2 - Qualifications Flashcards
What is the difference between actual and apparent authority?
Actual authority is what the principal has explicitly stated the agent can do.
Apparent authority is what the agent does outside of the contract in the course of business.
What are the four requirements for agents?
- Be licensed
- Enter into an agency contract
- Practice the highest standards of ethical conduct
- Have E/O insurance
What are the obligations of the agent in the agency relationship?
They must follow professional standards for conduct with principal or principals, colleagues, and clients.
What are the obligations of the principal in the agency relationship?
They must follow all regulatory requirements plus honour commitments to agents and clients.
What are the obligations of the client in the agency relationship?
They must not misrepresent any information to the agent or insurer.
What are the 4 principles of ethical conduct?
- Knowing the client
- Demonstrating fiduciary responsibility
- Respecting privacy and confidentiality
- Following professional standards
What is “due diligence?”
Examining and evaluating the risks of a business transaction. Usually applies to someone with a fiduciary duty.
Define “fiduciary responsibility.”
It is the responsibility of confidentiality and trust for a client. Lawyers, doctors, and bankers have a fiduciary responsibility to their clients.
What are the 5 situations in which it is legally permissible that personal information may be provided to others?
- If the client gives consent
- If disclosure is required by law
- If the information is reasonably required to determine eligibility
- To protect the insurer against fraud or misrepresentation
- If the information is disclosed in the discharge of a public duty
What is “holding out?”
How an insurance agent presents themselves to the public.
Full disclosure (name of insurer, the fact of commission, cancellation/surrendering procedures, and the cost for a policy with CSV)
How does commission work in the insurance industry?
It is a percentage of sales, typically heavily weighted to the early stages of the policy.
What is replacement?
When an insurance policy is replaced by a new one.
What is “surrendering?”
The cancellation of an insurance policy before it’s expiry date. Any CSV is received by the policy owner at that point.
What is “Cash Surrender Value” (CSV)?
It is the amount due to the policy owner upon surrendering the policy, if that policy includes a CSV. Otherwise no amount is due to the policy owner.
What is tied selling?
Tied selling is the requirement of purchasing additional services as a condition of doing business. It is illegal.
Example: an company issues a loan on the condition that an insurance policy is also purchased from the same company.
