caib 1 chapter 7

Question 1

Provide 5 examples of decisions which brokers must frequently make which reflect on their ethical standards

Answer 1

Provide coverage best suited for their clients needs regardless of premium, and not take advantage of clients lack of knowledge

To disclose to the insurer all material facts about a risk even if such info might jeopardize the placement of the risk

To hold clients affairs in strict confidence, unless authorized or required by law to divulge such information

To serve clients in a conscientious, diligent and efficient manner

To abide by the terms of the agency agreement

Question 2

Three characteristics of persons who hold themselves out to be professionals

Answer 2

A commitment to high ethical standards

a high standard of educational preparedness and training, with mandatory continuous education

Public recognition as a profession

Question 3

What is the largest cause of E & O claims

Answer 3

Inadequate coverage

Question 4

Name a number of causes of inadequate coverage

Answer 4

Failure to provide proper coverage, failure to advise clients of policy exclusions, exemptions, and other disadvantageous terms, failure to place coverage, placing coverage too late, not correctly advising as to availability of coverage, mistake in coverage

Question 5

Three most common E&O claims

Answer 5

Inadequate coverage. Misrepresentation and Description Error, Cancellation/Renewal Errors

Question 6

Duty to client

Answer 6

must exercise good faith and reasonable skill, care, diligence in the execution of the type of policies, their different terms, and the coverage available in the area in which his principle seeks to be protected

Question 7

Duty to Insurer

Answer 7

an insurer has a right of action against a broker when it has been required to pay a loss which it did not intend to insure

Question 8

Provide two examples of brokers e&o regarding renewals

Answer 8

Not renewing at all
Not renewing adequate coverage
Not warning of pending expiry

Question 9

Example of policy change errors

Answer 9

Make sure what actually is being requested is being done. With auto policies, there may be numerous additions and deletions, and if care is not taken, the wrong vehicle could be deleted or coverage deleted on wrong vehicle.

Question 10

Example of Processing Delays

Answer 10

Must ensure that the time period in which the broker must place the requested coverages appears to be related to the time in which the broker has previously been able to place similar insurance

Question 11

Example of Agency Agreement violations

Answer 11

Must ensure they are staying within the agency agreement limits of the binding authority

Question 12

Six measures that can be taken to prevent e&o claims

Answer 12

Ensure acting with highest level of competence
Taking all steps necessary to properly determine clients needs
Be advisers, not deciders
Know coverage and insurers
Time required to place coverage
Keep within the bounds of their binding authority

Question 13

Five procedures which can be used to prevent E&O claims arising from claims handling

Answer 13

Report the claim immediately to the insurer
Inform the insured they will be contacted by an adjuster and remind them of the duties imposed by the policy
Do not authorize the insured to proceed with repairs or replacement not make any statement that would commit the insurer to a particular course of action
If certain loss is not covered, inform the insured of this fact
Follow up periodically with the insured to ensure settlement is progressing

Question 14

What is the key source of broker credibility in an E&O claim?

Answer 14

Documentation (conversation/telephone logs, confirming letters)