Chapter 4: Contract and Agency Law

Question 1

What does the law of agency require brokers to do?

Answer 1

• Obedience
• Skill and due care
• Good faith
• Accountability

Question 2

Are agents allowed to delegate their tasks?

Answer 2

No unless given permission from their principal unless they are mechanical and involve no further judgement.

Question 3

What does fiduciary mean?

Answer 3

Holding something in trust for another

Question 4

What duties does a principle owe to their agents

Answer 4

Remuneration and Indemnity

Question 5

When is a broker considered to be the agent of the insured?

Answer 5

Giving advice on the type of cover to place

Giving advice on how to make a claim

Question 6

When is an insurance broker the agent of the insurer?

Answer 6

broker receives and handle proposal forms on behalf and confirm cover
Broker surveys and describes a property on an insurers’ behalf
Collects premiums

Question 7

Under the principal of tort are brokers legally responsible to their principal in the they fail to use reasonable care?

Answer 7

Yes

Question 8

What situations can conflicts of interest occur?

Answer 8

• Delegated Authority
• Close links with the insurer
• Insurance and Reinsurance (both the placing broker and reinsurance broker)
• Lloyd’s Broker
• Contingent Commissions/Overriders
• Other inducements
• acting for two or more clients with similar interests

Question 9

Can an agent have more than one principal at a time?

Answer 9

No

Question 10

how do you remedy a conflict?

Answer 10

Clear disclosure and transparency

Question 11

How do brokers identify and manage conflicts of interest?

Answer 11

Independent file reviews either as internal audits or a file review by an individual not involved in the placing process.

Question 12

What should TOBA be?

Answer 12

Clear and succinct
Reflect the business relationship
Define and Allocate responsibilities
Ensure compliance with regulatory or statutory rules

Question 13

What elements make up an insurer TOBA with a broker ?

Answer 13

• Regulatory status
• Broker’s authority
• Ownership and access to data and records
• Commission
• Conflicts in interest
• Conflict Management
• Confidentiality
• Law

Question 14

What does a risk transfer TOBA allow the broker to do on behalf of the insurer?

Answer 14

Hold funds

Question 15

What is the difference between a risk transfer TOBA and a non-risk transfer TOBA?

Answer 15

A risk transfer TOBA is used where the insurer has given the broker permission to hold funds on its behalf.
A non-risk TOBA does not include this permission.

Question 16

If an insurance broker gives advice to clients on the most appropriate type of cover and how to make a claim but also has authority to collect premiums on behalf of the insurer, who is the broker an agent for?

Answer 16

The client and the insurer

Question 17

A client who is intending to insure his shop premises with his local insurance broker must receive the prescribed regulatory information:

Answer 17

prior to the completion of the contract.

Question 18

What is included in the regulatory information contained within a terms of business agreement between a client and his insurance broke

Answer 18

The availability of compensation schemes.