M81 Chapter 1 - Legal Environment

Question 1

Give examples of where the Broker is the Agent of the Insurer (rather than the insured)?

Answer 1

Issuing Cover notes
Underwriting binding Authorities
Claims delegated Authorities
Completion of Proposals - Where they insist on behalf of the Insured.

Question 2

What under general law of agency is a broker required to do?

PEAMA

Answer 2

Perform all principles lawful instructions in a timely fashion

Exercise reasonable skill and care in the performance of those instructions

Act at all times in the best interest of the principal, avoid conflicts of interest and disclose any potential conflicts.

Make full disclosure to their principal interest in any transaction

Account to their principal for monies received on their behalf

Question 3

When can a broker delegate duties of agency?

Answer 3

Tasks that are ‘mechanical’ and not ‘judgemental’ EG Accounts, Compliance, Claims handling

Question 4

What does Fiduciary duties mean?

Answer 4

The broker must not use the relationship with their principles to their own benefit. They must account for all monies, there can be no ‘secret profits’ with all earnings disclosed.

The principal can recover the ‘secret profit’ under the prevention of corruption act 1906

Question 5

Where can conflicts of interest arise for brokers?

Answer 5

Close links with an Insurer 
Personal relationships
Insurance and re-insurance
Lloyds - Brokers and Underwriters
Contingent commissions and overrides - EG Profit share
Binding authorities/Claims handling

Question 6

Under CIDRA (Consumers) when is the broker acting on behalf of the insurer?

Answer 6

Is an AR
Has expressed authority to collect information as their agent
Has expressed authority to enter into contracts (bind cover)

Question 7

Under CIDRA (Consumers) when is the broker acting on behalf of the INSURED?

Answer 7

Gives impartial advice
Conducts fair analyses of the market
Consumer pays the broker a fee

Question 8

What did the IA introduce?

Answer 8

1. The principle of ‘Fair Representation’

2. Changed Warranties so that when breach, cover is only suspended.

Question 9

Can you ‘Contract out’ of CIDRA or IA?

Answer 9

CIDRA - No

IA - Yes. however the change must be brought to the intention of the insured.

Question 10

Enterprise Act 2016 - What did it do?

Answer 10

Brought in provisions for claimants to seek damages for late claim payment. If unreasonable

Insurers can Contract out, as per IA.

Question 11

What are the Data Protection 6 Principles?

Answer 11

1. Processed lawfully, fairly and transparent manner
2. Collect for specific, explicit and legitimate purposes
3. Adequate, relevant and restricted to what is necessary
4. Accurate and up to date
5. Kept in a form that keeps the records for no longer than is required
6. Processed in a manner that keeps the data safe

Question 12

Individuals rights under GDPR

BARERDTR

Answer 12

Be informed
Access
Rectification
Erasure
Restrict processing
data portability
to object 
Rights in relation to automated decision making and profiling

Question 13

Financial Crime - What acts apply?

APMSS

Answer 13

Anti-terrorism and Crime - 2001

Proceeds of Crime Act (POCA) - 2002

Money Laundering, Terrorist Financing and Transfer of Funds Regs - 2017

Serious Organised Crime and Police Act 2005.

Sanctions and Anti-Money Laundering Act 2018

Question 14

Fraud Act 2006 - What is fraud?

Answer 14

False Representation
Failure to disclose information
Abuse of position

Question 15

What will you find in a TOBA between Brokers?

Answer 15

Each broker is responsible for its own regulatory status to its client

The requirement to provide certain documentation to the client

Client money procedures & safeguards

Fee’s and Charges and disclosures

Complaints procedures

Claims procedures

Question 16

Are TOBA’s legally required between brokers?

Answer 16

No, but it is good practice.