Chapter 4

Question 1

Outline the process for selecting an insurer and coverage appropriate for the client

Answer 1

For an agent who has only one market, the selection of insurer is obvious - either the client is acceptable to the insurer and the business can be written, or the client is not acceptable and the agent must advise the client that coverage cannot be provided. Be able to suggest alternative intermediaries that the applicant can approach

For agents and brokers with multiple markets, selection of an insurer requires more consideration. They need to check the insurers underwriting guidelines, analyze and compare each insurers products, and select an appropriate policy or wordings based on the analysis of the client’s needs. If the agent or broker cannot place the clients insurance with any of his or her markets, or through a subbroker relationship with a wholesaler broker, he or she must advise the client of this and suggest that the client contact other intermediaries. Only if the agent or broker is certain that the coverage cannot be purchased can he or she tell the client that there is no coverage available.

Question 2

Define binding authority

Answer 2

The capacity to confirm to people who have submitted insurance applications that they have insurance coverage. It gives agents or brokers the power to make decisions that enter insurers into contracts of insurance

Question 3

Define binder

Answer 3

A written or oral agreement given by an insurer to insure a risk, pending the issuance of a formal policy. A binder is deemed to be the policy and must be cancelled in the same manner.

Question 4

Explain the importance of brokers and agents staying within the terms of their binding authority

Answer 4

The binding authority granted by each of the agencies or brokerages markets May differ since the contract terms negotiated with each insurer are unique. And intermediate should never assume that he or she has binding authority in the absence of firm confirmation. If there’s any doubt whatsoever, the best it’s best to assume that there is no authority.

When presented with the risk that exceeds their binding authority, agents and brokers must always provide full details of the risk under consideration and requests the underwriter’s decision. The client must be advised clearly that coverage depends on the insurer confirmation and this should be reinstated in writing at once.

Question 5

List five dire consequences of misunderstandings or eronomous binding can have

Answer 5

1. The agency or brokerage could be held liable for any loss the insured suffers from the date the intermediary allegedly bound the risk until the insurer confirms it will write the business
2. If the insurer agrees to write only a portion of the risk, the intermediary could be held responsible for any uninsured portion of losses because the risk is uninsured, the intimidatory must approach other insurers to take a share of the risk.
3. If the insurer decides that the rest does not meet its underwriting guidelines and declines it, the risk is uninsured and the intermediary could be held responsible for any losses. The intermediary must approach other insurers to write the risk.
4. The insurer could reconsider the agency or brokerages binding authority. It could withdraw or revoke it from the individual who accepted the risk or from the entire agency or brokerage.
5. The agents here brokerage may lose the client due to dissatisfaction with the service

Question 6

Define cover note

Answer 6

A document with insurance, or the insurance protection provided

Question 7

Describe the information required on a typical binder

Answer 7

The following to which the binder is subject includes several items:

1. The name of the insured
2. The mailing address of the insured
3. Any loss pays or mortgages and their mailing addresses
4. The time and date that coverage takes effect
5. The time and date that coverage expires
6. Location and type of risk that is being insured
7. Exact coverage details, including the limits of the insurance and specific form numbers identifying the policy coverage forms, and any riders or endorsements amending these policy forms

Question 8

Who issues a cover note and who issues a binder?

Answer 8

1. A cover note, which is issued by the intermediary

2. A binder, which is issued by the insurer

Question 9

Define statutory conditions

Answer 9

Special prescribed in standardized conditions that the provincial and territorial Insurance acts required to be included in insurance policies

Question 10

Define general conditions

Answer 10

Conditions of a contract that set the minimum performance requirements for the contractor. These conditions also include the rights and responsibilities of the parties involved

Question 11

What are the most common reasons that policy documents can be delayed?

Answer 11

1. The underwriter may want to more fully investigate the risk to determine the correct rating.
2. The insurer is waiting for more information from the insured such as appraisals or supplementary questionnaires. Since the risk may not be as completely insured as the client wants, the intermediate where it will advise him or her what is needed to expand the coverage when it is needed, and the consequences of not supplying it or providing it too slowly
3. The insurer is behind in processing the documents

Question 12

List parts of a policy

Answer 12

1. Declarations
2. Insuring agreements
3. Deductibles
4. Conditions
5. Warranties
6. Signature clause

Question 13

Define declarations and include what is on a declarations page

Answer 13

The declarations, also known as the coverage summary, are usually on a separate page and may take a form prescribed by legislation, such as that use an automobile insurance. Declaration include the following

1. The names of the insured and the insurer - it is important to State correctly the legal name and address of the insured, a policy is a personal contract and cannot be transferred to another without the consent of the insure or accept and special cases
2. The effect of expiry dates and policy term. Generally a policy is for one year, it can, however, be written for other terms agreed to by the parties involved, particularly when used in commercial insurance or by non-standard markets
3. Names and addresses of any lost payees and mortgage
4. The total premium and rate
5. The amounts insured
6. The deductibles applicable to each coverage

Question 14

Define insuring agreements and what the agreements can be detailed and include?

Answer 14

Ensuring agreements explains what is covered and for how much period the agreements can be quite detailed and include the following

1. The subject matter of insurance - description of the property covered
2. The coverage applicable
3. The term of the policy
4. The perils against. When red and conjunction with the exclusion, this describes the coverage that is provided, the exclusions, and the circumstances under which the insured will receive payment of the proceeds for claims.

Question 15

Define deductible

Answer 15

And 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. And insurds obligation to pay a deductible is not based on whether the insured is at fault

Question 16

Define warranty

Answer 16

Statement or stipulation are promise and an insurance contract, the breach of which may nullify a contract

Question 17

Define subscription policy

Answer 17

A single policy covering a risk that is defined among the number of insurers, the policy is issued by the lead company and signed by all participating companies

Question 18

Define signature clause

Answer 18

This clause is found immediately following the ensuring agreements or the conditions. A policy is signed either underhand or under seal, but the former method is more general. There is for practical purposes no difference between the two methods. The policy is signed by the insurers only, the insured signature is not required. The wording of the clause generally reads in witness where of the ABC Insurance company has caused this policy to be signed by:

Question 19

Define contra preferendum

Answer 19

Illegal term that provides that any ambiguity in a contract must be interpreted against the person who drew the contract because that person had the opportunity to make it more clear

Question 20

Automobile insurance policy wordings

Answer 20

Automobile policy wordings are subject to a standard form governed by each provinces and territories regulations or the legislation sets out general standards to which all contracts must conform. Policies are subject to statutory conditions and common law provinces and territories, and to general conditions in quebec. These conditions deal with such matters as changes in risk, prohibited use of the vehicle, obligations after a loss, and policy cancellation, among others. The policy is the same for each insured in the jurisdiction. Wordings May differ between jurisdictions, but within each they are identical and are non-negotiable

Question 21

Property insurance policy wordings

Answer 21

Property insurance policy wordings differ from insurer to insure. However, these wordings must be consistent with the general rule set up by the legislation. Provincial and territorial statutes State the minimum coverage that fire policies must include - The perils of fire, lightning, and limited explosion - but do not specify the exact wording of policies. A fire policy may contain whatever additional perils the insurer wishes.

Question 22

Liability and crime insurance policy wordings.

Answer 22

In all Canadian jurisdictions except alberta, neither liability insurance nor crime insurance is governed by statutory conditions. In alberta, both of these coverages are subject to statutory conditions. As the wordings for liability and crime coverages very considerably from insurer to insurer and can be quite different in the amount and type of coverage given, when comparing one of these wordings to another, the intermediary must take care to ensure that clients are provided with the most appropriate coverage.

Question 23

Explain why intermediaries should ensure policy document accuracy.

Answer 23

The policy should be checked carefully to ensure it matches the binder and the coverage requested from the insurer. Intermediaries can take the opportunity to review any expiring documents one last time to ensure that all the information has been transcribed, updated common recorded completely and correctly on the new policy. The documents might be hard or soft copy, but side by side line by line comparison is often the best way to ensure the document receive matches the requested coverage. Many times, the intermediary is responsible for King the information into the inters portal, but the underwriter still review what has been entered and can make changes document accuracy reassures the client of the caregiving to their needs and concerns. Typically, discrepancies fall into three categories.

Question 24

List three categories that describe and see usually fall with document accuracy

Answer 24

1. Entry errors
2. Premium discrepancies
3. Coverage discrepancies