LO 10: Understanding the brokers role in the way business is conducted in the London Market Flashcards
whos involved in a straight forward insurance transaction
- insurer
- insured
where the broker comes in
- 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
principal and agent
an agent (broker) is authorised by a principal (insured) to bring them into a contractual agreement with a third party (insurer)
how agent/principal relationships can be created
- 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)
broker agency for insurer?
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)
duties of the agent
- obedience
- personal performance (cant delegate duties)
- due care and skill
- good faith
- accountability
duties of the principal
- renumeration
- indemnity (for expenses and losses when acting on the principals behalf)
undisclosed principal
the agent acts on the behalf of client but acts as if its for them
not super common in the london market
actual authority
- express authority = from toba which can be oral or written
- implied authority = action thats required to fulfill express authority
apparent authority
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
ways for agency termination
- mutual agreement
- termination by either party
- death, bankruptcy, insanity of either
brokerage
% of the premiums, paid by the insurer
- if a client fee is charged this is returned to the client
services provided by brokers to insured
- 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
services provided by intermediaries to insurers
- binding risks (delegate authority schemes, often have some kind of profit sharing with the intermediary)
- issuing documents
- settling claims
- collecting premium
market reform contract
summary of the risk
- aka a slip
- can be supplemented with proposal forms and survey reports
insurance act 2015 implications
things known by the broker (intermediary), excluding the confidential, is assumed to be known by their client
broker market restrictions
there are none, they can place the risk anywhere but certainty of the payment of claims should be conisidered
inking
confirmation of an insurers line on the slip
- they can get a copy of the slip at that point
where does the broker submit risk information
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
info broker submits to XIS
- slip
- premium (presented using london premium advanced notes)
- tax payable
unique market reference
unique code given to the risk by the broker
- given to insurers along with other XIS reference codes
marine insuance act 1906
broker is responsible for the payment of premiums
- not invoked
evidence of cover for the insured
- when
- fulfills?
- mrc
- broker insurance document
- formal policy (if insurers require it)
should be provided within 30 days of inception
fulfills contract certainty
reporting changes to the risk
client informs broker
broker negotiates new agreement
agreement submitted to XIS
claims process
- 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
claim money movment
done by XCS
- requires the correct combination of insurer agreement
- pays out expert fees as well
- generally paid to broker
enterprise act 2016
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
