Chapter 8 - Role of a broker Flashcards
Who are the two parties in an insurance transaction?
Insured and insurer
What’s the relationship between the principal and agent?
The principal instructs the agent to bring the principal into a contractual party with a third party.
What is the law of agency?
Everyone who acts on behalf of another is an agent
How do you create a principal/agent relationship (3)?
Consent - express appointment via a TOBA
Necessity - actions that become necessary in an emergency
Ratification - acting with authority, to which then the principal agrees with afterwards
What’s the role of an agent of the insured?
Binding insurance on behalf (via a binder)
Collecting premium
What 5 duties does the agent have to their principal?
1 - Obedience - obeying instructions
2 - Personal performance - cannot delegate to other people
3 - Due care and skill - high standard of ability
4 - Good faith - trust
5 - Accountability - record transactions and account for principal all the money they’ve received on their behalf
What are the 2 duties of a principal?
1 - Remuneration - under ICOBS if a commercial client requests, the agent must disclose the amount of commission they’ve received
2 - Indemnity - Agent has right to claim an indemnity for all expenses or loss incurred when acting on their behalf
When can you have an undisclosed principal?
English law permits undisclosed principal - e.g. a multimillionaire
What are the two types of actual authority? What’s apparent authority?
ACTUAL
Express authority - in an agency agreement such as a TOBA (can be verbal)
Implied authority - if agent has to do certain things in order to carry out express instructions (eg travel costs)
APPARENT
Apparent (ostensible) authority - when one assumes that a person has such authority
What are the three ways an agent is terminated?
- Mutual Agreement
- Termination by one party
- Death, bankruptcy, insanity
All relevant parties must be notified by the principal or apparent authority may be assumed of the agent
What is an appointed representative?
Appointed under terms of contract (either individual or company). The principal would take the responsibility for the appointed representative acting on its behalf.
Who registers brokers as Lloyds brokers?
Council of Lloyds
What did the Legislative Reform Order 2008 do?
Granted wider range of non-Lloyds intermediaries access to Lloyd’s
What are London Premium Advice Notes LPANs?
Docs issued to present premium info in a standard format
What is a BID?
Broker insurance document, evidencing contract of insurance (contract certainty)
