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LM2 > Chapter 6 - Broking > Flashcards

Chapter 6 - Broking Flashcards

Broking

1
Q

What is the formal term for broking?

A

Insurance intermediation

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2
Q

Who is generally the principal?

A

The insured

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3
Q

What are chinese walls?

A

Separating roles to prevent conflicts of interest

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4
Q

What are the 3 ways that agency can be agreed?

A

Express
Ratification
Necessity

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5
Q

What are 5 duties that agents have towards their principals?

A

Follow instructions
Act in good faith
Don’t delegate without permission
Act with due care
Account for funds

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6
Q

If an agent acts outside of their authority, what can the principal do?

A

Ratify their actions, do nothing
Ratify their actions, then sue them for claims
Refuse their actions, expose them to third party for claims

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7
Q

What is a wholesale broker?

A

Broker representing the insurer

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7
Q

Why does the agent need to act with due care?

A

Otherwise they will be subject to a professional negligence claim

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8
Q

What is a retail broker?

A

Broker representing the insured

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9
Q

What is the producing broker?

A

Broker for the insured which is producing the work

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10
Q

What is a single tied agent?

A

Broker for only 1 insurer, does not work in London markets. Restricted to a set number of products

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11
Q

What is a multi-tied agent?

A

Broker for 1 insurer, sells 1 product per insurer. Does not work in london market

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12
Q

What is an indepedent intermediary?

A

Not affiliated with any insurer, represents insured. Traditional london market broker

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13
Q

What is a surplus lines broker?

A

Mostly for US markets - advises on risks which local lines cannot take. Details must be added to the MRC

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14
Q

What is an open market correspondent?

A

OMC are intermediaries but not an approved Lloyds coverholder
Advises on risks which are individually placed i.e. not through delegation or slips
Introduces business directly or through lloyds broker

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15
Q

What is a Lloyds broker?

A

FCA + Lloyds approved broker

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16
Q

What is the order of placing for a broker?

A

Review client requirements
Compile MRC
Review quotes and finalise placement
Compiling documentation
Request premiums
Submit to Xchanging
Make any changes

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17
Q

In reviewing a client’s requirements, what is a key consideration?

A

Solvency, otherwise could lead to prof. neg. claim

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18
Q

What type of supplementary information is submitted by the insurer in compiling the MRC

A

Surveys and records

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19
Q

What is material information?

A

Information which the broker would consider to be important to the risk

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20
Q

What are some activities in finalising the placement? What are the electronic platforms used?

A

Confirming with lead and following underwriters
Signing down if shares > 100%

PPL or Whitespace

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21
Q

What does line to stand mean?

A

The underwriter’s line is not to be signed down even if the total signed share > 100

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22
Q

What is done when compiling documentation to Xchanging for premiums?

A

Submitting MRC and LPANs
Tax requirements

23
Q

What is the system called which moves premium and records risk information?

A

Accounting and Settlement

24
Q

What is the central repository for risk documents?
What information is included in unique reference code

A

Insurer’s Market Repository
Signing number and date contributes to UMR (unique market reference)

25
Q

What is the process for changing risks?

A

Via endorsement papers, through brokers

26
Q

What is the process for claims processing?

A

First notification
Experts instructions
Negotiation
Settlement
Recoveries

27
Q

How are experts instructed?

A

Through the broker

28
Q

What is the broker’s role in settlement?

A

Insurer pays money into broker accounts, which reaches the insured

29
Q

How do brokers assist in subrogation?

A

Combine total amounts (minus deductible) or subrogration

30
Q

What are TOBAs and who do they need to be issued to?

A

Terms and conditions under which a broker does business. Issued to insurers, insured, broker. Or managing agents per sydnicate

31
Q

What is regulatory status in TOBA?

A

Insurer and broker warranty that they are authorised to deal business

32
Q

What is the broker’s authority in a TOBA?
What is risk transfer TOBA?
What is a non risk transfer TOBA?

A

Outlines broker’s authority to hold premiums in insurer
RIsk Transfer Toba = money collected is deemed to be paid to insurer
Non risk = money not allowed to be held in insurer’s name

33
Q

What is renumeration?

A

Brokerage / commission

33
Q

What is holding money / taxes

A

Funds withheld by broker but taxes paid on interest held

34
Q

What is a flat fee?

A

Paid by client, sum of money paid
Must be agreed before client incurs any cost

35
Q

What is brokerage / commission

A

Fee for placing business, paid by insurer. Usually held directly through the total premium paid to insurer.

Must disclose amount if insured asks

36
Q

What is collecting commission?

A

Fees charged (1%) on collecting claims

37
Q

What is coverholder & profit commission?

A

Commission collected through taking on risks through delegated underwriting
Profit commission - additional commission made on profit made

38
Q

What is special technical advice

A

Specialist advice offered by inhouse services in return for commission

39
Q

What are the two main principles of the IDD?
What info about renumeration do they need to disclose?
How has brexit impacted this?

A

Act in best interest of customers
Information provided must not be misleading

Renumeration nature and basis must be disclosed

Brokers have had to setup offices in home state

40
Q

What are the 3 pillars of FCA

A

Event driven work
Product review
Business conduct / interest of customers

41
Q

What FCA rule is about client monies and what does it stipulate?

A

CASS
Client money must be kept in separate bank accounts

42
Q

What is the difference between a statutory and non statutory trust account?

A

Statutory - Broker cannot fund payments out of account which they hold money in. Used for when the client money has been received. Can only pay once if they receive the money

Non statutory - Money can be paid out even if the other party has not paid in

43
Q

What is the maximum period that a broker has to pay out funds to clients?

A

1 day since receiving receipts

44
Q

What is DPA 2018?
What are its 3 main elements?

A

Data protection in UK
Confidentiality for medical/sensitive data
Access to data that is only necessary. Delete if requested
Provide ICO with more powers

45
Q

What data does UK GDPR apply to?

A

Personal data of living individual

46
Q

What are special categories of personal data?

A

Sensitive personal informationWh

47
Q

What are the 6 Data protection principles? (PAIDSL)

A

Purpose limitation
Accuracy
Integrity
Data minimalization
Storage limitation
Lawfulness

48
Q

What are the 6 bases for lawful processing (CCPLLV)

A

Consent
Contract
Public Task
Legal obligation
Legit interest
Vital interest

49
Q

What are the 8 rightsof GDPR (RAIDPEOR)

A

Restrict processing
Access
Informed
Data portability
Profiling & Automation
Erasure
Object
Rectification

50
Q

What is the maximum fine for breaching GDPR

A

17.25M or 4% of Global revenue

51
Q

How does GDPR protect against transferring data overseas?

A

Outside the EU, data transfer is restricted

52
Q

Under the IDD, what role was first introduced?

A

Those who sell directly to consumers

53
Q

What activity is a broker least likely to be involved in?

A

Arranging reinsurance agreements

54
Q

Under ICOBs, what must the broker do regarding fees when disclosing to clients?

A

Fees must be disclosed before any costs are incurred

55
Q
A

LM2 (10 decks)

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