Chapter 2- Role of Broker (keywords) Flashcards
Law Of Agency
Brokers have a legal duty to act in the best interests of their clients. The FCA requires the broker to treat their customers fairly.
Core Broking Functions
Traditional Broking Services:
- The provision of products & services
- Negotiation and placement
- Selection of insurers
- Claims, negotiation, collection and payment
- the design and operation of insurance programmes
Demands and Needs
Identifying and clarifying a clients requirements
Proposal Form
Establishing a clients demands and needs is usually done through a set of questions, this is done through the proposal form. Most brokers follow an established format with different questionnaires for different insurance types
Suitability Statement
Recommending the product to the client ensuring that they have all the information about the product and include a statement of how that product meets the clients needs
Warranties
Once a suitability statement is mead then the broker must as a minimum explain any warranties that apply and explain the repercussions for non-compliance
Material Facts
Brokers needs to collect relevant risk data including material facts, so they can be presented to a suitable insurer - every circumstance is material which would influence the judgement of a insurer in fixing the premium or determining whether he will take the risk
Loss Experience
This a key material fact it SHOULD be disclosed to the underwriters, this data needs to be captured as well as claims made and any uninsured losses that have occurred on a previous policy
Duty Of Disclosure
Within capturing data brokers must provide an ideal opportunity for client to disclose anything that would constitutes a material fact. Clients have a duty of disclosure and brokers will remind clients what the consequences of non disclosure are
Remuneration
This is payment or compensation received for services or employment. This includes the base salary and any bonuses or other economic benefits that an employee or executive receives during employment.
Contract Certainty
All the terms and conditions of the insurance policy have all been agreed before any insured or insurer commits to the contract
Insurance: Conduct of Business Sourcebook (ICOBS)
The FCA provides a specific guidance on how brokers should select insurers and give advice through the ICOBS. When quotations are made the broker is required to tell the client the basis in which they have carried out the broking on each risk
Fair Analysis
A broker is able to make recommendation based on a fair analysis, for this to take place the broker must:
- Consider a fair amount of insurers
- To evidence the analysis by adhering to and documenting a set process
Fraud
The broker has responsibilities regarding fraud. A broker who peruses a claim on their clients behalf when they know it is fraudulent is commuting an offence.
Soft Markets
The higher frequency of claims and the higher claim costs, coupled with lower premiums drives capital out of the market
