LO 10: Understanding the brokers role in the way business is conducted in the London Market

Question 1

whos involved in a straight forward insurance transaction

Answer 1

• insurer
• insured

Question 2

where the broker comes in

Answer 2

• buyer is not well versed in market and seeks an expert advisor
• can represent the insured in negotations and communication
• offers independent impartial advise on cover, insurance placing and claim making

Question 3

principal and agent

Answer 3

an agent (broker) is authorised by a principal (insured) to bring them into a contractual agreement with a third party (insurer)

Question 4

how agent/principal relationships can be created

Answer 4

• consent (TOBA or implied by the payment of commision)
• necessity (when entrusted with anothers goods)
• ratification (principal accepts work done on their behalf even if it was outside the agents authority, must be a full acceptance - no cherry picking)

Question 5

broker agency for insurer?

Answer 5

TOBA can be between brokers and insurers as well eg.
- claims settlement authority
- premium collection
- bind cover (accept risks as if they were the insurer)

Question 6

duties of the agent

Answer 6

• obedience
• personal performance (cant delegate duties)
• due care and skill
• good faith
• accountability

Question 7

duties of the principal

Answer 7

• renumeration
• indemnity (for expenses and losses when acting on the principals behalf)

Question 8

undisclosed principal

Answer 8

the agent acts on the behalf of client but acts as if its for them

not super common in the london market

Question 9

actual authority

Answer 9

• express authority = from toba which can be oral or written
• implied authority = action thats required to fulfill express authority

Question 10

apparent authority

Answer 10

expected due to role or title and thus assumed by a third party who can have know knowledge of the actualn authority

can apply for a period after the termination of agreement

Question 11

ways for agency termination

Answer 11

• mutual agreement
• termination by either party
• death, bankruptcy, insanity of either

Question 13

brokerage

Answer 13

% of the premiums, paid by the insurer
- if a client fee is charged this is returned to the client

Question 14

services provided by brokers to insured

Answer 14

• review client needs
• advise whether the risk is insurable
• decide on the best market for the risk
• negotiate terms and conditions
• provide advice to the client
• negotiate renewals
• advise and assist clients in relation to claims matters
• risk management advice
• recoveries

Question 15

services provided by intermediaries to insurers

Answer 15

• binding risks (delegate authority schemes, often have some kind of profit sharing with the intermediary)
• issuing documents
• settling claims
• collecting premium

Question 16

market reform contract

Answer 16

summary of the risk

• aka a slip
• can be supplemented with proposal forms and survey reports

Question 17

insurance act 2015 implications

Answer 17

things known by the broker (intermediary), excluding the confidential, is assumed to be known by their client

Question 18

broker market restrictions

Answer 18

there are none, they can place the risk anywhere but certainty of the payment of claims should be conisidered

Question 19

inking

Answer 19

confirmation of an insurers line on the slip
- they can get a copy of the slip at that point

Question 20

where does the broker submit risk information

Answer 20

Xchanging Ins-sure Services (aka bureau)
- manages central market database for risks in Lloyds and IUA companies
- facilitates the transfer of premiums from the brokers account to the insurer
- can submitted electronically using accounting and settlement

Question 21

info broker submits to XIS

Answer 21

• slip
• premium (presented using london premium advanced notes)
• tax payable

Question 22

unique market reference

Answer 22

unique code given to the risk by the broker
- given to insurers along with other XIS reference codes

Question 23

marine insuance act 1906

Answer 23

broker is responsible for the payment of premiums
- not invoked

Question 24

evidence of cover for the insured
- when
- fulfills?

Answer 24

• mrc
• broker insurance document
• formal policy (if insurers require it)

should be provided within 30 days of inception

fulfills contract certainty

Question 25

reporting changes to the risk

Answer 25

client informs broker
broker negotiates new agreement
agreement submitted to XIS

Question 26

claims process

Answer 26

• broker informed by client (helps with maintaining evidence and practical actions, and claim presentation)
• broker tells relevant insurers (agreement parties)
• broker appoints experts (surveyors, loss adjuster, lawyers) and reports results
• negotiation to smooth the claims process
• submit claims to Xchanging Claims Services (lloyds central claims database, ) via the Electronic Claims File system
• broker receives money
• broker pays client
• broker stays in contact with insurer for any subrogation

Question 27

claim money movment

Answer 27

done by XCS
- requires the correct combination of insurer agreement
- pays out expert fees as well
- generally paid to broker

Question 28

enterprise act 2016

Answer 28

for insured who think they got paid late
- a year to file for damages

must consider:
–type of insurance
–size/complexity of claim
–factors outside of the insurers control