CHAPTER 6 - B

Question 1

What are middle-men or intermediaries in the insurance market commonly known as?

Answer 1

They are generally known as ‘brokers’.

Question 2

Wholesale broker

Answer 2

This broker has direct contact with the insurer.

There is no reason why they cannot also have contact with the client if they are the only broker in the chain, but where there are several brokers, this term is used for the one closest to the insurer.

Question 3

Retail broker

Answer 3

the retail broker has the contact with the
ultimate client.

The retail and wholesale brokers could be two entirely separate broking firms, or two firms which have a business relationship/alliance or they could be two offices of the same broker

Question 4

Producing broker

Answer 4

the broker (individual or organization) which has
the contact with the client and creates or produces the work for the client.

Question 5

Single tied agent

Answer 5

A single tied agent is a representative of the insurer, not the insured.

Single tied agents are most common in a high street agency selling a number of products from a single insurer.

the agent cannot advise the client on other insurers’ products but is restricted to the products offered by their principal.

These agents do not work in the London Market

Question 6

Multi-tied agent

Answer 6

the agent is selling a number of different insurers’ products – but only one product per insurer.

For example, they might be tied to Insurer A for their house insurance product and to Insurer B for their car insurance product.

As with the single tied agent, this agent cannot offer independent advice
to a client about products in the wider market and does not work in the
London Market.

Question 7

Independent intermediary

Answer 7

This is the traditional London Market broker, which is not tied into any insurer and works for their ultimate client who is the insured or reinsured.

This agent can take an unbiased view of the entire market (London and elsewhere) and advise the client on the best options for their particular needs

Question 8

Surplus lines broker

Answer 8

the London Market is what is known as a ‘surplus lines market’ which means that it can only be used if the local or ‘admitted’ market has been shown the risk but is not able or willing to
take it on.

If the London Market is used, then a licensed surplus lines broker must be used in the intermediary chain and the details of that broker form part of the data
captured about the risk on the slip

Question 9

Open market correspondent

Answer 9

an intermediary but is not a Lloyd’s
approved cover holder (a party holding delegated authority from a Lloyd’s syndicate to write insurance business on its behalf)

they introduce business to Lloyd’s either directly or via a Lloyd’s broker on an open market basis.

There are certain territories where brokers/intermediaries that want to introduce business into Lloyd’s need to have this additional level of approval by Lloyd’s and need to be sponsored in this approval by a managing agent or Lloyd’s broker.

The list of territories where this is required is not particularly large but it does include areas such as Canada and Italy which are sizeable sources of business
into the market

Question 10

Lloyd’s broker

Answer 10

a broker who is already approved by their own regulator can apply to Lloyd’s to go through a separate accreditation process.

Question 11

Non-Lloyd’s broker

Answer 11

This is a broker regulated either by the UK regulator or their own home state regulator (if overseas) but which has not obtained Lloyd’s accreditation