Study 4 From Quote to Policy - LO

Question 1

Outline the processes for selecting an insurer and coverage appropriate to
the client.

Answer 1

• Agents have limited insurers, often one market
• Brokers provide business to more insurers
• Which insurer to select depends on the intermediary’s markets and the insurers’ risk appetite

• Compare wordings available to confirm that the selected insurance provider offers the best coverage
for the client’s needs

• Explain the quoted terms, including restrictions and limitations
• Coverage can be bound either by intermediary directly or through insurer’s portal

Question 2

Explain the importance of brokers and agents staying within the terms of their binding authority.

Answer 2

• Authority to bind temporary insurance
o Privilege and responsibility granted to some
intermediaries
o Allows clients to acquire coverage they need in a
timely manner

• Intermediaries must be clear on what they can and cannot bind (which differs between markets)

• Binding coverage when not authorized can be serious
o Do not bind when in doubt—contact insurer for
confirmation
o Never backdate coverage without prior agreement
from insurer

Question 3

Describe the information required on a typical binder and the process in using a binder.

Answer 3

• A binder is an agreement that insurance coverage is provided
o Preferably a written document
o Same as a policy document

• When creating a binder, ensure it is
  o Accurate
  o Comprehensive
  o Incorporates the coverage and conditions of the 
     policy

• To issue a binder, an intermediary must have binding authority

• Binders are cancelled in the same way as a regular policy
o Since policy documents replacing the binder close it
out, set a follow-up date to ensure they are
received within the binder timeframe

Question 4

Outline the main parts of a policy wording and the effect of legislation on wordings.

Answer 4

• An insurance policy outlines, describes, and identifies the parties to and coverage extended by the contract

• Sections of an insurance policy include:
  o Declarations 
  o Insuring agreements 
  o Deductibles 
  o Conditions 
  o Warranties 
  o Signature clause

• Intermediaries need to be well versed in their products
o Policy wordings can vary widely
• Some governed by legislation
• Statutory or general conditions apply to many lines
• Wordings and coverages vary from market to market

• Intermediaries need to be able to identify and explain
o Coverages, conditions, limitations, and exclusions to clients
o Expectations and intentions of the insurer o How to comply with conditions and warranties

Question 5

Explain why intermediaries should ensure policy document accuracy and the steps they take to do this.

Answer 5

• Intermediaries compare the binder to the policy documents received from the company
o Detect and possibly correct any discrepancies (intentional or accidentally)
o Understand the typical causes of discrepancies and how to address them
o Identify, understand, and have any differences corrected or explained to the client
o Provide clients with solutions to provide coverage as originally quoted