O-LevelCommerceInsurance7100/22 · Oct/Nov 2021 · Q413 Marks

An online insurance company accepts payment for premiums by direct debit and debit card.

(a)(i)Explain what is meant by direct debit.[2]
(a)(ii)State one reason why insurance companies accept debit card payments for premiums.[1]
(b)Explain, using examples, two reasons why people of the same age may be quoted different premiums for life cover by the same insurance company.[4]
(c)Assess the benefits and drawbacks of buying insurance from an online insurance company. Give reasons for your answer.[6]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2021). The mark or mark type is shown in brackets.

[2] Instruction to a bank (1) to authorise/allow creditor to take money from their account (1) payment is collected by insurance company/creditor (1) on irregular/regular amounts (1) on irregular/regular intervals/dates (1)
[1] Payment is guaranteed/secure
Immediate/instant payment/faster/direct payment / no credit
No bad debts
Aids/quick cash flow
Reduces cash handling
Reduces paperwork
[4] Any 2 reasons and explanation of each to a maximum of 4 marks
Health (1) may already have a serious illness (1) higher premiums for serious illnesses (1)
Family medical history (1) may be predisposed to more ailments (1) higher premiums for those with a family history of illness (1)
Smoker (1) has higher health risk (1) higher premiums for smokers (1)
Gender (1) females usually have higher life expectancy (1) lower premiums for females (1)
Occupation (1) might be a / stuntman/miner (1) higher premiums for dangerous jobs (1)
Lifestyle (1) e.g. like climbing mountains/racing cars (1) higher premiums for high-risk activities (1)
Location/environment (1) areas have different mortality rates (1) areas with higher mortality rates, higher premiums (1)
Past claims made / accident records (1) more claims, higher premiums (1) younger drivers have more car accidents (1) higher premiums for younger drivers (1)
[6] Up to 2 marks for describing insurance/online insurance company
Up to a further 2 marks for analysing whether buying insurance online should (or not) used
Up to a final 2 marks for evaluating whether buying insurance from an online insurance company should be used
An online insurance company sells insurance policies via the internet.
Benefits: Online is convenient as you do not have to spend hours on the telephone
No pressure to buy a particular policy as you do not meet a salesperson face-to-face
Only have to fill out one form, one time and get several quotes
Easy to compare insurance quotes - some websites provide this service
Online companies may be able to offer better rates as they are able to take advantage of savings in labour/marketing costs
Drawbacks: The personal touch is lost and it may be difficult to obtain information/advice on queries that arise
May be difficult to make a claim
The website advert may give very little information about the insurance offered and what cover is included
May be hidden charges which increase the cost
Might result in fraud with money lost if company is not reputable / have fake website
Evaluation: Buying insurance online is a fast and probably cheaper option but it is not for everyone. Some people are not computer literate or do not want to spend time completing online forms. They would prefer to phone up an insurance company to speak to a human being to receive personalised advice in answer to specific questions.