Chapter 6: Insurance Intermediation Flashcards
Define ‘principal’
The person the broker is serving- generallu the insured. the broker acts on their behalf
if a broker hsd two principals what must they do to ensure neither is disadvantaged?
Put up ‘Chinese Walls’ or ‘ethical walls’
How can an agency agreement be created?
By agreement, by ratification, or by necessity
Define ‘agency by agreement’
Espressly agreed and in writing
Define ‘agency by ratification’
Some behaviour is accepted or condones after the fact
Define ‘agency by necessity’
Emergency situation
Define ‘duty of care’
Broker has a duty of care for their client to behave to the standard of a competent broker in the market
Define ‘wholesale broker’
Broker who has direct contact with the insurer
Define ‘retail broker’
Broker who has contact with the ultimate client
Define ‘producing broker’
The broker which has the contact with the client and creates or produces the work for the client
Define ‘single tied agent’
A representative of the insurer, not the insured- do not work in the London Market, most common in high street agencies
Define ‘multitied agent’
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.
Define ‘independent intermediary’
Traditional London MArket broker, works for the insured
Define ‘surplus lines broker’
operates in surplus lines market- USA
Define ‘open market correspondent’
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
Define ‘Lloyd’s broker’
A broker approved by Lloyds
Define ‘placing provess’
Placing a risk
What are the broker’s key roles in the placing proccess?
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
WHat is the broker’s role in the claims proccess?
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.
Define TOBA
Market agreement which captures the terms and conditions under which a broker does business with various parties
What does an insurer TOBA with a broker have?
The regulatory status, the broker’s authority
What does it mean if a broker is granted risk transfer in a TOBA?
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
What does a broker’s TOBA with a client have?
Identity of a client, claims notification, disclosure, how broker is paid, how money is held, data [rptection, complaints, and dispute resolution
Define ‘broker remuneration’
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
