6 - Key Financial Issues Facing Insurance Brokers Flashcards
What is meant by ‘client assets’?
When insurance brokers hold money on their clients behalf.
What sets out the FCA’s rules for client assets?
Client Assets Sourcebook (CASS).
Emphasises adequate protection of client money.
How often must earned broker commission be removed from the account?
At least every 25 business days.
When would a ‘return premium’ be paid by the insurer to the client?
If the client makes a change to their policy during the term of their contract, which results in a reduction of their risk.
What is a change to a policy during its term known as?
A mid-term adjustment.
What is NOT considered as a client asset?
An insurance premium.
How must a broker hold client assets?
Brokers must segregate their firms funds from client money.
I.e. Client asserts must be held in a separate account.
How must a broker hold an insurers funds?
Insurers funds must be held in a peerage account to the brokers own money.
What is the difference between a ‘risk transfer TOBA’ & ‘non-risk transfer TOBA’?
Risk transfer TOBA = Allows the broker to hold funds on the insurers behalf.
Non-risk transfer TOBA = Does NOT allow the broker to hold funds on the insurers behalf.
In terms of commission disclosure, what does the Insurance Distribution Directive (IDD) require brokers to do?
Pre-contractual disclosure of the nature of the brokers remuneration.
Now, what ways do most brokers achieve growth?
Through new business and retaining existing clients.
What does ‘Churn’ mean?
When an insured moves their business to different brokers to get a better deal each year.
What does ‘Sticky’ mean?
Refers to the classes of business that tend to stay with the same broker each year.
What does a brokers ‘renewal retention figure’ refer to? And what does it indicate?
The % of clients the broker retains at renewal each year.
Indicates how satisfied clients are with the service provided as well as the quality & price of the products.
Client retention of greater than 95% is a common goal for insurance brokers.
What does ‘training & competence’ contribute directly and then indirectly to?
Training & competence contributes directly to the provision of quality service and, therefore, better retention of clients.
