Chapter 4: The Insurance Process Flashcards
Broker’s role in the insurance process
to serve as the intermediary between the client and the insurer
Primary duty owed by brokers to clients
to ensure they receive the right insurance advice and coverages. The law requires that brokers exercise “reasonable, skill, care and diligence”
Primary duty owed by brokers to insurers
to tell the truth about the risks they submit and not withhold or conceal important information
Most common cause of errors and omissions claims is…
inadequate coverage
Who are underwriters?
non-client facing insurance company employees not selling insurance and not required to be licensed
Primary role of underwriters
to select those risks likely to be most profitable for the insurer
3 sources of information used by underwriters when making a decision regarding the suitability of a risk
- the application: info on risks and hazards
- the broker: info on client’s personal and business reputation
- loss experience data: info on loss experience for that class of risk
What is a physical hazard
conditions related to premises which may cause a peril to occur
Conditions that are considered by underwriters in evaluating physical hazard in a risk…
- type of building construction
- occupancy
- housekeeping
What is a moral hazard
subjective characteristics of applicant that could cause a peril to occur
Conditions indicating the presence of moral hazard…
- financial condition
- moral character
- indifference to loss
Identify 2 steps normally taken when a loss occurs…
- insured reports claim to brokerage
2. brokerage reports claim to insurer
Difference between “company” adjusters and “independent” adjusters
Company adjusters: have own staff who handle the bulk of their claim settlements
Independent adjusters: when staff adjusters are not available or if the loss adjustment requires a particular expertise
