Study 7: Relationships Between Sales Intermediaries And Insurers Flashcards
Whom does a company-employed agent work for?
A) An insurer
B) A broker
C) Works as an independent
D) In a collective
A) A company-employed agent works directly for the insurer. The insurer that employs company agents owns the client expiration list.
An exclusive agent is sometimes referred to as what?
A) Independent broker
B) Broker
C) Captive agent
D) Company-employed agent
C) Captive agent
An exclusive agent, sometimes referred to as a captive agent, places business with one insurer but remains an independent businessperson with his or her own office.
What is a broker?
A) Exclusive agent
B) Insurance specialist
C) Insurance ambassador
D) Independent businessperson who manages clients’ insurance needs
D) Independent businessperson who manages clients’ insurance needs
A broker is an independent businessperson who works with the public as a trusted adviser to help manage their insurance needs. Brokers operate as independent businesses and establish agreements with multiple insurers to sell their insurance products.
Insurance companies are typically either direct writers or
A) Captive agents
B) Broker markets
C) Exclusive agents
D) Collective market
B) Broker markets
Insurance companies are typically either direct writers, which use no intermediaries to distributed their products but rather sell directly to the public, or they are broker markets, which use intermediaries (that is, brokers) in the transaction between the insurer and the insured.
What type of review does an insurer conduct when choosing a producer to work with? A) Application review B) Background check C) Forensic accounting audit D) Due diligence review
D) Due diligence review
Once the insurer has decided where to look for potential new producers, it must find a way to decide which producers it would like to work with from among the candidates it has identified. The insurer analyzes each potential candidate with appropriate thoroughness - that is, with due diligence.
Why is it important for an insurer to know about the producers corporate structure?
A) To reassure the insurer that a contact person is available in case of emergency
B) So the insurer can be aware of cash flow issues
C) It is not unusual for insurers to provide capital to a producer
D) The insurer needs to be aware of how the operations will benefit the insurer.
C) It is not unusual for insurers to provide capital to a producer.
It is not unusual for insurers to provide capital to a producer. Therefore, the insurer needs to know whether a producer it does or is considering doing business with depends on another insurer for any part of its capital.
Why is it important for an insurer to know the skills of the producer’s staff?
A) The insurer wants to grant the producer underwriting authority.
B) The insurer needs to pay for training.
C) The insurer may want a long-standing relationship.
D) The insurer may want to hire some key people.
A) The insurer wants to grant the producer underwriting authority.
Knowing the skills of the producer’s staff can be especially important if the insurer is considering granting the producer any underwriting authority.
Why is it important for an insurer to know if key people leave the producer?
A) They need to know who to contact
B) Clients may follow the account manager
C) Insurer needs to follow the money
D) Insurer needs to protect its business.
B) Clients may follow the account manager
Account managers can have strong relationships with their clients - so strong, in fact, that clients may choose to have their business follow the account manager if he or she leaves the producer. This means that the account would also leave the producer’s portfolio or book of business.
A bordereau is a collection of
A) Data organized into a standardized format.
B) Premiums organized by date.
C) Calls to be made for follow-up on a claim.
D) Items that need to be appraised for insurance.
A) Data organized into a standardized format
A bordereau is a collection of data organized into a standardized format. It may represent a list or summary of information about an account or portfolio of insurance business. Traditionally, bordereau used for insurance purposes summarizes premium or claims activity for an insurer or reinsurer on accounts, portfolios, or reinsurance treaties.
How can automation help the relationship between insurer and producer?
A) By speeding up communication
B) By ensuring that submissions above a certain amount of premium, are automatically sent to a referral writer at the insurance company
C) By ensuring that all money is accounted for
D) By ensuring that if there are issues, a red flag is raised
B) By ensuring that submissions above a certain amount of premium are automatically sent to a referral writer at the insurance company
It is helpful if the computer systems can communicate with each other so that if a submission is more than a specific amount of premium it is sent to a referral underwriter at the insurance company.
Narrative: State Five questions an underwriter should ask when assessing a producer. (5 marks)
Five questions an underwriter should ask when assessing a producer ( any five of the following)
1) Is the producer aggressive an looking to expand its business?
2) Can the producer grow with the insurer, or has it reached its maximum capacity?
3) Can the producer sell the range of the insurer’s products?
4) What is the producer’s mix of business?
5) Will the producer support and work with the insurer?
6) How well does (or will =) the producer work with the insurer?
7) What Human Resources practices does the producer follow?
8) What makes the producer’s customer’s loyal to the producer?
9) Will the producer allow the insurer to have contact with the client?
10) Could the insurer delegate to the producer certain insurance functions, such as underwriting, claims handling, policy administration, and accounting?
Narrative: Describe what a wholesaler is and how it operates. (5 marks)
Wholesaler:
1) A broker or agent unable to place a risk with the insurers he or she deals with might instead arrange coverage through a wholesaler
2) Also known as a “broker’s broker”
3) Act as auxiliary markets for brokers or agents who cannot place their risks elsewhere
4) Functions as another intermediary, placing risks on behalf of a broker or agent with a pool of insurers in return for commissions and other fee arrangements
5) For the business it places with its insurers on behalf of a broker or agent, the wholesaler charges the insurers a commission and passes a portion of that back to the broker or agent
Narrative: Describe how an exclusive agent operates. (5 marks)
How an exclusive agent operates:
1) Places business with one insurer
2) Remains an independent businessperson with own office
3) Contract between the agent and insurer
3. 1) Option to place business elsewhere if insurer declines (first right of refusal)
3. 2) Prevents agent from placing business with an insurer who has competing program or product
3. 3) Can be reversed: insurer exclusive to agent.
