Study 1: Insurance and the Intermediary - Narrative Questions

Question 1

Identify five (5) delivery systems in the property and casualty (P&C) insurance industry. (5 marks)

Answer 1

Delivery systems in the P&C industry

• Independent brokerages
• Exclusive agencies
• Direct writers
• Online and call centre operations
• Wholesale brokers

Question 2

What are five (5) responsibilities of a broker or agent to their clients? (5 marks)

Answer 2

Responsibilities to clients (any five of the following)

• Act in the best interests of their client
• Possess knowledge about insurance
• Inspire trust in their clients
• Provide knowledgeable, professional advice
• Assist clients in assessing their specific risks
• Assist clients in selecting appropriate coverage
• Assist clients in choosing the insurer to protect them

• Make recommendations based on prior loss settlements and through the use of replacement
cost evaluators

• Suggest additional coverage to broaden client protection
• Clarify what a policy does and does not cover
• Explain the process of obtaining insurance and of claims adjustment
• Have an adequate capacity and range of coverages
• Use accurate and adequate accounting and office methods
• Handle complaints appropriately
• Answer any client queries

Question 3

What are the five (5) major causes of errors and omissions (E&O) claims? (5 marks)

Answer 3

Major causes of E&O claims

• Failure to provide cover for exposures (broker or agent did not fully understand nature of the risk
OR client does not accept enhanced coverage suggested by intermediary)

• Failure to explain effects of exclusions, exemptions, warranties, and restrictions (client has inaccurate preconceptions of the nature of the coverage offered or does not fully understand the effect of the proposed wordings)

• Failure to place cover at all (broker or agent did not pursue placing coverage, wrongly advised
the client that cover was not available, wrongly advised client that cover was already in place, or lost the file)

• Failure to provide correct cover (client requested one form, but broker or agent arranged another)

• Failure to provide cover in time (somewhere between accepting the application from the client
and binding the requested coverage, a loss occurs)