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LM2 > Insurance Intermediation in the London Market > Flashcards

Insurance Intermediation in the London Market Flashcards

1
Q

What is difference between retail and wholesale broker?

A

Retail: direct contact with insured/closest.

Wholesale: direct contact with insurer and retail broker.

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2
Q

Do single and multi tied agents operate in London Market?

A

No. UK based and usually high street.

Single tied- sells product for single insurer.

Multi tied- sells multiple products for different insurers. Only 1 insurer per product.

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3
Q

How is an independent intermediary different from other intermediaries?

A

London Market broker.

Not tied to insurer, best options in LM and outside.

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4
Q

What is a surplus lines broker?

A

Operates in the USA and acquires business rejected by local markets.

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5
Q

What is different about Lloyd’s broker?

A

Accredited by Lloyd’s in addition to approval from regulators.

Don’t have to be Lloyd’s broker to place business in LM.

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6
Q

What is an open market correspondent?

A

Intermediary that is not approved as Lloyd’s cover holder.

Business placed with Lloyd’s or via approved broker.

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7
Q

What are the main roles for brokers in the London Market?

A

-Review client requirements
-Identify good markets
-Compile MRC (summary of risk)
-Review quotes with client
-After client acceptance, ink on MRC, signing down the line.
-Premium timescale for clients
-Submit MRC and LPAN to Xchanging.
-Obtain signing number and date from ‘Accountjng and ‘Settlement’.
-Produce endorsement paperwork if changes to risk.

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8
Q

What two main digital tools are used in the placing process?

A

PPL (Placing Platform Limited)

Whitespace

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9
Q

What do brokers need to know about tax?

A

-What amount goes to insurers and tax authority.

-Tax overseas collected by overseas broker.

-Awareness that tax might come through with premium.

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10
Q

What is the purpose of a TOBA?

A

Terms of Business Agreement sets out how business is conducted between broker and insurer or broker and client.

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11
Q

What is included in a TOBA between a broker and insurer?

A

-Both warrant approval by regulators

-Broker authority on holding funds (premium), risk transfer.

-Brokerage agreement (amount)

-Accountability if broker pays taxes on insurer behalf.

-Both will comply with contract certainty and avoid financial crime

-Both will comply with data protection and GDPR

-Both will be heard in Court of Law

-Both will adopt conflict management procedures

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12
Q

What is included in a TOBA between a broker and client?

A

-Broker name and client identity

-Broker guidance on claims process

-Broker fee and brokerage

-Client duty of disclosure

-Broker risk transfer (hold money for insurer). Interest.

-Broker agreement with GDPR and Data Protection Act 2018

-Information on complaints process and FOS

-Pre determined dispute resolutions agreed by broker

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13
Q

How are brokers paid?

A

Flat fee: charged to client
Under FCA ICOBS brokers advise on fees expected

Brokerage: charged to insurer

Claims commission: 1% of claim total value (paid by insurer)

Coverholder commission: insurer pays profit commission

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14
Q

How is an agency agreement created?

A
  1. By written agreement
  2. By ratification (agent acts outside authority)
  3. By necessity (emergency agent acts on principal behalf)
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15
Q

What can principal do if agent acts outside authority?

A
  1. Nothing and accept actions.
  2. Agree action then claim against agent later.
  3. Reject action and open agent up to 3rd party claims
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16
Q

What are ethical/Chinese walls?

A

The process of managing Conflict of Interest.

Example: if broker (agent) has two principals (client) on one risk.

17
Q

What is the Insurance Distribution Directive 2018?

A

Originally EU, but now in UK law.

Regime which ensure intermediaries conduct business with honesty, fairness and professionalism.

Standards include disclosure on remuneration and no misleading info.

18
Q

Who does the IDD apply to?

A

-Sellers of insurance products

-Admin roles in contracts

-Ancillary insurance intermediaries

19
Q

What is the impact of Brexit on the IDD?

A

-Stricter cross-border entry into European markets.

-Heavy regulation on knowledge and competency of intermediaries operating in EU.

-UK companies have to set up offices in EU to continue conducting business with clients

20
Q

Why is IDD important?

A

Protects buyers of insurance

21
Q

Why is FCA important for intermediaries?

A

-Main UK regulatory body for all brokers.

-Handbook sets out guidelines on conducting insurance business.

E.g. Handling client money (Client Asset Rules/CASS).

22
Q

Under what framework does the FCA operate?

A

Three Pillars:

  1. Assess broker conduct and ensure market integrity.
  2. Follow event driven approach.
  3. Conduct overall review of issues and insurance products.
23
Q

Under FCA guidelines, how should brokers store client money?

A

Statutory Trust Account: storage of money only.

Non-Statutory Trust Account*: broker can fund payments out of account. E.g. claims.

*Non-stat accounts allow brokers to extend credit to clients.

24
Q

What is the Data Protection Act 2018 and GDPR?

A

UK legislation that seeks to protect people’s data.

Amended after Brexit, EU GDPR similar.

25
Q

What body has authority to issue punishment for data breaches?

A

Information Commissioners Office (ICO)

Fines up to £17.5m or 4% of global annual turnover

26
Q

Who does DPA and GDPR apply to?

A

Data controllers and processors in UK and Northern Ireland

27
Q

Under DPA and GDPR what is age limit for parental consent?

A

16

28
Q

What are main principles that must be followed under DPA?

A

-Lawfulness, transparency and fairness

-Limited purpose (why use?)

-Minimise data (is it necessary?)

-Accuracy

-Storage limitation

-Integrity and confidentiality

29
Q

What are the legal bases for processing data?

A
  1. Consent obtained freely
  2. Subject exists to process, e.g contract
  3. Legal obligation
  4. Vital interests
  5. Public interest
  6. Legitimate interest

Many of these bases relate to protection of life, firm, etc. main reason for processing data.

30
Q

What are your rights under UK GDPR law?

A

The Right:

-To be informed
-To access data (SAR)
-To rectification of inaccurate data
-To erase data if you want to
-To restrict processing of your data
-To data portability (reuse)
-To object to automated decision making and profitability

31
Q

What tools can be used to ensure compliance with GDPR?

A

Privacy by design-systems, services and products are created with data protection in mind.

Privacy by Impact Assessment-process where highest risks to individuals are identified and minimised.

32
Q

What is BIPAR? How is it relevant to business in LM?

A

European Federation of Insurance Intermediaries

Broker obligations to client during placing process.

E.g. Inform on how premium is calculated

LM2 (4 decks)

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