I10 3 Understand Contract and Agency in relation to insurance brokers and their client Flashcards
Which document is used to detail each party’s duties in the insurance placement process when a retail insurance broker and a wholesale insurance broker are both involved in placing an insurance policy?
A. A demands and needs statement.
B. An initial disclosure document.
C. An insurance policy.
D. A Terms of Business Agreement
D. A Terms of Business Agreement
An insurance broker has two clients competing for limited market capacity. In order to manage a potential conflict of interest, what should the broker do?
A. Agree to receive a reduced fee or commission in respect of the placement of this business.
B. Disclose the details to both clients and obtain their agreement on how to proceed.
C. Disclose the details to potential insurers in order to negotiate increased capacity.
D. Report the situation to the Financial Conduct Authority for a ruling.
B. Disclose the details to both clients and obtain their agreement on how to proceed.
What type of task may an insurance broker outsource without seeking the client’s permission?
A. An additional service for which the client has paid a fee.
B. A service which requires a level of expertise outside the broker’s skill set.
C. One which requires no question of judgement or advice.
D. One which requires the safekeeping of client monies.
C. One which requires no question of judgement or advice.
Which party(ies) may be the principal of an insurance broker when the broker is dealing with a claim?
A. The insurer only.
B. The policyholder only.
C. The third party only.
D. Both the insurer and the policyholder.
D. Both the insurer and the policyholder.
What will be included in an insurance broker’s Terms of Business Agreement with a client concerning the duty of disclosure?
A. The broker confirms that all details disclosed by the insurer will be passed to the client.
B. The broker will always disclose the amount of commission to the client.
C. The client is assured that all material circumstances will be passed to the insurer.
D. The client is reminded of the potential consequences of non disclosure.
D. The client is reminded of the potential consequences of non disclosure.
What will be warranted within the regulatory status section of a Terms of Business Agreement between an insurer and an insurance broker?
A. If either party becomes insolvent, it will notify the other party.
B. The date on which the insurance broker became authorised to transact business.
C. Whether the broker is a member of the Financial Ombudsman Service.
D. Whether the insurer is a member of the Association of British Insurers
A. If either party becomes insolvent, it will notify the other party.
A firm of motor insurance brokers receives notification of a motor claim in which two separate clients are involved, each insured with a different insurer. What should the claims handler consider?
A. Whether it is necessary to notify each insurer of the incident.
B. Whether the terms of the agency agreement with the insurer are breached.
C. Whether there is a conflict of interest.
D. Which client is at fault and should therefore lose its no claims bonus entitlement.
C. Whether there is a conflict of interest.
The basis of how commission can be withdrawn by an insurance broker from an insurer’s money account is usually detailed in
A. a demands and needs statement.
B. a key features document.
C. the Client Assets Sourcebook.
D. a Terms of Business Agreement
D. a Terms of Business Agreement
For what purpose does a firm of insurance brokers send a Terms of Business Agreement to a client?
A. It contains the client’s insurance quotation.
B. It details the services that the broker will provide to the client.
C. It provides a summary of the client’s insurance coverage.
D. It states the client’s insurance requirements.
B. It details the services that the broker will provide to the client.
What does the duty of obedience require an insurance broker to do when acting for a client?
A. Act in the client’s best interests at all times.
B. Avoid any conflict of interest.
C. Keep accurate records of monies handled.
D. Perform all of the client’s lawful instructions in a timely manner.
D. Perform all of the client’s lawful instructions in a timely manner.
Under the principle of tort, for what are insurance brokers legally responsible to their principal?
A. To abide by all statutory requirements.
B. To achieve contract certainty.
C. To exercise reasonable care.
D. To maintain Continuous Professional Development records.
C. To exercise reasonable care.
During the claim process, when may a conflict of interest occur at a firm of insurance brokers?
A. When a claim payment is received from an insurer.
B. When a loss assessor and a loss adjuster are both involved in a claim.
C. When notifying an insurer of a claim.
D. When two or more clients are involved in the same claim.
D. When two or more clients are involved in the same claim.
Why might a conflict of interest arise if an insurance broker has a delegated authority agreement, which includes a profit commission, with an insurer?
A. Business can only be placed with an insurer specifically requested by the client.
B. Business may be placed with other insurers who quote preferential terms.
C. Only good quality risks may be placed under the delegated authority.
D. Only sub-standard risks may be placed under the delegated authority.
C. Only good quality risks may be placed under the delegated authority.
In which document will an insurer detail the level of authority that is provided to an insurance
broker?
A. The demands and needs statement.
B. The policy wording.
C. The suitability statement.
D. The Terms of Business Agreement
D. The Terms of Business Agreement
With regards to the specific terminology used in relation to delegated authority schemes, which of the following gives an accurate description of the role of the coverholder?
A. An insurance broker or wholesaler that underwrites risks.
B. The report provided by the entity delegated to of the risks and claims provided.
C. An entity to which an insurer can give delegated authority.
D. The contract under which delegated authority is given
C. An entity to which an insurer can give delegated authority.
The final stage in the process of operating a delegated authority scheme can be described as the:
A. Drawing up of the agreement and procedures.
B. Auditing and monitoring of procedures.
C. Operation of the agreement.
D. Presentation of the business case.
B. Auditing and monitoring of procedures.
In your role as an insurance broker you receive a number of client calls. Which of the following options best describes a risk control scenario?
A. A client informs you that they are thinking about whether some extension work at their busy high street shop is necessary.
B. A nursery client informs you that the insurer’s requirement for their child protection policy is now in place.
C. A client informs you that they are likely to receive a penalty notice for speeding.
D. A client informs you that they are looking to change their car to a newer model.
B. A nursery client informs you that the insurer’s requirement for their child protection policy is now in place.
As part of an insurance company’s claims team, you are tasked with clarifying the correct name of a client who is insured under a delegated authority agreement. Your manager instructs you to speak with the coverholder. Who should you call?
A. The end client who has paid their premium in full but has not received full documentation.
B. The underwriter who regularly audits the delegated authority agreement.
C. The end client who has paid their premium in full and has received full documentation.
D. The entity to which the insurer has given the delegated authority facility.
D. The entity to which the insurer has given the delegated authority facility.
A captive insurance company is best described as:
A. An overseas branch of a composite ‘household name’ insurer.
B. An insurer based outside of the UK that specialises in employers’ liability risks in the UK.
C. A proprietary company which uses a range of other insurers to cover its risks.
D. An insurance company which is primarily set up to insure the risks of its parent
D. An insurance company which is primarily set up to insure the risks of its parent
What term is used to describe the report detailing the risks written and claims reported by an entity to which an insurer has given delegated authority?
A. Delegated.
B. Bordereau.
C. Coverholder.
D. Binding.
B. Bordereau.
You are asked to evaluate a risk to predict the likelihood of future losses. What best describes the activity you are engaged in?
A. Risk analysis.
B. Risk control.
C. Risk implementation.
D. Risk avoidance.
A. Risk analysis.
As lead underwriter with an insurer, you approve a delegated authority agreement. In thinking through your strategy, can you identify an advantage of the agreement?
A. Reduced levels of control in underwriting each risk.
B. Coverholder could sub-delegate without authorisation.
C. Increased potential for funds to be mismanaged.
D. Reduction in operating costs per risk
D. Reduction in operating costs per risk
Of the methods of risk control available, which of the following is most effective at eliminating risk?
A. Reduction.
B. Avoidance.
C. Minimisation.
D. Transfer.
B. Avoidance.
Glen owns a number of out of town warehouses and is considering commercial risk management so that he can make informed decisions about the risks faced by his business. What is the final stage of the risk management process?
A. Risk perception.
B. Risk identification.
C. Risk control.
D. Risk analysis.
C. Risk control.
An insurance broker has two clients competing for limited market capacity. In order to manage a potential conflict of interest, what should the broker do?
A. Agree to receive a reduced fee or commission in respect of the placement of this business.
B. Disclose the details to both clients and obtain their agreement on how to proceed.
C. Disclose the details to potential insurers in order to negotiate increased capacity.
D. Report the situation to the Financial Conduct Authority for a ruling
B. Disclose the details to both clients and obtain their agreement on how to proceed.
What type of task may an insurance broker outsource without seeking the client’s permission?
A. An additional service for which the client has paid a fee.
B. A service which requires a level of expertise outside the broker’s skill set.
C. One which requires no question of judgement or advice.
D. One which requires the safekeeping of client monies
C. One which requires no question of judgement or advice.
Which party(ies) may be the principal of an insurance broker when the broker is dealing with a claim?
A. The insurer only.
B. The policyholder only.
C. The third party only.
D. Both the insurer and the policyholder
D. Both the insurer and the policyholder
What will be included in an insurance broker’s Terms of Business Agreement with a client concerning the duty of disclosure?
A. The broker confirms that all details disclosed by the insurer will be passed to the client.
B. The broker will always disclose the amount of commission to the client.
C. The client is assured that all material circumstances will be passed to the insurer.
D. The client is reminded of the potential consequences of non disclosure.
D. The client is reminded of the potential consequences of non disclosure.
What will be warranted within the regulatory status section of a Terms of Business Agreement
between an insurer and an insurance broker?
A. If either party becomes insolvent, it will notify the other party.
B. The date on which the insurance broker became authorised to transact business.
C. Whether the broker is a member of the Financial Ombudsman Service.
D. Whether the insurer is a member of the Association of British Insurers.
A. If either party becomes insolvent, it will notify the other party.
A firm of motor insurance brokers receives notification of a motor claim in which two separate clients are involved, each insured with a different insurer. What must the claims handler consider?
A. Whether it is necessary to notify each insurer of the incident.
B. Whether the terms of the agency agreement with the insurer are breached.
C. Whether there is a conflict of interest.
D. Which client is at fault and should therefore lose its no claims bonus entitlement.
C. Whether there is a conflict of interest.
Which document is used to detail each party’s duties in the insurance placement process when a retail insurance broker and a wholesale insurance broker are both involved in placing an insurance policy?
A. A demands and needs statement.
B. An initial disclosure document.
C. An insurance policy.
D. A Terms of Business Agreement.
D. A Terms of Business Agreement.
An insurance broker has two clients competing for limited market capacity. In order to manage a potential conflict of interest, what should the broker do?
A. Agree to receive a reduced fee or commission in respect of the placement of this business.
B. Disclose the details to both clients and obtain their agreement on how to proceed.
C. Disclose the details to potential insurers in order to negotiate increased capacity.
D. Report the situation to the Financial Conduct Authority for a ruling.
B. Disclose the details to both clients and obtain their agreement on how to proceed.
What type of task may an insurance broker outsource without seeking the client’s permission?
A. An additional service for which the client has paid a fee.
B. A service which requires a level of expertise outside the broker’s skill set.
C. One which requires no question of judgement or advice.
D. One which requires the safekeeping of client monies.
C. One which requires no question of judgement or advice.
Which party(ies) may be the principal of an insurance broker when the broker is dealing with a claim?
A. The insurer only.
B. The policyholder only.
C. The third party only.
D. Both the insurer and the policyholder.
D. Both the insurer and the policyholder.
What will be included in an insurance broker’s Terms of Business Agreement with a client concerning the duty of disclosure?
A. The broker confirms that all details disclosed by the insurer will be passed to the client.
B. The broker will always disclose the amount of commission to the client.
C. The client is assured that all material circumstances will be passed to the insurer.
D. The client is reminded of the potential consequences of non disclosure.
D. The client is reminded of the potential consequences of non disclosure.
What will be warranted within the regulatory status section of a Terms of Business Agreement between an insurer and an insurance broker?
A. If either party becomes insolvent, it will notify the other party.
B. The date on which the insurance broker became authorised to transact business.
C. Whether the broker is a member of the Financial Ombudsman Service.
D. Whether the insurer is a member of the Association of British Insurers.
A. If either party becomes insolvent, it will notify the other party.
A firm of motor insurance brokers receives notification of a motor claim in which two separate clients are involved, each insured with a different insurer. What should the claims handler consider?
A.Whether it is necessary to notify each insurer of the incident.
B. Whether the terms of the agency agreement with the insurer are breached.
C. Whether there is a conflict of interest.
D.Which client is at fault and should therefore lose its no claims bonus entitlement.
C. Whether there is a conflict of interest.
