Role Of A Broker (chapter 8)

Question 1

Principal, agent, third party

Answer 1

Principal - client
Agent - broker
Third party - insurer

Question 2

3 ways relationship of principal and agent may arise

Answer 2

Consent - terms of business agreements

Necessity - entrusted with someone else’s goods

Ratification - agent acts without authority

Question 3

Duties of an agent

Answer 3

Obedience
Personal performance
Due care and skill
Good faith
Accountability

Question 4

Duties of a principal

Answer 4

Remuneration (commission)

Indemnity

Question 5

Undisclosed principal

Answer 5

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

Question 6

Authority of an agent

Answer 6

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

Question 7

Agency may be terminated in 3 ways

Answer 7

Mutual agreement

By one party or the other

Death, bankruptcy, insanity

Question 8

Offering advice

Answer 8

Must apply for authorisation from FCA

Question 9

Appointed representatives

Answer 9

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

Question 10

Wholesale and retail brokers

Answer 10

Wholesale - contact with insurer

Retail - direct contact with client

Question 11

Services of intermediaries to clients

Answer 11

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

Question 12

Services of intermediary to insurer

Answer 12

Binding risks
Settling claims
Issuing docs
Collecting premium

Question 13

Delegated authority

Answer 13

Ability to grant immediate cover
Ease of operation
Profit sharing provisions

Question 14

Central recording of risk and payment of premium

Answer 14

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

Question 15

Agent

Answer 15

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

Question 16

Define ‘delegated authority’

Answer 16

Someone the insurer has delegated underwriting authority to

Question 17

Define ‘principal’

Answer 17

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

Question 18

Define ‘law of agency’

Answer 18

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

Question 19

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

Answer 19

Consent, necessity, ratification

Question 20

Define ‘agency by consent’

Answer 20

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

Question 21

Define ‘terms of business agreement’

Answer 21

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

Question 22

Define ‘agency by necessity’

Answer 22

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

Question 23

Define ‘agency by ratification’

Answer 23

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

Question 24

When is a broker considered the agent of the insured?

Answer 24

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

Question 25

When is a broker considered the agent of the insurer?

Answer 25

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

Question 26

When is a broker considered the agent of the insurer?

Answer 26

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

Question 27

What duties does a principal have to their agent?

Answer 27

Renumeration and indemnity

Question 28

Define ‘apparent authority’

Answer 28

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

Question 29

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

Answer 29

Insured and insurer

Question 30

Who does the broker usually consider to be their client?

Answer 30

The insured

Question 31

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

Answer 31

Ratification

Question 32

What is meant by the agents duty of personal performance?

Answer 32

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

Question 33

What is not a common way of terminating an agency agreement

Answer 33

Reporting to the regulator

Question 34

Who regulates brokers in the London Market?

Answer 34

FCA

Question 35

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

Answer 35

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

Question 36

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

Answer 36

Brokerage

Question 37

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

Answer 37

No, they are free to approach any insurers

Question 38

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

Answer 38

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

Question 39

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

Answer 39

Xchanging Claims Services.

Question 40

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

Answer 40

Binding the risk.

Question 41

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?

Answer 41

Terms of business agreement.

Question 42

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?

Answer 42

Albion Insurance.