Overall Flashcards
General insurance is referred to as?
Property and casualty insurance
A client wants terrorism insurance for his hotel; however, the insurance companies that the broker deals with do not provide such coverage. The broker can obtain such coverage from?
Wholesale brokers who specialize in non standard or difficult to place risks
Material info disclosed to a broker or agent by a client is deemed to be?
Knowledge of the insurer
As an insurance professional, your role throughout the interaction with your client is?
Contact person, salesperson, insurance advisor, and service provider
What is utmost good faith
Is the legal principle that requires all people involved in an insurance contract to act with the highest ethical standard and requires full disclosure by the insured and brokers/agents of all information material to the contract
What is errors and omissions?
to have done something wrong to have not done something you should have done
What is the best defense against errors and omissions?
documentation: always keep a record in your file detailing whom you talked to, the date the discussion took place, what you talked about and the subsequent actions that you have taken
communications: communicate clearly with your clients what you will do on their behalf, and confirm action taken. Provide your insurers with prompt, complete instructions and information. Act within the scope of your authority and competence.
What are some possible causes of E&O?
?inadequate coverage
?the agent/broker did not understand the nature of the risk and did not obtain the full detail of the risk by asking the required questions
?the agent/broker did not pursue placing coverage
?wrongly advised the client that coverage was not available
?or wrongly advised the client that coverage was already in place when it was not
?wrong coverage ex. client requires replacement cost on his COED but the broker arranged coverage based on ACV
After the broker/agent has pre?qualified the client, what actions must he or she take to fulfill the insurance negotiating process?
? review the clients insurance portfolio
?solicit information from the client as required
?offer options to improve coverage, if possible
?carry out the clients instructions
?arrange insurance coverage
?arrange changes to existing coverage
?arrange for cancellation or lapse of coverage
Define risk
The possibility of loss or damage to property, or the change of incurring liability. Individuals transfer their risks, business and personal, to insurance companies by buying insurance policies.
What is an insurance policy?
A contract formed between an insurance company (the insurer) and a customer (the insured), in which the insurer reimburses the insured for specified losses.
What are the three major categories of insurance?
Social insurance
Life and health insurance
General insurance/property and casualty insurance
What is an insurance intermediary?
Also known as agents and brokers, they help in identifying insurance needs, matching those needs with products that are available, and facilitating insurance contracts to the satisfaction of both insurers and insureds.
What limits the type of insurance an intermediary can provide?
Insurance intermediaries can deal with all of the lines of insurance, provided they are licensed to do so
What are the difference between an agent and a broker?
Agents? generally sell and service the insurance policies offered by a single insurer. The agents are either employed by an insurer or operate independently on contract with only one insurer.
Brokers? Independent business people, own brokerages. The brokerage is paid commission for each policy it issues on behalf of its clients. Sometimes will charge a fee to clients for its services, rather then taking a commission from the insurer. Brokerages operate with multiple insurers.
? both act as intermediaries
?both act to facilitate the purchase of an insurance policy
?both service the account
What is the difference between an employed agent and an independent agent?
Employed agents? work directly for the insurer. These insurers are known as direct writers, because they sell insurance directly to the public. The insurance policies sold, business written and client list belong to the insurer.
Independent Agents? Maintain separate offices from the one insurer they deal with. These companies are known as agencies. The business and client list usually belong to the insurer, and commissions for new business is generally set higher to encourage production.
When would a wholesale broker be used?
When a clients risk cannot be adequately covered through the one or more insurers that a broker or agent represents, the broker or agent may be able to arrange coverage through a wholesale broker.
ex. golf courses, hotels or motels, fine art galleries
What is a non standard risk
Client could have poor loss history, or the risks, by their very nature, could be hard to place in regular markets. Non standard risks require a higher degree of underwriting expertise not generally available from the regular insurance markets.
Define agent as it is used in the Law of Agency
An agent is a person who is authorized to act on behalf of another. Under common law, agents are employed to secure contracts or act for their employers in contractual matters. Consequently, agents may be employees, or they may be independent business people.
What is a mandate, mandator and madatary?
mandate? a contract
mandator? the principal
mandatory? the agent
.
What are the responsibilities of an insurance intermediary?
The dual responsibilities of the intermediary role places obligations to act as both agent to the insurer and as principal and agent for the insured at different points in the insurance transaction.
?when soliciting insurance applications, describing types of coverage and policies available, and interpreting policy provisions, and interpreting policies provisions, intermediaries act for the insurer
?when providing insurance advise, carrying out specific tasks requested by a client, such as increasing coverage, and monitoring a clients insurance needs, they act for the client
From what document does an intermediary receive authority?
agency/brokerage contract or agreement
What is the purpose of the agency/brokerage contract or agreement?
Details the authority, obligations, rights and duties of each party. The contract is the basis of the relationship between the broker or independent agent and the insurer
Define duty of care
A legal duty that one owes to another, arising out of the principal relationship. Standards are prescribed by common law, the civil code of quebec, and statute law.
When acting as an insurance intermediary, perfection is not required, but a reasonable degree of care?that of a reasonable competent agent? is expected.
How are the rights of consumers protected?
Common law, civil code and statutory duties flow from the responsibilities assumed by intermediaries: what they say they will do, what they do, and to what extent clients have relied on statements made by them. These laws protect the rights of consumers. When it comes to analyzing to whom the duty of care is owed, the insurance professional can expect that the clients interests should come above those of the insurer.
What is an insurance intermediarys functions?
prospect for potential new clients qualify the client advise the client facilitate the application for insurance obtain instructions from the client negotiate insurance facilitate the claims process
How can you identify potential clients?
target marketing? developing a sales strategy to target a specific segment of the population
market segmentation? identifying the potential insureds you could approach based on your target marketing plan
advertising? advertising your services in relevant publications or by creating a sales publication to be distributed
cold?calling? contacting people you have never met, to introduce yourself and offer your services
referrals? selling to friends or family members of existing clients based on the clients recommendations
What advice does an insurance intermediary offer to a client?
?evaluate clients exposures and advise what improvements can be made to the clients current insurance program
?recommend insurance
?advise of all insurance available
? advise to control risk
What are some of the steps in the insurance negotiating process?
?review the clients insurance portfolio
?solicit information from the client, as required
?offer options to improve coverage, if possible
? carry out the clients instructions
?arrange insurance coverage
?arrange changes to existing coverage
?arrange for cancellation or lapsing of coverage
What actions and responsibilities do you have when a claim is reported?
?reassure your client that you are there to assist in notifying the insurer of the claim and in explaining the claims process to the client
?Review the situation and offer any immediate assistance if necessary
?avoid making any comments on the validity of a claim as brokers and agents do not confirm or deny coverage
?outline the basic claims process and advise your client of what to expect
?notify the insurer
? monitor the progress of the claim
? call the client to verify that the claim is progressing to his or her satisfaction
Why do licensing requirements for intermediaries exist in every jurisdiction?
They are protection for the consumer to ensure that those who advise the public on insurance matters are qualified to do so.
What is restrictive and progressive licensing?
Allows the license holder to transact business in only certain classes of insurance, and some offer different levels of licensing.
The first level permits the licensee to work under the supervision of a more experienced individual and handle only certain types of insurance.
After completing further study and obtaining work experience, individuals are permitted to write the next level of examination.
What characterizes a professional insurance agent or broker?
Must be well informed, comply with the law and relevant rules of insurance, and operate with the utmost good faith.
Under the code of ethics, what duties are brokers expected to render to their clients? To their insurers?
Duty to clients? provide the coverage best suited to the clients needs, not be swayed by remunerative gain, not take advantage of clients lack of knowledge or inexperience, hold information in strict confidence and competently perform services undertaken, which requires broker to be well educated and indicates the needs for continuing education
Duties to the insurer? be honest and trustworthy, stay within the terms of the broker agreement and disclose all relevant material facts to the insurer, even if it will make placing the risk difficult
What is a material fact
Any information that could affect the contract of insurance to an extent that, if it were disclosed, it wold change the agreement between the insurer and the insured. Material facts must always be disclosed. If such facts are not revealed when asked about, the policy involved could become void as a result, meaning the clients claim will not be paid.
What is PIPEDA?
The Personal Information Protections and Electronic Documents Act?governs the collection and use of personal information. PIPEDA, a federal statue, states that personal information collected must be relevant, and that all information collected must be held in the strictest of confidence.
What are the common elements of customer service?
Timeliness, clarity in conveying information, accuracy, courtesy and professional manners.
What skills are required for effective communication?
verbal? body language, tone, and the way words are delivered, not just through the words themselves
Written? email, letters, faxes etc.
Active listening? listen to what is being said, interpreting how it is being said, processing non verbal cues, questioning those parts that you did not understand, and confirming that what you did absorb was understood correctly.
What are matching and mirroring in verbal communication?
When communicating in person with a client if you tend to assume at least some of the same body positions or postures, this is matching. When similar actions are performed, as if looking in a mirror, this is called mirroring.
What are some of the cues to listen to during a telephone conversation?
?tone
?vocabulary
?rate of speech
How would you prepare for a telephone conversation with a client?
make available the things you will need ? pad of paper ?pens ?access to the computer files ?client files for reference ?a calculator ?any forms or applications you may need
How would you counter a clients reaction to bad news?
Remain calm, clarify the clients position, keep the discussion focused on the facts, and avoid falling into the traps inherent to the specific situation.
Spend time with your client, appreciate their feelings, have empathy for the situation
What is a target market? What is a lead?
A source of potential clients, this may be further segmented into groups identifiable by age, socio?economic backgrounds, personal interests, business pursuits, coverage needs etc.A Lead is a member of a group of potential clients that fits a certain profile, which you have determined as your marketing target.
What information do you require to qualify a client?
?name ?address and email address ?phone numbers ?family information ?interests and hobbies
What are three sources of clients?
Referrals? majority of brokers business comes from referrals. Because existing clients have referred them, new prospects are generally from the same target segment.
Advertising/walk ins? advertising in the local media or yellow pages can generate clients. If your brokerage operates a storefront business clients may see your office and come in.
Cold calling? making contact with a person you do not know in order to introduce yourself and your services.
What is an X date and what is the importance of collecting them?
also known as an expiry date, tracking expiry dates is a way to form a database of prospective customers.
How long are files retained?
There are no provincial regulations that specify how long insurance documents must be kept or how they are to be kept. Generally insurance professionals are guided by the prescription periods applicable to various classes of insurance when determining the length of time that documents should be retained.
What is a prescription period
In law, is a time after which a cause of action ceases. In insurance, it is the time after which a claim may not be brought.
What is risk management?
The minimization (at a cost) of the detrimental effects of risk by identifying the risk, measuring the risk, and controlling the risk.
What is risk analysis?
Assessing your potential clients exposures in the broader context of risk. this includes, risk to physical property, financial exposures to liability risks, and the assessment of the potential client.
What are some property risks a client could face?
Physical property refers to any material goods a client may own. These can range from high value items such as a car or house, to a clients collection of antique dolls. Anything that would result in a financial loss to the client should loss or damage occur
What are some liability risks a client could face?
Liability refers to a legal obligation. Liability exists where an individual has a responsibility for the safety or property of another. Not only are individuals responsible for their own actions, however unintentional, they are also responsible for the actions of their children and pets.
When evaluating loss exposures, what are the three main aspects a broker should consider?
?The subject of insurance exposed to loss
?the perils that might give rise to loss
?the estimated financial impact a loss will cause
What is the subject of insurance?
What is exposed to loss. ex. house, car, personal property, liability
What is a peril?
An event that could cause a loss ex. fire, theft windstorm, explosion, earthquake, and vandalism.
What are the types of financial impact that can result from a loss?
direct losses? loss of property and contents
indirect losses? financial losses caused not by the event itself but as a consequence of the property being destroyed. ex. a small restaurant is destroyed by fire, as they can not operate due to this loss they will also have a loss of income.
Define two major types of hazard
A hazard is a condition that may cause a peril to occur.
physical hazard? a factor that may influence the outcome of a loss. It increased the change of a peril affecting the insured, or makes the damage resulting from the peril more severe. Usually it can be quite readily identified and measured and often it can be completely removed or reduced by preventive methods. ex. flammable materials stored near a heating system increase the likelihood of a fire occurring and spreading more quickly to other areas of the building.
Moral Hazard? refers to conditions attributable to the human element. It grows out of attitudes, and depends on the character of insureds and their employees. It can involve outright dishonesty, which could lead to fraud, but it is also concerned with carelessness and poor management. It may lead to the occurrence of a peril, or to making the resultant damage from a loss more severe.
What is the difference between moral hazard and morale hazard?
moral hazards are the characteristics of the insured (or applicant) that increase the probability or severity of a loss. ex. a client that has gone bankrupt several times may benefit financially from an insurance loss and would then find making an insurance claim attractive.
Morale hazard relates not to the dishonesty and the like, but to a poor attitude on the part of the insured. Ex. poor upkeep of the premises, poor maintenance of equipment, a don’t care outlook, hiring low quality employees or lack of supervision.
What are the benefits of meeting a client in person?
? establish a one on one relationship
?if meeting at the clients residence or place of business you also have the opportunity to inspect the premises as part of your assessment.
?affords you the opportunity to secure a premium deposit immediately.
What is risk control?
An aspect of risk management, involves suggesting safety precautions for the identified loss exposure that can help prevent perils from occurring, or that can help reduce the extent of loss arising from a particular peril.
Why should brokers inform their clients about loss control or loss prevention techniques?
Using risk control techniques will reduce the amount of money that insurers pay in claims, which improves the financial results of the insurers and ultimately reduces insurance costs to consumers. Remind clients that extra care and investment now may save them the time and trouble of claims made later as a result of possibly preventable peril.
What is an application?
A request for insurance that introduces the applicant to the insurance company. It also identifies your brokerage as the broker of record, and identifies the insurer to whom you are directing the request for coverage.
Who is an applicant?
Can be a new client who has no coverage at all, is looking for an alternate quote for whatever policy is currently expiring, or wants to evaluate the services provided by another broker because they are not satisfied with their present broker
What is duty of disclosure?
Is fundamental to the principle of utmost good faith that underlies all insurance transactions. Misrepresentation of material facts in the application can have serious consequences, in the most extreme cases causing losses to be denied and/or the insured policy to be voided.
What is misrepresentation?
Giving false information to an underwriter, knowing it is false? in other words, telling a lie.
What is a representation?
A factual statement about the risk, either expressed or implied, that needs to be communicated to the underwriter so that the risk may be properly assessed.
What is an oral application?
When the insured and broker discuss insurance needs, either over the phone or in person, and you document your conversation in signed, dated notes.
What is a written application?
This may be a printed form provided by the insurer, a combination of a letter and forms developed by either the insurer or the broker, or just a letter. the form can be conventional paper or electronic versions.
What is CSIO/CEPA?
A national organization of property and casualty insurers and independent insurance brokers working together to achieve electronic business solutions for the insurance industry.
What is insurable interest?
When the applicant stands in such position to the subject of insurance that he or she could be financially prejudiced by that property’s loss or damage, and financially benefited by its continued existence.
The applicant also has an insurable interest in his or her potential capability to pay damages in the event that he or she is found responsible (legally liable) for having caused injuries to other or damage to their property.
How can trade names be used as legal names?
Trade names are not legal entities until registered as a limited company.
What is a loss payee?
The generic term for someone other than the named insured to whom the proceeds of insurance will be paid.
What is a mortgagee?
A special class of loss payee. Mortgagees have a registered interest on real property?that is, buildings or land? offered as security for the money that they have loaned the property owner.
Unlike other loss payees, who are simply noted on the policy as such with respect to the property that they have an interest in, the mortgagees interests are protected by a separate insuring clause granting additional protection to the mortgagee.
Why do insurers want signed applications?
It becomes a declaration made by the applicant, confirming that the statements made are accurate and even when it does not form part of the policy, the application is the basis on which the contract issued.
What is the process that a broker takes when selecting personal lines insurance to match the needs of a client?
?Checking the insurers underwriting guidelines. These will normally be clearly outlined in the personal lines manual that each insurer provides your brokerage
?analyzing and comparing the products of your insurer. Each insurer has its own version of the various personal lines package policies?broad form and limited (or named perils) form. Automobile wordings are statutorily dictated by province
?selecting an insurance policy based on your analysis of your clients needs and the policies your insurers supply.
What is the process that a broker takes when selecting commercial lines insurance to match the needs of a client?
?applying your knowledge of the products available. Select appropriate policies based on your discussions with your client and your analysis of their insurance needs and the adequacy of their existing coverage.
?applying your knowledge of what your insurer(s) want. The insurers will have communicated to your broker management the classes of business they cover and the specific products they offer. Some of your markets may be better able than others to meet your clients insurance needs
?talking to your colleagues about which market would be the most appropriate for your client, if you are unclear about what your markets want. As you gain experience, you will come to know the types of business that you various markets prefer.
What is binding authority?
A brokers capacity to confirm to applicants that they have coverage against certain losses. Individuals with binding authority can tell their clients that they are covered by an insurance policy without first submitting the application for insurance to the insurer.
In what document is binding authority granted?
Broker agreement
Is there standard binding authority granted to all brokers?
Not all brokers are granted binding authority or the same degree of binding authority. When granted, binding authority is normally limited to personal lines policies and smaller commercial lines policies. The binding authority depends on the terms negotiated between insurer and brokerage, and may differ between brokerages contracted with the same insurer. ex. wholesale brokers generally are granted binding authority for specific situations only, such as pre arranged insurance programs where the wholesale broker operates as the insurer.
What are some of the terms of binding authority?
?the classes of risk and the limits of insurance that the brokerage is permitted to bind
?the risks that the brokerage cannot bind. (such risks could be extremely hazardous, or require special underwriting expertise, or an insurer may simply have decided not to insure these classes of risk, or not be licensed to write them.)
?the reporting requirements, including time frame within which the insurer expects the broker to forward notice of binding. That is, you will have a certain number of days after binding insurance to submit the binder to the insurer, or binding will not be valid, and you could be held liable for any uninsured or under insured loss.
What effect does binder authority have on a brokers powers?
The binding limits outlined in the broker agreement do not represent the maximumamount an insurer will consider; they primarily act as a control on brokers’ bindingpowers.
What role does the broker have in preventing fraud?
Brokers have an important role to play in fraud prevention; they are the eyes andears of the insurer.
What are the warning signs of potential fraud?
Client wants you to backdate a policy
Client asks to bind coverage for a new risk without adequate information
A new applicant is in a hurry to get the cover bound
What is a binder?
A binder can be written or oral. Since there is typically a delay between the time a risk is bound and the time thepolicy is issued, it is preferable to have written confirmation of the coverage that wasbound.
What is the different between a binder and cover note?
There are two forms of document used to record interim or temporary cover:1. A cover note issued by the broker2. A binder issued by the insurer
What information is generally included in a binder?
?Name of the insured
?Mailing address of the insured
?Any loss payees or mortgagees
?Time and date that the coverage takes effect ?Time and date the coverage expires
?Location and type of risk that is being insured
?Exact coverage details
?Clause that states that the cover is subject to all the terms and conditions usual tothe insurer’s policy wording
Details of deductibles, special warranties, any conditions, or any special wordingsthat restrict or broaden coverage
?A clause stating, This policy contains a clause that my limit the amount payable.”
What does contra proferentem mean?
means against the offeror.”Any ambiguity in wording will be construed in favour of the insured.”
Give examples of policy wordings that are legislated and examples of those that are not
Automobile Insurance ?Automobile policy wordings are subject to a standard form legislated by statute orregulation in the various provinces and territories. In common law provinces, automobile policies are subject to Statutory Conditions. In Quebec, automobile policies are subject to the General Conditions.
Property Insurance? Property insurance policy wordings differ from insurer to insurer. Provincial statutes state the minimum coverage that fire policies must include ?perils of fire, lightning, and limited explosion?but do not specify the exact wordingsof policies. Provincial legislation can also specify information that must be included in the policywording. If there is any clause in the policy that limits the amount an insured may recover,such as, a deductible, co?insurance, or distribution clause, the phrase This policycontains a clause that may limit the amount payable.” must be stamped or printed onthe face of the policy.
What is in the policy declarations?
names of the insured and the insurer; effective and expiry dates; names and addresses of any loss payees and mortgagees; total premium; and amount insured.
What is the function of the insuring agreements?
Explains what is covered and for how much
What is included in the insuring agreements?
Shows the coverage’s applicable; term of the policy; perils covered; exclusions (which restrict the perils insured); and circumstances under which the insured will receive payment of the proceeds of a claim.
Explain the policy conditions
policy conditions affect the actions of the insured or insurer under the contract under certain circumstances. If a condition is breached by the insured, the policy may be void or voidable, or a claim arising out of the breach may be denied by the insurer, depending upon the condition involved.
define void
the policy is treated as if it never existed
define voidable
means that the policy can be affirmed or rejected at the option of the aggrieved party? effectively, the insurer (if the aggrieved party) has the discretion to either pay or deny any claims
What are warranties
promises the insured makes as part of the contract that a specified state of affairs will continue to exist for the duration of the policy. They are obligations which the insured must fulfill in order to keep the policy in force. A failure to satisfy a warranty could result in the insurer not paying a claim
What is the difference between a warranty and a condition?
A true condition may be recognized by the fact that the clause says, in effect, if the insured does or does not do such and such, the insurer will not pay or the policy will be voidable. A warranty is a promise by the insured to do something or to maintain something in a particular condition.
what is a deductible?
The amount of a loss that the insured must pay.
How can a deductible be used to the advantage of an insured?
Larger deductibles can be selected as a method of reducing premiums.
