chapter 6 - E Flashcards
What is broker remuneration?
Broker remuneration refers to the payment received by a broker for their services, which may not always be paid by their clients.
What are the two payment methods by which a broker can be remunerated?
The two payment methods are:
* Flat fee
* Commission (or brokerage)
Who pays the flat fee to the broker?
The client pays the flat fee.
What must a broking firm provide a client under the FCA Insurance: Conduct of Business rules (ICOBS) regarding fees?
A broking firm must provide details of any fees payable before the client incurs any fees.
What is the gross premium?
The gross premium is the total premium charged to the client before any deductions.
What is the net premium?
The net premium is the amount received by the insurer after the broker’s commission is deducted from the gross premium.
Who pays the commission or brokerage to the broker?
The insurer pays the commission or brokerage to the broker.
True or False: A broker must volunteer commission information to a commercial client.
False
What is a collecting commission?
A collecting commission is an additional commission charged by brokers on claims, usually around 1% of the claims value.
What happens if a broker charges a collecting commission on claims?
The insurer pays 101% of the claim value, but the insured receives only the 100% component.
What is a coverholder commission?
A coverholder commission is paid to a broker acting as a coverholder under a contract of delegated underwriting authority for each risk bound.
What type of advice can brokers charge fees for?
Brokers can charge fees for specialist technical advice, such as on engineering matters.
Fill in the blank: The amount retained by the broker from the gross premium is known as _______.
[brokerage]
What must a broker advise a client regarding potential additional fees?
The broker must advise the client up front about any further fees that might be incurred during the life of a policy.
