Term
| State the role of the broker in the insurance process. |
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Definition
| The role of brokers and agents is to serve as the intermediary between the client and the insurer. (They are not a party to the insurance contract) |
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Term
| State the primary duty owed by brokers to clients. |
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Definition
| The brokers primary duty to the client is to ensure they receive the right insurance advice and coverage. The law requires that insurance brokers exercise "reasonable skill, care & diligence" in their affairs. |
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Term
| State the primary duty owed by brokers to insurers. |
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Definition
Insurers have the right to expect that brokers will:
1. Tell the truth about the risks they submit; and
2. Will not witthold or conceal important information. |
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Term
| Brokers do make mistakes, some of which can result in financial loss to their clients. Identify the most common cause of errors and omissions claims. |
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Definition
Inadequate coverage is the most common cause of errors and omissions claims, accounting for nearly 50% of all claims.
Examples:
1. Failure to advise clients of exclusions.
2. Failure to place coverage or placing it too late.
3.Providing the incorrect coverage
4. Incorrect advice as to availability of coverages |
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Term
| Other sources of errors and omissions claims include: |
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Definition
* Misrepresentation and errors in description of the risk being insured;
* Cancellation and renewal errors;
* Policy change errors;
* Processing delays; and,
* Brokerage Agreement violations. |
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Term
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Definition
| Underwriters are employees of insurance companies. They are not involved in selling insurance directly to consumers & are not required to be licensed. |
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Term
| State the primary role of an underwriter. |
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Definition
| The primary role of an underwriter is to select those risks likely to be most profitable for the insurer. |
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Term
| Identify three sources of information used by underwriters when making a decision regarding the suitability of a risk. |
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Definition
1. The application
2. The broker
3. Loss experience data
4. Inspection reports |
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Term
| Define "Physical Hazard" & provide an example. |
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Definition
Conditions relating to the premises which may cause a peril to occur.
I.e.:
- Type of building construction
- The use or occupancy of the property
- Housekeeping (the general state of the premises) |
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Term
| Define "Moral Hazard" & provide an example. |
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Definition
Moral hazards are subjective characteristics of the applicant that could cause a peril to occur.
Conditions indicating the presence of moral hazard include:
- Financial condition
- Moral character
- Indifference to loss |
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Term
| When a loss occurs, insureds expect prompt, efficient handling of their claim. Identify the two steps normally taken when a loss occurs. |
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Definition
1. Insured reports claim to brokerage.
2. Brokerage reports claim to Insurer. |
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Term
| Explain the difference between "company" adjusters & "independent" adjusters. |
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Definition
1. Most insurance companies have their own staff adjusters who handle the bulk of their claim settlements.
2. When staff adjusters are not available, or if the loss adjustment requires a specific expertise, the insurance company may contract the services of an independent adjustment firm. Sometimes , insurers will allow the brokerage to appoint independent adjusters on their behalf. |
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Term
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Definition
To serve as the intermediary between the client and the insurer.
Direct Writers are insurance companies that sell their own insurance products, and only their own insurance products. |
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Term
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Definition
To serve as the intermediary between the client and the insurer.
Insurance agents work with only one insurance company. They are basically a reseller of that company's insurance products, and no others.
Agents represent client's interests. |
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Term
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Definition
The broker's primary duty is to ensure that clients receive the right insurance advice and coverages.
The law requires that insurance brokers exercise reasonable skill, care & diligence in their affairs. |
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Term
| What underwriters do - rating and rate making |
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Definition
Most insurers have developed special policies for smaller businesses. The application for these policies includes a rating sheet which can be easily completed by the broker.
On the more complex commercial risks, all rating is done by the underwriter. |
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Term
| Four decisions underwriters can make about the risk being presented to the insurer. |
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Definition
1. To reject the risk
2. To accept the risk on the basis presented
3. To accept the risk with an increase in rate
4. To accept the risk with an increase in the deductible
5. To accept the risk subject to certain conditions |
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Term
| Types of risks which can be rated by underwriters & types of risks which are rated by underwriters. |
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Definition
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Term
| Two ways claims usually adjusted. |
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Definition
1. Insurance Company Adjusters
2. Independent Adjusters |
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