Chapter 4

Question 1

. When standard markets look to get out of an unprofitable class of business, who can brokers go to
for assistance in finding appropriate coverage?

Answer 1

b. Wholesalers

Question 2

When is the broker considered to be acting for the insurer?

Answer 2

When the broker accepts payment to send to the insurer on the client’s behalf

Question 3

Through which governing body are agents licensed to sell insurance in Ontario?

Answer 3

. Financial Services Regulatory Authority of Ontario (FSRA)

Question 4

When reviewing a producer’s ability to grow business, sell the insurer’s products, and work as a
partner with the insurer, it is conducting what type of review?

Answer 4

Network analysis

Question 5

An insurer can determine the producer’s plan for the future and determine its viability by reviewing
which of the following?

Answer 5

Business plan

Question 6

Why would it be important for a producer to be able to access an insurer’s online quoting portal?

Answer 6

To be able to take a call from an applicant and provide a quote immediately

Question 7

What is a bordereau?

Answer 7

An itemized list or summary of insurance or reinsurance premiums or losses

Question 8

What is the purpose of a key person clause in a contract between insurer and producer?

Answer 8

To allow the insurer, at its option, to terminate the agreement if certain people leave the
employ of the producer

Question 9

If the producer has binding authority, what type of insurance coverage should it have to protect
itself?

Answer 9

Errors and omissions insurance

Question 10

When would fidelity insurance be required by the producer?

Answer 10

When making claim payments on behalf of an insurer

Question 11

Describe five different types of producers. (5 marks)

Answer 11

swers:
1. Types of producers (any five of the following):
* Agent: sells and services insurance policies offered by a single insurer
* Company-employed agent: works directly for the insurer
* Independent agent: an entrepreneur who maintains a separate office from that of the insurer
* Exclusive agent: sometimes referred to as a captive agent; places business with one insurer but
remains an independent businessperson with their own office
* Subagents: appointed to perform functions undertaken by the agent for the insurer
* Broker: independent businessperson who places risks with multiple insurers
* Wholesalers/general agents/managing general agents (MGAs)/managing general underwriters
(MGUs): act as auxiliary markets for brokers or agents who cannot place their risks elsewhere

Question 12

Ways to limit a producer’s underwriting authority (any five of the following):

Answer 12

For a period of time
* Until corrective actions are implemented
* Until an audit is performed
* The type of risk
* The size of premium
* Complexity of coverage

Question 13

Areas of authority that can be granted to a producer:

Answer 13

Soliciting and submitting insurance applications
* Underwriting and binding coverage on behalf of the insurer
* Issuing policies and endorsements
* Collecting premium
* Handling claims

Question 14

What are five elements typically included in a due diligence review? (5 marks)

Answer 14

Ownership
 Financial analysis
 Business plan
 Business processes
 Staff
 Computer systems
 Other insurers

Question 15

Assessing network analysis considerations (any five of the following):

Answer 15

 Can the producer grow with the insurer, or has the producer reached its maximum capacity?
 Can the producer indeed sell the insurer’s products?
 What is the producer’s mix of business?
 Will the producer support and work with the insurer?
 How well does (or will) the producer work with the insurer?
 What about the producer’s staff?

Question 16

Assessing considerations for a business plan and business process (any five of the following):

Answer 16

What has the producer’s record of growth been?
 How does the producer plan to grow in the foreseeable future, and does its growth strategy fit with
the insurer’s strategy?
 How will the producer handle the increased business caused by growth?
 Does the producer have a succession plan?
 What is the producer’s organizational structure?
 Are the producer’s resources equal to the demands on them?
 Are there provisions to cover for an absent staff person?