6 - Insurance Intermediation Flashcards
‘Insurance intermediation’ is the formal term for what?
Broking
What issue arises when a broker acts as an agent for two different principles on the same risk?
Conflict of interest
What are the three ways an agency agreement can be created?
Agreement
Ratification
Necessity
What is agency by agreement?
Agreement is agreed expressly, idealy in writing
What is agency by ratification?
Where behaviour is accepted after the fact and the principal is prepared to stand by their agent.
What is agency by necessity?
Usually in an emergency situation where someone has to make a decision
what can a principle do if they find out their agent has acted outside their authority?
Ratify their actions and choose whether to make a damages claim, or refuse to ratify and expose the agent to third party claims.
what can constitute a breach of an agent’s duty of care?
- Not placing with suitable insurers
- Not having suitable terms
- Not understanding client’s needs
- Not explaining terms properly
What is the role of a producing broker?
A broker who has contact with the client and produces work on their behalf, eg. renewal info.
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?
Single tied agent
Why are brokers in the London Market ‘independent’ intermediaries?
Not tied to any one insurer, so can give unbiased view and advise clients impartially.
Which intermediary introduces business to London market and requires Lloyd’s approval, but is not a cover holder?
Open Market Correspondant
How does a broker finalise a placement?
The broker uploads MRC and any other requirements to PPL, where it is signed by underwriters and closed once all have signed.
why is it important for a broker to consider market security?
To avoid a professional negligence claim from the client if the insurer cannot pay.
What is the name given to written lines which are adjusted down to 100% on a slip?
Signed Lines
What documents are submitted to Xchanging during placement?
Market Reform Contract - MRC
London Premium Advice Notice - LPAN
How are changes to the risk expressed once a MRC is uploaded to PPL/ signed?
Endorsements.
Who are ‘experts’ in the claims process?
Loss adjusters
Surveyors
Who instructs the experts when a claim is made?
Insurer instructs the experts to carry out an investigation, but this is made usually through the broker
Why is it beneficial for a broker to be a part of instructing the expert without having agency?
Their findings are sent to both insured and insurer, so insurer has no need to deal with insured.
What is arguably the most important role of a broker in the claims process?
negotiating setllements
What happens when a broker is granted ‘risk transfer’ in a TOBA?
The broker can hold premium funds, and therefore requires trust in them from the insurer.
Under what section of a TOBA is the brokerage/commision set out?
Remuneration
What type of remuneration is charged to the insured?
Flat fee
How is a flat fee determined?
Either stated outright before work starts, or its calculation determined and agreed
What is the net premium?
Amount received by insurer
What is the gross premium?
Amount paid by insured (net premium+brokerage)
What is the term, and usual value, for when a broker gets paid during the claims process?
Collecting comission - usually 1%
What is the term, and usual value, for when a broker gets paid during the claims process?
Collecting commission - usually 1% of total claim
What directive was brought in by the EU to ease cross-border entry to EU markets, but also introduced stricter professional requirements?
Insurance Distribution Directive
The Insurance Distribution Directive was adopted by UK law through what?
Specific Legislation
What has the UK leaving the EU meant for insurers and intermediaries?
Many have opened EU domiciled entities to serve in the EU
Within the FCA handbook, what does a CASS dictate?
Client Assets rues - the broker is responsible for providing adequate protection to client assets
Where MUST client money be held by a broker?
Separate from the broking firm’s own money
How does a non-statutory account differ from a statutory one?
Brokers can pay premiums/claims from a non-statutory account, before they’ve received the money from the insured/insurer
Under FCA’s CASS rules, how quickly should client money be paid?
one business day after receipt by the broker
What was the Data Protection Act introduced to include?
- Data Processing
- Regulation and Enforcement
Who does GDPR apply to?
Controllers and processors of data in the UK and EU
What form should GDPR conscent take?
Must be some form of positive opt-in, unambiguous and separate from other T&Cs
Under GDPR, what is the name for the act of asking if a company stores your personal data?
Subject Access Request (SAR)
How long do companies have to respond to a SAR?
One-month, in some circumstances three months
With which parties might a broker have a TOBA?
Clients
Insurers
Placing Brokers
