Chapter 7 Flashcards
What are three actions which demonstrate a broker’s unethical conduct?
- To sell more insurance than is needed
- To sell higher priced coverages when equivalent coverage is available at a lower price
- To recommend policies with the highest commission rates
What are three qualities of professionals?
- Commitment to high ethical standards
- Have a high standard of educational preparedness and training with mandatory continuous education
- Formal association regulating power over its members
What responsibilities do brokers owe their customers?
Brokers must exercise reasonable skill and diligence in their affairs with customers
What responsibilities do brokers owe Insurance Companies?
- Comply with all the conditions of agency agreement
- Ensure timely payment of premiums collected on their behalf
- Tell the truth about all applications submitted
What are four leading causes of E&O losses?
- Inadequate coverage
- Misrepresentation
- Description or ID errors
- Cancellation errors
What is one example of inadequate coverage?
Failure to provide proper coverage
What are two situations which may cause E&O losses resulting from renewal errors?
- Not renewing at all
- Not renewing adequate coverage
Provide an example of E&O losses resulting from policy change errors.
When errors occur on revisions or endorsements required during the policy year
Provide an example of E&O losses resulting processing delays.
When brokerages do not request changes required immediately
Provide an example of E&O losses resulting from agency agreement violations.
When brokerages exceed their binding authority
What are five things brokers can do to reduce their E&O losses?
- Ensure they are acting within scope of their competence
- Take all steps necessary to determine client’s needs
- Be advisors, not deciders
- Know coverage and insurers
- Keep within bounds of binding authority
What are five systems that may reduce E&O losses in the claims process?
- Report claim immediately to insurer
- Inform client of responsibilities after losses
- Do not authorize insured to proceed with repairs
- When loss clearly not insured, advise insured
- Follow up with client to ensure adjustment is progressing to their satisfaction
What are two examples of record-keeping that may assist brokers when defending E&O claims?
- Conversation and telephone logs
- Letters of confirmation
What does E&O insurance cover?
E&O policies insure the negligent acts involving error and omissions of the insured, or employees, while acting as an insurance broker
What types of losses are not insured on E&O policies?
E&O policies will not insure dishonest, fraudulent or criminal acts
Where can a general description of “Minimal Ethical Behaviour” be found?
Provincial Insurance Act
Identify and describe two measures a brokers can use to minimize error and omission losses
- Ensuring they are acting within their level of compentence
- Take all reasonable steps to properly determine a client’s needs
Name two provinces that have Insurance Councils
British Columbia and Saskatchewan
Identify three temptations brokers face because they are paid on a commission basis
- Sell more insurance than needed
- Sell higher priced coverage when similar coverage is available for less
- Recommends policies with the highest commission percentage
What are three causes of error and omissions losses?
- Inadequate coverage
- Misrepresentation and description errors
- Cancellation or renewal errors
