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LM1 > Role Of A Broker (chapter 8) > Flashcards

Role Of A Broker (chapter 8) Flashcards

1
Q

Principal, agent, third party

A

Principal - client
Agent - broker
Third party - insurer

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2
Q

3 ways relationship of principal and agent may arise

A

Consent - terms of business agreements

Necessity - entrusted with someone else’s goods

Ratification - agent acts without authority

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3
Q

Duties of an agent

A

Obedience
Personal performance
Due care and skill
Good faith
Accountability

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4
Q

Duties of a principal

A

Remuneration (commission)

Indemnity

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5
Q

Undisclosed principal

A

Agent can act for an undisclosed principle, whilst seeming to act on their own behalf. Agent must have authority at the time the contract is made

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6
Q

Authority of an agent

A

Actual authority :
Express - terms of an agency agreement
Implied - Apparent authority:
If the agent has to undertake a certain action in order to carry out express instructions, they will have imputed authority

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7
Q

Agency may be terminated in 3 ways

A

Mutual agreement

By one party or the other

Death, bankruptcy, insanity

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8
Q

Offering advice

A

Must apply for authorisation from FCA

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9
Q

Appointed representatives

A

An individual or company appointed by an authorised person and may be acti n for an intermediary

TOBA determines roles and responsibilities

Principal takes responsibility for appointed representatives activities

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10
Q

Wholesale and retail brokers

A

Wholesale - contact with insurer

Retail - direct contact with client

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11
Q

Services of intermediaries to clients

A

Review clients needs
Advise whether risk insurable
Decide best market for risk
Negotiate terms and conditions
Provide advice
Negotiate renewals
Assist with claims

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12
Q

Services of intermediary to insurer

A

Binding risks
Settling claims
Issuing docs
Collecting premium

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13
Q

Delegated authority

A

Ability to grant immediate cover
Ease of operation
Profit sharing provisions

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14
Q

Central recording of risk and payment of premium

A

broker submits risk info (bureau) to Xchanging Ins-sure Services (XIS)
Accounting and Settlement now used for vast majority providing mix of scanned docs and electronic docs
info recorded on XIS system
UMR given by broker
system facilitates movement of funds from broker to insurer

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15
Q

Agent

A

One who is authorised by the principal to bring the client into a contractual relationship with the third party

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16
Q

Define ‘delegated authority’

A

Someone the insurer has delegated underwriting authority to

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17
Q

Define ‘principal’

A

The one who is brought into the insurance contract with a third party

18
Q

Define ‘law of agency’

A

Everyone who acts on behalf of another person is an agent, and we accept responsibility for the actions they take on our behalf

19
Q

WHat are the three ways the relationship between agent and principal can arise?

A

Consent, necessity, ratification

20
Q

Define ‘agency by consent’

A

Principal consents to this by means of express appointment, and teh terms are writtem down

21
Q

Define ‘terms of business agreement’

A

Documents used in the London Market to set out clearly the rights and responsibilities of the principal and the agent

22
Q

Define ‘agency by necessity’

A

When a person is entrusted with someone else’s goods and it is necessary to act in a certain way to preserve the property in an emergency

23
Q

Define ‘agency by ratification’

A

When an agent acts without authority, but the principal agrees to this after the event- they ratify it

24
Q

When is a broker considered the agent of the insured?

A

When the broker gives advice on placing the insurance or on how to make a claim

25
Q

When is a broker considered the agent of the insurer?

A

When they can bind cover, or have authority to collect premiums and does so

26
Q

When is a broker considered the agent of the insurer?

A

When they can bind cover, or have authority to collect premiums and does so

27
Q

What duties does a principal have to their agent?

A

Renumeration and indemnity

28
Q

Define ‘apparent authority’

A

That which should come with a certain position in an organisation- may not actually have it, but from the outside it seems like they do

29
Q

Who are the two main parties in a simple insurance transaction?

A

Insured and insurer

30
Q

Who does the broker usually consider to be their client?

A

The insured

31
Q

If an agent acts outside their authority and their principle subsequently accepts their actions, what is this act by the principle known as?

A

Ratification

32
Q

What is meant by the agents duty of personal performance?

A

Not delegating tasks that they have been asked to do without permission.

33
Q

What is not a common way of terminating an agency agreement

A

Reporting to the regulator

34
Q

Who regulates brokers in the London Market?

A

FCA

35
Q

What is the difference between a wholesale and a retail broker?

A

A wholesale broker is closer to the insurers and retail broker closer to the client.

36
Q

What is the term for the payment that the broker receive from the underwriters?

A

Brokerage

37
Q

If the broker has started placing the risk in the London Market, are there any insurers that they cannot approach?

A

No, they are free to approach any insurers

38
Q

How are brokers involved in the payment part of the claims process?

A

They receive the fund from insurers and pay them onto their client

39
Q

Which company is responsible for maintaining the Lloyd’s claims database?

A

Xchanging Claims Services.

40
Q

In the London Market, what is the final confirmation that creates the contract between the insured and insurer known as?

A

Binding the risk.

41
Q

When doing business in the London Market, what is the document called that is given to the insured and sets out the nature of the relationship between them and a broker?

A

Terms of business agreement.

42
Q

An insurance agent works for QBB Ltd that is an appointed representative of Albion Insurance. Who is ultimately responsible, from a regulatory perspective, for the agent’s actions?

A

Albion Insurance.

LM1 (7 decks)

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