Chapter 2 Flashcards
Key Term: An independent business operation given authority by a number of insurance companies to solicit business on behalf of such companies. Responsibilities include recruiting, training, and supervising agents.
Managing General Agent (MGA)
Key Term: Any party, other than the original named insured, identified as an insured in the policy declarations. An additional named insured has more rights under the policy than does an additional insured but also more responsibilities.
Additional Named Insured
Key Term: A fact that would affect a contract of insurance enough to influence and insurers decision regarding whether to accept or reject the risk or the premium to be set. Material facts must be disclosed by the applicant if asked about.
Material Fact
Key Term: Incorrect or missing information about a material fact that is offered or not by an applicant or insured with or without the intent to mislead.
Misrepresentation
Key Term: 1. In Law, a limitation of time within which legal action can be taken by a claimant
2. In insurance, the period of time in which a claim may be brought by the policyholder.
Prescription
Key Term: A civil court proceeding where each party must provide (i) all their knowledge, remembrance, information and belief concerning the matter in question; and (ii) the production of all documents in their possession or power relating to such matter.
Examination for discover
Key Term: A situation in which one party- for example, an employer- is held partly responsible for the unlawful actions of a third party, an employee. Vicarious liability can arise in situations where one party is supposed to be responsible for (and have control over) a third party, and is negligent in carrying out that responsibility and exercising that control
Vicarious Liability
Key Term: A provision in some insurance and reinsurance contracts covering only claims made during the term of the contract
Claims-Made Basis
Key Term: Insurance that does not participate until all other similar insurance on the same subject is exhausted, or until the loss exceeds a previously agreed-upon amount. Where there are two policies on a risk and both contain a provision that they are “excess to all other insurance,” the problem is resolved by the general “guiding principles”. This is usually interpreted so that each insurer contributes pro rata to the loss
Excess Insurance
Key Term: An agreed specified amount that the insured must pay on a claim before the insurance company will cover the rest of the claim. This amount is agreed upon by both the insurer and the insured.
Deductible
List FIVE (5) things that have led to global changes in policy wording exclusions.
Terrorism: The increasing global threat of terrorism (the most notable example in recent years being the September2001, attack in the United States)
Mould: The high incidence of mould claims (mainly in homeowners risks in America)
Ebusiness: The proliferation of ebusiness and its vulnerability to attack
Pollution: The legislated increase in the responsibility of individuals and businesses for pollution liability
Cyber attack: The new and increasing risk of cyber attacks on both commercial and residential risks
Disease: The potentially catastrophic impact of unintentionally insured communicable disease losses
List the FIVE (5) most common causes of liability to insurers.
Failing to revise coverage upon request
Exceeding the limits of contractual authority
Binding undesirable risks
Delaying the forwarding of underwriting information
Failing to act in the best interests of the insurer
What are FIVE (5) exclusions common to both liability and E&O policies?
Loss or damage to property in the care, custody, or control of the insured
Liability for fines or penalties
Punitive or exemplary damages
Liability of others assumed under contracts or agreements
Liability for dishonest, fraudulent, criminal, or malicious acts
Liability for libel, slander, and other intentional torts
Nuclear liability
Application Question
Priyanka has been asked to make a presentation at her brokerage regarding ethics and professionalism. She explains that ethics and professionalism are of paramount importance to the firm, both in terms of doing right, but also for the reputation of the firm. Then she goes into some detail about specifics of how to avoid not only unethical behaviour, but also the appearance of unethical or unprofessional behaviour.
What are factors that can limit a brokerage’s independence and thus must be considered before acting in such a way as to give a perception of unprofessionalism?
Volume commitments
Promotions and contests
Loss of market options
Insurer investments
Commission and payment
Application Question
Priyanka has been asked to make a presentation at her brokerage regarding ethics and professionalism. She explains that ethics and professionalism are of paramount importance to the firm, both in terms of doing right, but also for the reputation of the firm. Then she goes into some detail about specifics of how to avoid not only unethical behaviour, but also the appearance of unethical or unprofessional behaviour.
Under the law of agency, brokers have a duty to provide insurers with all information that is material to the underwriting of the risk. However, what are circumstances under which disclosure may not be necessary?
Already known: The information is known, or may reasonably be presumed to be known, to the insurer
Discoverable: The information can be discovered by the insurer upon inquiry, where the applicant has given sufficient information to fulfill disclosure obligations
Waived information: The information concerns requirements that have been waived by the insurer
Information lowers exposure: The information tends to lessen the risk
Policy conditions: The information does not need to be disclosed by reason of a policy condition
Application Question
Priyanka has been asked to make a presentation at her brokerage regarding ethics and professionalism. She explains that ethics and professionalism are of paramount importance to the firm, both in terms of doing right, but also for the reputation of the firm. Then she goes into some detail about specifics of how to avoid not only unethical behaviour, but also the appearance of unethical or unprofessional behaviour.
What are typical clauses in a code of conduct?
Integrity: Discharging duties to clients, the public, insurers, and peers with honesty, conscientiousness, and diligence
Quality of service: Delivering high-quality service performed in a competent, professional manner compatible with integrity and effectiveness
Clients’ interests: Being honest and candid in advising clients, putting their interests first, uninfluenced by the basis of the broker’s remuneration
Confidentiality: Keeping client information strictly confidential, unless the client authorizes disclosure or the law requires it
Conduct toward others: Being respectful and courteous, and upholding the principle of utmost good faith
Knowledge: Being proficient and competently performing services for clients
