Chapter 6 - Insurance Intermediation Flashcards

1
Q

What are the duties an agent has to its principal?

A

Follow their instructions
Act in good faith
Not to sub-delegate without permission
Account for funds
Act with all due care and skill

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2
Q

What are the 3 ways an agency can be created?

A

By agreement - agreed expressly and ideally in writing
Ratification - when some behaviour is accepted or condoned after the fact and the principal is prepared to stand by their agent
Necessity - usually in an emergency situation where someone has to make a decision, as no-one with actual authority to do so is present

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3
Q

What are the types of intermediaries?

A

Wholesale broker - broker has direct contact with the insurer
Retail broker - has the contact with the ultimate client
Producing broker - the broker which has the contact with the client
Single tied agent - works for one insurer
Multi-tied agent - works for multiple insurers, selling one product per firm
Independent intermediary - not tied to any insurer and works for the insured
Surplus Lines broker - must be used if the LM is used in the USA on a surplus lines basis
Open market correspondent - not Lloyd’s approved but they introduce business to Lloyd’s either directly or via a Lloyd’s broker on an open market basis
Lloyd’s broker - one who is accredited by Lloyd’s
Non-Lloyd’s broker - broker which is regulated but not Lloyd’s accredited

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4
Q

What is the broker’s role in the placing process?

A

Reviewing the client’s needs
Putting together a MRC to obtain quotes
Reviewing quotes with the client
Finalising the placement
Compiling documentation for submission to Xchanging
Requesting premium from their client
Submit documentation to Xchanging
Making changes to the risk

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5
Q

What is the broker’s role in the claims process?

A

First Advice
Expert instructions
Further updates
negotiation
Settlement
Recoveries/subrogation

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6
Q

What is a terms of business agreement (TOBA)?

A

The market agreements used to capture the T&Cs under which a broker does business with various parties, a broker will have them with insurers, clients and possibly producing brokers

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7
Q

What are the contents of an insurer’s TOBA with a broker?

A

Regulatory status
Broker’s authority
Remuneration
Holding money/taxes
Compliance
Ownership and access to data and records
Law and jurisdiction
Conflict management
Confidentiality

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8
Q

What is included in a broker’s TOBA with the client?

A

Identity of client
Claims notification
Disclosure
How the brokers are paid
how monies are held
data protection
complaints
dispute resolution

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9
Q

What are the ways brokers can receive remuneration?

A

Flat fee - payable by the client
Commission or brokerage - paid by the insurer
Other fees - such as a collecting commission

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10
Q

What are the 2 general principles under the Insurance Distribution Directive (IDD)?

A

Distributors (e.g. insurers) must always act honestly, fairly and professionally in accordance with the best interests of customers
All info provided by distributors must be fair, clear and not misleading
- all brokers required to be registered in their home state
- brokers have to be transparent
- UK brokers have to consider setting up EU domiciled offices to continue EU operations

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11
Q

What are client asset rules (CASS)?

A

FCA has set out specific rules concerning client money, with the basic concept being that the broker must arrange adequate protection in respect of all client assets for which they are responsible

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12
Q

What is a statutory and non-statutory trust account?

A

statutory - exists only for client money the broker has received and must not be transferred out
non-statutory - can be transferred out as claims can be paid to clients before money is received from insurers

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13
Q

What is classed as sensitive data under UK GDPR?

A

race
ethnic origin
politics
religion
trade union membership
genetics
biometrics
health
sex life
sexual orientation

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14
Q

What are the 6 lawful bases for processing data?

A

Consent
Contract
Legal obligation
Vital interests
Public task
Legitimate interest

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15
Q

What rights exist under UK GDPR?

A

To be informed
right of access
To rectification
Right to erasure
Right to restrict processing
Right to data portability
Right to object
Rights in relation to automated decision making and profiling

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