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C132- Broker Management Issues- Self Notes > Multiple Choice- Definitions- Made up > Flashcards

Multiple Choice- Definitions- Made up Flashcards

1
Q

An agent primarily acts on behalf of:

A. The insured in placing business with insurers
B. A person or entity to whom they are licensed and authorized to represent
C. The government to regulate insurance practices
D. A third-party vendor in insurance claims processing

A

Correct Answer: B

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2
Q

What distinguishes a broker from an agent?

A. Brokers require no licensing, while agents do
B. Brokers act on behalf of insurers, while agents act on behalf of insureds
C. Brokers are independent and act on behalf of insureds, while agents act on behalf of insurers
D. Brokers are salaried employees, while agents work on commission

A

Correct Answer: C

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3
Q

A shareholder in an insurance brokerage firm:

A. Is always involved in daily operations of the business
B. Owns part of the company through purchased shares
C. Has a fiduciary duty to insureds
D. Directly determines the brokerage’s insurance policies

A

Correct Answer: B

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4
Q

Which of the following is NOT a characteristic of a fiduciary?

A. Entrusted to act in another’s best interest
B. Held to a higher legal standard of honesty and diligence
C. May benefit financially from acting in another’s interest without disclosure
D. Has a legal obligation to manage property or funds on behalf of another

A

Correct Answer: C

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5
Q

The purpose of a fiduciary bond is to:

A. Guarantee that a fiduciary will perform their duties as required by law
B. Insure against liability for errors or omissions in professional duties
C. Protect personal information from unauthorized access
D. Ensure the fiduciary receives their compensation promptly

A

Correct Answer: A

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6
Q

Which of the following scenarios constitutes identity theft?

A. Hacking into a company’s server and stealing corporate data
B. Using someone else’s personal information for financial gain
C. Fraudulently obtaining auto insurance by lying about claims history
D. Stealing a physical wallet but not using its contents

A

Correct Answer: B

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7
Q

Cyber crime involves all the following EXCEPT:

A. Unauthorized access to data or systems
B. Fraudulent use of personal information
C. Denying service to legitimate users
D. Providing software updates to secure systems

A

Correct Answer: D

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8
Q

Under PIPEDA, businesses collecting personal information must:

A. Provide access to the collected information only to the government
B. Obtain consent and ensure the information is relevant and kept confidential
C. Share information with other organizations for marketing purposes
D. Disclose collected information without consent to expedite business

A

Correct Answer: B

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9
Q

Errors & Omissions insurance typically does NOT cover:

A. Financial losses caused by professional negligence
B. Bodily injury claims
C. Omissions in professional duties
D. Mistakes made during the delivery of professional services

A

Correct Answer: B

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10
Q

The law of agency establishes the relationship between:

A. Brokers and underwriters
B. Principals and the government
C. Agents or brokers and their principals
D. Insurance companies and claimants

A

Correct Answer: C

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11
Q

Which of the following best defines “standard of care”?

A. The legal authority granted to an insurance broker
B. The expected level of conduct for a specific professional group
C. The amount of effort required to sell a policy
D. A guideline that guarantees profit in a brokerage

A

Correct Answer: B

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12
Q

The principle of utmost good faith requires:

A. Insureds to disclose all material facts truthfully
B. Insurers to settle claims promptly
C. Brokers to minimize errors in policy documentation
D. Agents to act solely in their own interest

A

Correct Answer: A

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13
Q

In the insurance industry, a producer is another term for:

A. A claims adjuster
B. A broker or agent who sells insurance
C. An underwriter responsible for policy approval
D. A marketing manager for an insurer

A

Correct Answer: B

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14
Q

Under the broker bill system, the broker:

A. Bills the insured and transmits payments to the insurer
B. Collects premiums monthly through direct debit
C. Relies on the insurer to handle premium collection
D. Only collects commissions from the insurer

A

Correct Answer: A

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15
Q

A key characteristic of the direct bill system is:

A. Premiums are collected by the broker
B. Insurers handle all premium collection directly from the insured
C. Brokers retain full responsibility for transmitting payments
D. Premiums must be paid annually in one lump sum

A

Correct Answer: B

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16
Q

What is a contingency commissions agreement?

A. An agreement requiring brokers to meet monthly sales quotas
B. A bonus offered to brokers for exceptional profits or volume
C. A mandatory payment from brokers to insurers
D. A standard commission paid for all policies sold

A

Correct Answer: B

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17
Q

A cancellation clause typically outlines:

A. The broker’s commission structure
B. The terms and process for policy termination
C. The limits of liability under a policy
D. The requirements for premium payments

A

Correct Answer: B

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18
Q

A broker’s legal authority comes from:

A. Their personal credentials and experience
B. Common law or Civil Code and the agency contract
C. The insured’s instructions only
D. Provincial government mandates exclusively

A

Correct Answer: B

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19
Q

Express authority is:

A. Permission implied through conduct
B. Authority granted explicitly in oral or written form
C. Authority granted only by provincial regulatory bodies
D. Permission assumed by a broker without agreement

A

Correct Answer: B

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20
Q

Implied authority allows a broker to:

A. Perform acts consistent with the principal’s general instructions
B. Take actions without the principal’s knowledge or approval
C. Act solely based on their personal judgment
D. Create contracts with other principals independently

A

Correct Answer: A

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21
Q

A general agent is primarily responsible for:

A. Appointing sub-agents within their exclusive territory
B. Directly underwriting policies
C. Collecting premiums on behalf of insurers
D. Representing multiple insurance companies in one region

A

Correct Answer: A

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22
Q

Which of the following is a key responsibility of an MGA?

A. Underwriting and issuing claims payments directly to insureds
B. Soliciting business and supervising agents on behalf of insurers
C. Providing legal advice to insureds on coverage disputes
D. Collecting premiums and managing claims adjustments exclusively

A

Correct Answer: B

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23
Q

What distinguishes an additional named insured from an additional insured?

A. Additional named insureds have more rights and responsibilities under the policy
B. Additional insureds can file claims without the named insured’s approval
C. Additional named insureds are only listed in endorsements, not declarations
D. Additional insureds are automatically included in every insurance policy

A

Correct Answer: A

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24
Q

Which of the following is an example of a material fact?

A. The insured’s marital status
B. The replacement value of a property
C. The insured’s preferred method of payment
D. The size of the insurer’s market share

A

Correct Answer: B

25
Q

Misrepresentation in insurance occurs when:

A. The applicant intentionally provides false information about a non-material fact
B. A material fact is omitted or incorrectly stated, intentionally or unintentionally
C. An insured disagrees with the insurer’s premium calculation
D. The insurer refuses to disclose the underwriting process

A

Correct Answer: B

26
Q

The term “prescription” in insurance refers to:

A. The period within which a claim may be brought by the policyholder
B. The process of writing a new insurance policy
C. The penalties imposed for late premium payments
D. The requirement to disclose pre-existing conditions

A

Correct Answer: A

27
Q

Which of the following best describes an examination for discovery?

A. A formal process where parties share all relevant information and documents in a civil case
B. An investigation by an insurer to assess the legitimacy of a claim
C. A mandatory training session for insurance brokers on policy endorsements
D. A negotiation between an insurer and the insured to settle a claim

A

Correct Answer: A

28
Q

An employer may be held vicariously liable when:

A. An employee commits a wrongful act during the course of their employment
B. The employer refuses to settle an employee’s personal legal disputes
C. A policyholder fails to disclose material facts about their employees
D. An employer delegates work to an independent contractor

A

Correct Answer: A

29
Q

A claims-made insurance policy covers:

A. Any claims arising from incidents during the policy period, regardless of when they are reported
B. Only claims reported during the policy period, regardless of when the incidents occurred
C. Claims arising from incidents that occurred prior to the policy period
D. All claims that exceed the deductible during the policy period

A

Correct Answer: B

30
Q

Excess insurance is triggered when:

A. The insured pays the deductible
B. The loss exceeds the limits of all underlying insurance policies
C. The primary insurer denies a claim
D. The insured has multiple policies for the same risk

A

Correct Answer: B

31
Q

What is the primary purpose of a deductible in an insurance policy?

A. To increase the insured’s premium payment
B. To share the financial risk between the insured and the insurer
C. To eliminate small claims from being reported
D. To guarantee that the insurer will always recover losses

A

Correct Answer: B

32
Q

What is the primary purpose of a mission statement?

A. To outline the financial goals of the organization
B. To declare core values, principles, and philosophy in dealing with clients and employees
C. To predict future trends in the industry
D. To detail the organizational hierarchy and roles

A

Correct Answer: B

33
Q

A vision statement is primarily focused on:

A. Detailing the company’s core values and current strategies
B. Describing the organization’s aspirations for its future and the industry it serves
C. Listing all of the services and products the company offers
D. Explaining how the organization plans to cut costs

A

Correct Answer: B

34
Q

Which of the following is NOT a component of PEST analysis?
A. Political
B. Economic
C. Strengths
D. Technological

A

Correct Answer: C
Political, Economic, Social & Technological

35
Q

SWOT analysis evaluates which of the following elements?

A. Successes, Weaknesses, Opportunities, Threats
B. Strengths, Weaknesses, Opportunities, Threats
C. Strategic Plans, Weak Points, Opportunities, Targets
D. Strengths, Worries, Opportunities, Trends

A

Correct Answer: B
Strengths, Weaknesses, Opportunities, and Treats.

36
Q

The current ratio measures:

A. The ratio of long-term assets to liabilities
B. The ratio of current assets to current liabilities
C. The profitability of an organization over time
D. The total revenue generated from current clients

A

Correct Answer: B

37
Q

In the context of insurance, a prospect is:

A. A potential buyer of insurance
B. A current policyholder considering renewal
C. A broker or agent seeking to expand their territory
D. An insurer evaluating its risk exposure

A

Correct Answer: A

38
Q

An override commission is typically paid for:

A. Retaining clients for an extended period
B. Transferring a book of business or supervising sub-agents in a region
C. Selling personal insurance to a high-value customer
D. Resolving bad debt from a policyholder

A

Correct Answer: B

39
Q

Which statement best describes a contingent commission?

A. A payment based on the total volume of business written by the broker
B. A bonus paid to an agent based on the insurer’s profitability from the agent’s business
C. A fee paid for exceeding sales targets in a given fiscal year
D. A percentage of the premium collected for placing high-risk policies

A

Correct Answer: B

40
Q

Risk management in the insurance context involves:

A. Avoiding all high-risk investments
B. Analyzing and quantifying potential losses to decide on an appropriate action
C. Offering discounts to policyholders who pose minimal risk
D. Increasing insurance premiums for risky policyholders

A

Correct Answer: B

41
Q

In an insurance context, bad debt refers to:

A. Overdue premiums that have been paid after a claim is filed
B. Any account that is considered uncollectible
C. Claims filed after the policy expiration date
D. Payments made by insurers to settle disputes

A

Correct Answer: B

42
Q

Which of the following characteristics best describes a hard market?

A. Increased competition among insurers and decreasing premiums
B. Insurers reducing coverage capacity and raising premiums
C. Enhanced underwriting standards leading to broader coverage availability
D. Insurers expanding their willingness to write more policies

A

Correct Answer: B

43
Q

What is the defining feature of a soft market?

A. Supply decreases, and premiums rise
B. Insurers tighten underwriting criteria to reduce risk
C. Supply increases, and premiums fall
D. Insurers reduce claims payouts to remain competitive

A

Correct Answer: C

44
Q

Cyber risk includes:

A. Financial loss, business disruption, and reputational damage due to IT system failure
B. Claims made against a company for poor cybersecurity policies
C. Damages to physical property caused by cyber attacks
D. The cost of upgrading outdated IT systems

A

Correct Answer: A

45
Q

A wholesale broker primarily:

A. Provides retail clients with quotes from multiple insurers
B. Acts as an intermediary between retail brokers/agents and insurers
C. Handles claims on behalf of specialized insurers
D. Performs underwriting duties for retail agents

A

Correct Answer: B

46
Q

A hold-harmless agreement is also known as:

A. A liability waiver
B. An indemnity agreement
C. A coverage exclusion clause
D. A reciprocal insurance exchange

A

Correct Answer: B

47
Q

What is a primary characteristic of a captive insurance company?

A. It provides coverage exclusively for unrelated third-party risks
B. It is controlled by its owners to insure their specific risks
C. It only operates during soft market phases
D. It avoids regulatory oversight by operating offshore

A

Correct Answer: B

48
Q

A single-owned (single-parent) captive insures:

A. Risks of unrelated third parties
B. Risks of its owner and the owner’s subsidiaries
C. Risks of a specific industry group or association
D. Only high-severity, low-frequency risks

A

Correct Answer: B

49
Q

A group (multi-parent) captive is owned by:

A. A single corporation and its subsidiaries
B. Multiple unrelated organizations that insure their shared risks
C. A central government authority
D. A group of clients represented by a retail broker

A

Correct Answer: B

50
Q

An association captive typically serves:

A. Insurance agencies and brokers looking to insure client risks
B. A group of unrelated businesses sharing similar risks
C. Organizations within a specific industry or service sector
D. Captive insurance providers managing high-risk pools

A

Correct Answer: C

51
Q

An agency captive is owned by:

A. Insurance agencies or brokers to insure their clients’ risks
B. A government agency to regulate premium collection
C. An association of unrelated businesses for shared coverage
D. A third-party reinsurer specializing in complex risks

A

Correct Answer: A

52
Q

Which of the following describes a rent-a-captive?

A. A captive insurance company that provides temporary policies
B. A captive available for use by unrelated organizations for a fee
C. A captive insurance company owned by multiple parent organizations
D. A temporary insurance pool for short-term risks

A

Correct Answer: B

53
Q

A reciprocal insurance exchange functions by:

A. Sharing insurance costs among subscribers in the group
B. Transferring risks from one insurer to another
C. Offering discounted policies in soft market conditions
D. Establishing a centralized reinsurer for all subscribers

A

Correct Answer: A

54
Q

Retrocession refers to:

A. Transferring a risk from one reinsurer to another reinsurer
B. Canceling an insurance policy mid-term
C. Sharing a risk between multiple primary insurers
D. Returning unused premiums to policyholders

A

Correct Answer: A

55
Q

What is the primary purpose of a proposal in insurance?

A. To request premium payments from a client
B. To outline an insurable risk for underwriter approval
C. To cancel a policy pending the issuance of a new one
D. To cross-sell additional policies to existing clients

A

Correct Answer: B

56
Q

Which of the following statements is true about a binder?

A. It is a temporary insurance contract pending the issuance of a formal policy
B. It cannot be cancelled once issued
C. It is only used for cross-selling purposes
D. It provides coverage for risks that underwriters have rejected

A

Correct Answer: A

57
Q

Cross-selling in insurance refers to:

A. Selling an upgraded version of an existing policy
B. Providing multiple discounts to attract new clients
C. Offering additional coverage or lines of insurance to existing clients
D. Persuading clients to cancel policies with competitors

A

Correct Answer: C

58
Q

What does upselling in insurance typically involve?

A. Encouraging clients to purchase higher limits or enhanced coverage
B. Selling multiple lines of insurance to a single client
C. Offering a discounted version of an existing policy
D. Cancelling an outdated policy and offering a new one

A

Correct Answer: A

C132- Broker Management Issues- Self Notes (14 decks)

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