Chapter 5 Insurance Distribution and Insurance Intermediaries Flashcards
What is the difference between a broker and an agent?
Broker - is an independent business person who may place business with any number of insurers. Brokers usually have a contract/agreement with the insurers they represent.
Agent - represents only one company.
Discuss the relationship between insurers and intermediaries.
INSURER:
- Must pay the borker an agreed commission
- Assist the broker in certain advertising expenses
BROKER:
- Act within the terms of the contract
- Write only the classes of risk acceptable to the insurer
- Collect premiums and hold them in trust
- Remit premiums within a specified time period
- Submit applications promptly
- Advise the insurer of all claims
- Exercise reasonable care and skill
- Do not delegate the authority given
Define a general agent.
Is one who has authority from a company to manage all of that company’s business within his or her territory, to appoint other agents and settle claims.
Sometimes called provincial agency or provincial manager.
What is the difference between an independent agent and an exclusive agent?
Independent agent/broker
** **- are appointed by large insurance companies to be their sales force and to bring clients to them.
- They pay a commission for each policy they issue on behalf of the broker's clients. - Client list belongs to the broker.
Exclusive agent
** **- they represent only one company.
- Not employees of the insurance company. - They are paid by commission and must pay their own expenses. - Client list belongs to the company.
How do direct writers deliver their product to the consumer?
They employ producers/employees to sell policies to prospective insureds. They are paid by salary. The business belongs to the insurer.
Define an insurance intermediary.
A. an independent business person who works on behalf of a number of insurers (broker)
B. an independent person who works exclusively on behalf of one insurer (agent)
C. an employee of an insurer (direct writer)
Provide an example of a mandate under Quebec law.
An insurance contract.
What is a mandatary?
An agent
Who or what determines the relationship between insurers and their agents/brokers?
Common law
Who licenses insurance agents/brokers?
1. Government
2. Self-regulation
3. Insurance councils
Define self-regulation.
Laws regulating agents/brokers are passed by a provincial government. Control is passed on to either A. an organization whose members are elected by the licensed persons engaged in the business of distributing insurance to the public
B. have an outside representation (members of consumer group)
What are the FOUR (4) main areas of concern with respect to the regulation of insurance intermediaries?
1. Qualification
2. Licensing
3. Operating requirements
4. Renewal of license
Candidates for brokers’/agents licenses are examined in what TWO (2) main areas?
1. Knowledge of the insurance business
2. Government regulations pertaining to insurance intermediaries
What is an agency/brokerage agreement?
sets out the terms and conditions under which an agent or broker will bring business to the named insurance company.
From whom do agents/brokers obtain their authority with respect to the insurance they sell?
Agents/Brokers obtain their authority from the agreement or contract entered into with their insurers.
It is further influenced by provincial law as set out in the Insurance Act and by regulations administered by the Superintendent of Insurance.
