6 - Insurance Intermediation

Question 1

‘Insurance intermediation’ is the formal term for what?

Answer 1

Broking

Question 2

What issue arises when a broker acts as an agent for two different principles on the same risk?

Answer 2

Conflict of interest

Question 3

What are the three ways an agency agreement can be created?

Answer 3

Agreement
Ratification
Necessity

Question 4

What is agency by agreement?

Answer 4

Agreement is agreed expressly, idealy in writing

Question 5

What is agency by ratification?

Answer 5

Where behaviour is accepted after the fact and the principal is prepared to stand by their agent.

Question 6

What is agency by necessity?

Answer 6

Usually in an emergency situation where someone has to make a decision

Question 7

what can a principle do if they find out their agent has acted outside their authority?

Answer 7

Ratify their actions and choose whether to make a damages claim, or refuse to ratify and expose the agent to third party claims.

Question 8

what can constitute a breach of an agent’s duty of care?

Answer 8

1. Not placing with suitable insurers
2. Not having suitable terms
3. Not understanding client’s needs
4. Not explaining terms properly

Question 9

What is the role of a producing broker?

Answer 9

A broker who has contact with the client and produces work on their behalf, eg. renewal info.

Question 10

Which agent works on behalf on insurers selling a range of packages, usually on a highstreet level, and are unable to advise clients on rival insurers policies?

Answer 10

Single tied agent

Question 11

Why are brokers in the London Market ‘independent’ intermediaries?

Answer 11

Not tied to any one insurer, so can give unbiased view and advise clients impartially.

Question 12

Which intermediary introduces business to London market and requires Lloyd’s approval, but is not a cover holder?

Answer 12

Open Market Correspondant

Question 13

How does a broker finalise a placement?

Answer 13

The broker uploads MRC and any other requirements to PPL, where it is signed by underwriters and closed once all have signed.

Question 14

why is it important for a broker to consider market security?

Answer 14

To avoid a professional negligence claim from the client if the insurer cannot pay.

Question 15

What is the name given to written lines which are adjusted down to 100% on a slip?

Answer 15

Signed Lines

Question 16

What documents are submitted to Xchanging during placement?

Answer 16

Market Reform Contract - MRC
London Premium Advice Notice - LPAN

Question 17

How are changes to the risk expressed once a MRC is uploaded to PPL/ signed?

Answer 17

Endorsements.

Question 18

Who are ‘experts’ in the claims process?

Answer 18

Loss adjusters
Surveyors

Question 19

Who instructs the experts when a claim is made?

Answer 19

Insurer instructs the experts to carry out an investigation, but this is made usually through the broker

Question 20

Why is it beneficial for a broker to be a part of instructing the expert without having agency?

Answer 20

Their findings are sent to both insured and insurer, so insurer has no need to deal with insured.

Question 21

What is arguably the most important role of a broker in the claims process?

Answer 21

negotiating setllements

Question 22

What happens when a broker is granted ‘risk transfer’ in a TOBA?

Answer 22

The broker can hold premium funds, and therefore requires trust in them from the insurer.

Question 23

Under what section of a TOBA is the brokerage/commision set out?

Answer 23

Remuneration

Question 24

What type of remuneration is charged to the insured?

Answer 24

Flat fee

Question 25

How is a flat fee determined?

Answer 25

Either stated outright before work starts, or its calculation determined and agreed

Question 26

What is the net premium?

Answer 26

Amount received by insurer

Question 27

What is the gross premium?

Answer 27

Amount paid by insured (net premium+brokerage)

Question 28

What is the term, and usual value, for when a broker gets paid during the claims process?

Answer 28

Collecting comission - usually 1%

Question 29

What is the term, and usual value, for when a broker gets paid during the claims process?

Answer 29

Collecting commission - usually 1% of total claim

Question 30

What directive was brought in by the EU to ease cross-border entry to EU markets, but also introduced stricter professional requirements?

Answer 30

Insurance Distribution Directive

Question 31

The Insurance Distribution Directive was adopted by UK law through what?

Answer 31

Specific Legislation

Question 32

What has the UK leaving the EU meant for insurers and intermediaries?

Answer 32

Many have opened EU domiciled entities to serve in the EU

Question 33

Within the FCA handbook, what does a CASS dictate?

Answer 33

Client Assets rues - the broker is responsible for providing adequate protection to client assets

Question 34

Where MUST client money be held by a broker?

Answer 34

Separate from the broking firm’s own money

Question 35

How does a non-statutory account differ from a statutory one?

Answer 35

Brokers can pay premiums/claims from a non-statutory account, before they’ve received the money from the insured/insurer

Question 36

Under FCA’s CASS rules, how quickly should client money be paid?

Answer 36

one business day after receipt by the broker

Question 37

What was the Data Protection Act introduced to include?

Answer 37

1. Data Processing
2. Regulation and Enforcement

Question 38

Who does GDPR apply to?

Answer 38

Controllers and processors of data in the UK and EU

Question 39

What form should GDPR conscent take?

Answer 39

Must be some form of positive opt-in, unambiguous and separate from other T&Cs

Question 40

Under GDPR, what is the name for the act of asking if a company stores your personal data?

Answer 40

Subject Access Request (SAR)

Question 41

How long do companies have to respond to a SAR?

Answer 41

One-month, in some circumstances three months

Question 42

With which parties might a broker have a TOBA?

Answer 42

Clients
Insurers
Placing Brokers