deck 2 Flashcards
What effect has the Contracts (Rights of Third Parties) Act 1999 had in respect of insurance brokers?
A. It enables an insurance broker to pursue settlement of a claim against a negligent third party on behalf of an insurer.
B. It introduced the requirement that the insured is specifically identified and named in a contract where a producing insurance broker instructs a wholesale insurance broker to place business.
C. It introduced the requirement to state in all insurance policies the name of the loss payee if it is not the insured.
D. It requires that where the benefits have been assigned to another party, notification is made to the insurance broker.
B. It introduced the requirement that the insured is specifically identified and named in a contract where a producing insurance broker instructs a wholesale insurance broker to place business.
Under which Act is a firm of insurance brokers vicariously liable for an employee who accepts a payment to enhance business relations, which does NOT form part of a fee for placing insurance?
A. The Financial Services and Markets Act 2000.
B. The Proceeds of Crime Act 2002.
C. The Fraud Act 2006.
D. The Bribery Act 2010.
D. The Bribery Act 2010.
What type of insurance contract is excluded from the Financial Conduct Authority’s definition of general insurance contracts?
A. Aircraft.
B. Credit.
C. Extended warranty.
D. Fidelity guarantee.
C. Extended warranty.
What has been the effect on insurance brokers of the Financial Conduct Authority’s decision to focus on customer outcomes to be achieved?
A. Every firm of insurance brokers can interpret the Financial Conduct Authority’s principles in their own manner to achieve required outcomes.
B. Every firm of insurance brokers must follow the Financial Conduct Authority’s prescribed rules to achieve required outcomes.
C. Insurance brokers are limited to only complying with the Financial Conduct Authority’s principles.
D. Insurance brokers can interpret the Financial Conduct Authority’s rules in accordance with their individual practices.
A. Every firm of insurance brokers can interpret the Financial Conduct Authority’s principles in their own manner to achieve required outcomes.
Who is responsible for regulating insurance broking activities in the USA?
A. The Federal Insurance Office.
B. The Insurance Commissioner for each individual state.
C. The National Association of Insurance Commissioners.
D. The National Confederation of Insurance Legislators.
B. The Insurance Commissioner for each individual state.
Under the Consumer Insurance (Disclosure and Representations) Act 2012, an insurer is permitted to reduce a claim payment if the client has made a
misrepresentation which is
A. deliberate only.
B. deliberate or reckless only.
C. deliberate, reckless or careless.
D. reckless only.
C. deliberate, reckless or careless.
What action should an insurance broker take to seek to avoid a complaint becoming an errors and omissions claim?
A. Document all activities in relation to the complaint.
B. Ensure that he always follows the firm’s procedural guidelines.
C. Immediately notify the firm’s errors and omissions insurer so that any potential claim can be defended.
D. Respond personally to the complainant within three business days.
B. Ensure that he always follows the firm’s procedural guidelines.
Why does a firm of insurance broker’s Terms of Business Agreement contain a conflicts of interest provision?
A. To describe the procedures that a firm will always take when a conflict of interest is notified to them.
B. To detail the procedure that a firm will take to deal with any conflict of interest as and when it arises.
C. To inform the client that in the event of a conflict of interest, services currently provided by the firm will be passed to an independent third party.
D. To reiterate that the firm will always continue to act for the client in the event of any conflict of interest.
B. To detail the procedure that a firm will take to deal with any conflict of interest as and when it arises.
To whom, if anyone, does a wholesale broker have a duty of care?
A. The policyholder only.
B. The producing broker only.
C. Both the policyholder and the producing broker.
D. The wholesale broker does not have a duty of care to any party.
B. The producing broker only.
What objective should an insurance broker try to achieve when preparing an underwriting submission for an insurer’s quotation?
A. The compilation of a comprehensive package of information regarding the risk and all available information about the proposer.
B. The compilation of a summary of the information provided by the proposer which the broker considers material.
C. Ensuring that all material circumstances in its possession are accurately stated and clearly presented.
D. Ensuring that only the material circumstances provided by the proposer are included in the submission.
C. Ensuring that all material circumstances in its possession are accurately stated and clearly presented.
Why does an insurance broker take an insurer’s financial strength into consideration when considering which insurers to approach for a liability quotation?
A. An insurer with a greater capital will remain solvent and be able to pay future claims.
B. An insurer with greater claims reserves will provide a better claims service.
C. To ensure that the insurer has a strong investment philosophy to maintain reserves.
D. To ensure that the insurer has the ability to pay long-tail claims.
D. To ensure that the insurer has the ability to pay long-tail claims.
An insurance broker arranges a lineslip with a Lloyd’s underwriter to reduce the administration for placing insurance risks. This facility is most likely to be used for the placing of insurance risks originating from
A. consumers for standard personal lines insurance.
B. large manufacturers.
C. multi-national companies.
D. small manufacturing companies with no hazardous processes.
D. small manufacturing companies with no hazardous processes.
As a consequence of the legal protocols which govern the handling of third party claims, it is essential that an insurance broker should
A. establish procedures for dealing with conflicts of interest.
B. immediately notify the insurer of any new liability claim.
C. negotiate settlement of all claims on behalf of clients.
D. never charge a fee for handling a claim.
B. immediately notify the insurer of any new liability claim.
What is one of the main considerations when a company is deciding whether to establish a captive insurance company or use a rent-a-captive insurance company?
A. How it will account for the captive operation in its financial returns.
B. The premium that it will need to pay to meet anticipated insurance claims.
C. The scope of insurance coverage that the captive operation will be authorised to insure.
D. Whether it has sufficient capital to establish a captive and fund the cost of the operation.
D. Whether it has sufficient capital to establish a captive and fund the cost of the operation.
An example of the additional specialised services that larger brokers offer to their clients include:
a. giving immediate notification of losses to insurers.
b. briefing clients on the role of any loss adjusters that are appointed.
c. attending site meetings regarding major losses.
d. carrying out post-loss surveys.
d. carrying out post-loss surveys.
