o funeral expenses insurance.
• Critical illness insurance cover:
  o percentage of income payed on illness, incapacity or inability to work
  o payment made on diagnosis of specified critical illness.

C3 Commercial insurance policies
Learners will understand the range of commercial insurance policies available to companies and other organisations that can be used to protect their assets in the event of damage to property or third-party liability.

• Property insurance:
  o business/commercial assets, e.g. equipment
  o buildings cover to protect against fire, flood, theft, malicious damage and other risks
  o rating by insurer will depend on use of property and its construction
  o theft defined for commercial properties as forceful or violent entry or exit
  o product liability.
• Employee liability insurance:
  o compulsory by law for all employers
  o includes all employees, contractors, voluntary workers
  o cover provided for accident, injury, illness, death resulting from work activities, e.g. key person insurance.
• Public liability insurance:
  o not compulsory by law; few exceptions, e.g. nuclear installations
  o includes all members of the public the policyholder comes into contact with
  o cover provided for accident, injury, illness, death and damage to property resulting from negligence by the policyholder.
• Professional indemnity insurance:
  o compulsory for some professionals, e.g. solicitors and insurance brokers
  o taken out by professionals who advise or treat others and then act on this advice, including doctors, dentists, solicitors, accountants
  o claims made when customer/patients suffer loss as a result of negligence on the part of the professional who advised or treated them.

C4 The needs of customers and the insurance policies to meet these needs
Learners will understand the varying insurance needs of motor, personal and commercial customers.

• Personal and motor insurance needs:
  o budget available, debts and personal income
  o no claims history and protection
  o legal requirements for coverage
  o dependants
  o legal support
  o level of cover:
  – period of cover
  – period of payment
  o upfront or spread costs
  o benefits or contributions from employer
  o life stage, health and medical history.
• Commercial insurance in terms of priority of need depending on type of business, available budget and legal requirements:
  o insurance that is compulsory by law, e.g. motor insurance, employer liability cover and professional indemnity for some occupations
  o property insurance, and cover for any machinery, stock and other equipment necessary for the business
  o business interruption cover for expenses such as staff wages, rent, council tax and similar incurred during a period when the business is unable to operate
  o key person life cover to ensure that a business can continue in the event of the death of a key owner/employee.

Assessment Criteria

Essential information for assignments

The recommended structure of assessment is shown in the unit summary along with suitable forms of evidence. Section 6 gives information on setting assignments and there is further information on our website.

There is a maximum number of three summative assignments for this unit. The relationship of the learning aims and criteria is:

Learning aim: A (A.P1, A.P2, A.M1, A.D1)

Learning aim: B (B.P3, B.P4, B.M2, B.M3, B.D2)

Learning aim: C (C.P5, C.P6, C.M4, C.D3)

Further information for teachers and assessors

Resource requirements

For this unit, learners must have access to information on a range of insurance companies and insurance brokers, including Lloyd’s of London. Learners can access this information by contacting organisations directly or via their websites.

Essential information for assessment decisions

Learning aim A

For distinction standard, learners will be able to show a clear understanding of risk, how risk is assessed and how it can be managed, using a range of physical and financial controls. Learners will be able to apply these principles to a selected context. They will consider the context in detail, identifying a number of potential risks and discussing management opportunities for each risk. Learners will show detailed knowledge and understanding of contract law as it applies to insurance contracts. They will be able to discuss the ways in which an agency agreement can be formed in a given insurance context.

Learners will show good knowledge and understanding of the principles that underpin all insurance contracts. They will be able to explain how risk is pooled and how an equitable premium is calculated, and they will be able to discuss factors that may result in a policyholder not being fully indemnified. They will understand the extent to which an insurer can recover its losses in a given insurance context.

Learners will show breadth and depth in their understanding. They will use appropriate terminology consistently and accurately throughout.

For merit standard, learners will be able to show a clear understanding of risk, how risk is assessed and how it can be managed using physical and financial controls. Learners will be able to link these principles to a selected context. They will consider the context, identifying a number of potential risks to possible management opportunities.

Learners will show a clear understanding of contract law as it applies to insurance contracts and will be able to outline the ways in which an agency agreement can be formed in a given insurance context.

Learners will show a clear understanding of most of the principles that underpin all insurance contracts. They will be able to explain in simple terms how risk is pooled and how an equitable premium is calculated, they will be able to discuss some of the factors that may result in a policyholder not being fully indemnified. They will also have some understanding of the extent to which an insurer can recover its losses in a given insurance context.

Learners will show a clear understanding of the key factors of insurance risk, contract law and principles. Some aspects of their knowledge, however, may be inaccurate. Learners will show some breadth and depth in their understanding. They will use appropriate terminology accurately.

For pass standard, learners will be able to show some understanding of risk, how risk is assessed and how it can be managed using physical and financial controls. Learners will be able to make limited links between these principles and a selected context.

Learners will show understanding of contract law as it applies to insurance contracts and will be able to explain, with limited scope, the purpose of an agency agreement in a given insurance context.

Learners will show some understanding of most of the principles that underpin all insurance contracts and will be able to make relevant references to the pooling of risk, equitable premiums and policyholders being indemnified. They will also show some understanding as to when an insurer can recover its losses in a given insurance context.

Learners will show a limited understanding of the key factors of insurance risk, contract law and principles. They will use basic terminology with some accuracy.

Learning aim B

For distinction standard, learners will consider detailed aspects of the job responsibilities and the skills required to implement the role. They will look at these aspects on balance with the insurance provider and will form considered opinions based on relevant information about the relevance, significance and overall contribution the job roles to the insurance provider.

For merit standard, learners will identify the main factors relating to the purpose, ownership and products of two different insurance providers. Learners will show some depth of knowledge through selection and isolation of important distinguishing characteristics of the insurance providers. They will use this information to make a broad comparison of the similarities and differences of the products and the purposes these serve.

Learners will select two different common insurance provider job roles. They will define the most significant similarities and differences between the roles, the purpose the roles serve and how they contribute to the purpose of the company.

For pass standard, learners will give clear details of the purpose, ownership and products offered by two contrasting insurance providers. Learners will show some comprehension of the purpose of the insurance provider in terms of its objectives and suitability. They will outline the form of ownership of the insurance provider and give broad details covering the range of products offered, with some insight as to who the products are aimed at and the suitability of purpose.

Learners will summarise the main insurance provider job roles with a brief description of the skills and responsibilities relating to each one. They will use industry terminology for insurance types, activities, skills and practice to illustrate their points.

Learning aim C

For distinction standard, learners will give reasons and evidence to support their view and prove that the selection of insurance policies is right and reasonable, and meets the needs of a particular customer, based on the information provided by that customer. They will justify why a particular policy is more beneficial than another and how it fits in with the customer’s requirements and budget. Learners will use appropriate terminology consistently and accurately throughout.

For merit standard, learners will compare motor insurance policies for a particular customer need, personal insurance policies for a particular customer need and commercial insurance policies for a particular customer need. In their comparison, learners will identify the main factors relating to different insurance policies. Learners will explain the similarities, differences, advantages and disadvantages. They will consider customer priorities and balance their budget with the policies on offer. Learners will use appropriate terminology accurately.

For pass standard, learners will indicate the main protection needs of customers for motor, personal and commercial insurances by recognising customer priorities and determining the features of the policies. They will give a clear, objective account, in their own words, of the relevant features of, and information about, the terms for motor, personal and commercial insurance. Learners will use basic terminology with some accuracy.

Links to other units

This unit links to:

• Unit 3: Personal and Business Finance
• Unit 25: Aspects of Civil Liability Affecting Business
• Unit 30: Legal Principles and Professional Ethics in Financial Services.

Employer involvement

This unit would benefit from employer involvement in the form of:

• work experience within insurance companies or insurance brokers
• meeting with employees of insurers or insurance brokers to gain knowledge about the company, its products and employment opportunities.

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