Chapter 6: Insurance Intermediation

Question 1

Define ‘principal’

Answer 1

The person the broker is serving- generallu the insured. the broker acts on their behalf

Question 2

if a broker hsd two principals what must they do to ensure neither is disadvantaged?

Answer 2

Put up ‘Chinese Walls’ or ‘ethical walls’

Question 3

How can an agency agreement be created?

Answer 3

By agreement, by ratification, or by necessity

Question 4

Define ‘agency by agreement’

Answer 4

Espressly agreed and in writing

Question 5

Define ‘agency by ratification’

Answer 5

Some behaviour is accepted or condones after the fact

Question 6

Define ‘agency by necessity’

Answer 6

Emergency situation

Question 7

Define ‘duty of care’

Answer 7

Broker has a duty of care for their client to behave to the standard of a competent broker in the market

Question 8

Define ‘wholesale broker’

Answer 8

Broker who has direct contact with the insurer

Question 9

Define ‘retail broker’

Answer 9

Broker who has contact with the ultimate client

Question 10

Define ‘producing broker’

Answer 10

The broker which has the contact with the client and creates or produces the work for the client

Question 11

Define ‘single tied agent’

Answer 11

A representative of the insurer, not the insured- do not work in the London Market, most common in high street agencies

Question 12

Define ‘multitied agent’

Answer 12

Principal is still an insurer, but the agent is selling a number of different products- one from each insurer. Does not work in the London MArket.

Question 13

Define ‘independent intermediary’

Answer 13

Traditional London MArket broker, works for the insured

Question 14

Define ‘surplus lines broker’

Answer 14

operates in surplus lines market- USA

Question 15

Define ‘open market correspondent’

Answer 15

An intermediary who introduces business to Lloyds through a Lloyd’s broker or on an open market basis- required in areas like Canada and Italy

Question 16

Define ‘Lloyd’s broker’

Answer 16

A broker approved by Lloyds

Question 17

Define ‘placing provess’

Answer 17

Placing a risk

Question 18

What are the broker’s key roles in the placing proccess?

Answer 18

Reviewing the client’s needs, putting together a slip, reviewing the quotes with a client, finalisig the placement, completing the documentation for Velonetic, chasing premium, submitting docs to Velonetic, and changing the risk if necessary

Question 19

WHat is the broker’s role in the claims proccess?

Answer 19

First advice to the insured, and putting together the presentation for the insurers, instructing experts such as loss asjustors, updates, negotiation, settlement, and if the insurer decides to subrogate, it is done in the insured’s name, so the broker must cooperate.

Question 20

Define TOBA

Answer 20

Market agreement which captures the terms and conditions under which a broker does business with various parties

Question 21

What does an insurer TOBA with a broker have?

Answer 21

The regulatory status, the broker’s authority

Question 22

What does it mean if a broker is granted risk transfer in a TOBA?

Answer 22

It means money once paid to the broker is considered paid to the insurer, so the insurer and broker need to have a lot of trust, remuneration, compliance, records, confidentiality

Question 23

What does a broker’s TOBA with a client have?

Answer 23

Identity of a client, claims notification, disclosure, how broker is paid, how money is held, data [rptection, complaints, and dispute resolution

Question 24

Define ‘broker remuneration’

Answer 24

How brokers are paid. Most commonly by flat fee payable by client, brokerage paid by the insurer, or other fees, such as a collecting comission

Question 25

Define ‘collecting commission’

Answer 25

Teh insurer pays 101% value of a claim, but 1% goes to the broker

Question 26

WHat is the insurance distribution directive?

Answer 26

Law regarding the distribution of insurance. Says distributors must always act honestly, fairly, and professionally, and must provide clear, fair and not misleading information.

Question 27

Define ‘insurance mediation directive’

Answer 27

What IDD replaces

Question 28

Define ‘client asset rules’

Answer 28

CASS- rules concerning how brokers hold client money, laid out in FCA handbook

Question 29

What do the FCA rules require on client’s money?

Answer 29

Must be kept away from the broker’s money, in either a statutpry trust account or a non-stautory trust account

Question 30

Define ‘statutory trust account’

Answer 30

Only for client money the broker has received- they must not fund payment out of these

Question 31

Define ‘non statutory trust account’

Answer 31

A broker can fund payment out of these- ie they could pay the claim out to their client before they receive it from the insurer

Question 32

What sensitive personal data is regulated under data protection legislation?

Answer 32

ethnicity, political opinions, religious beliefs, trade union membership, genetic data, biometrics, health info, sexual orientation

Question 33

What are the seven data protection principles?

Answer 33

Lawfulness, fairness, transparency. Purpose linitation. Data minimisation, Accuracy. Storage limitation. Integrity anc confidentiality.
Accountability.

Question 34

What are the legal basises for lawful processing of data?

Answer 34

Consnet, contract, legal obligation, vital interests, public task, legitimate interest

Question 35

What rights do individuals have regarding their personal data?

Answer 35

Right to be informed, right of access, right of rectifcation, right to erasure, right to restrict processing, right to data portability, right to object, rights in relation to automated decision making and profiling

Question 36

What is the digital operational resilience act?

Answer 36

Applies from 17th January 2025, to strengthen the ICT security of companies operating in Europe

Question 37

When is a broker most likely to have conflict of interest?

Answer 37

When they have authority from insurers under a binding authority

Question 38

What are the disclosure requirements for brokers under IDD?

Answer 38

Disclosure of the basis and nature of any remuneration.