Chapter 7 - Building Towards Professionalism, Section 1 - Regulations of Brokers

Question 1

Who’s responsible for the administration of the insurance act in your province?

Answer 1

Administrative functions relating to licensing, complaints handling and discipline of brokers is the responsibility of separate Insurance Councils.

Question 2

Outline the initial licensing requirements, whether there are different levels of licenses, the supervision requirements, and license terms in your province.

Answer 2

To obtain an initial license, an applicant must be of good character and reputation and must pass an approved examination - CAIB program. CAIB program is a step licensing program.
Level I - The broker is licensed for all lines of insurance, under supervision. CAIB 1 or Fundamentals of Insurance is required.
Level II - The broker is licensed for all lines of insurance without supervision, but is not allowed to own or manage a brokerage. CAIB 2 and CAIB 3 are required.
Level III - The broker is licensed for all lines of insurance and is qualified to own and manage a brokerage. CAIB 4 is required.

Question 3

Outline the class of licence issued in your province and whether this license would be valid in other provinces.

Answer 3

Brokers generally receive an All Classes (Other than Life) license and are prohibited from selling other classes of insurance unless so licensed.

Question 4

Define “ethics”.

Answer 4

The principles of conduct governing an individual or group.

Question 5

Identify three temptations that could cause a broker to act unethically.

Answer 5

1) To sell more insurance than what’s needed.
2) To sell higher priced coverage when equivalent coverage is available at a lower price.
3) To recommend the policy with the highest commission percentage.

Question 6

Identify six reasons why your license to practice as an insurance broker may be revoked.

Answer 6

1) Is guilty of misrepresentation, fraud, deceit or dishonesty.
2) Contravenes any provision of The Insurance Act or its equivalent.
3) Unreasonably fails to pay to an insurer premiums collected and retained beyond the term stipulated in the Agency Agreement.
4)

Question 7

Professional brokers association at both the provincial and national levels are governed by codes of conduct which set ethical standards of a level than more compliance with the law. Outline three duties brokers owe to each of the following:

a) Clients
b) Insurers
c) Fellow Brokers

Answer 7

a) Duty to Clients
- To provide coverage best suited to the client’s needs, regardless of the premium, and to not take advantage of a client’s lack of experience or insurance knowledge.
- To be competent to perform the services undertaken on the client’s behalf.
- To serve clients in a conscientious diligent and efficient manner.

b) Duty to Insurers
- To abide by the terms of the Agency Agreement
- To adhere to the binding authority granted by the insurer
- To deal honestly with monies held in trust for the insurer.

c) Duty to Fellow Brokers
- To not harm the reputation of a fellow broker
- To treat fellow brokers with respect
- To co-operate in every reasonable way for the betterment of the industry.

Question 8

Outline three characteristics showed by all professionals, including brokers.

Answer 8

1) A commitment to high ethical standards.
2) A high standard of educational preparedness and training, with mandatory continuous education.
3) A formal association regulating power over its members.