Flashcards in Chapter 2- Role of Broker (keywords) Deck (18):
Law Of Agency
Brokers have a legal duty to act in the best interests of their clients. The FCA requires the broker to treat their customers fairly.
Core Broking Functions
Traditional Broking Services:
- The provision of products & services
- Negotiation and placement
- Selection of insurers
- Claims, negotiation, collection and payment
- the design and operation of insurance programmes
Demands and Needs
Identifying and clarifying a clients requirements
Establishing a clients demands and needs is usually done through a set of questions, this is done through the proposal form. Most brokers follow an established format with different questionnaires for different insurance types
Recommending the product to the client ensuring that they have all the information about the product and include a statement of how that product meets the clients needs
Once a suitability statement is mead then the broker must as a minimum explain any warranties that apply and explain the repercussions for non-compliance
Brokers needs to collect relevant risk data including material facts, so they can be presented to a suitable insurer - every circumstance is material which would influence the judgement of a insurer in fixing the premium or determining whether he will take the risk
This a key material fact it SHOULD be disclosed to the underwriters, this data needs to be captured as well as claims made and any uninsured losses that have occurred on a previous policy
Duty Of Disclosure
Within capturing data brokers must provide an ideal opportunity for client to disclose anything that would constitutes a material fact. Clients have a duty of disclosure and brokers will remind clients what the consequences of non disclosure are
This is payment or compensation received for services or employment. This includes the base salary and any bonuses or other economic benefits that an employee or executive receives during employment.
All the terms and conditions of the insurance policy have all been agreed before any insured or insurer commits to the contract
Insurance: Conduct of Business Sourcebook (ICOBS)
The FCA provides a specific guidance on how brokers should select insurers and give advice through the ICOBS. When quotations are made the broker is required to tell the client the basis in which they have carried out the broking on each risk
A broker is able to make recommendation based on a fair analysis, for this to take place the broker must:
- Consider a fair amount of insurers
- To evidence the analysis by adhering to and documenting a set process
The broker has responsibilities regarding fraud. A broker who peruses a claim on their clients behalf when they know it is fraudulent is commuting an offence.
The higher frequency of claims and the higher claim costs, coupled with lower premiums drives capital out of the market
Insurers are able to increase their premiums and restrict cover as they become more selective in the business that they write. This increases profitability.
Upmost Good Faith
A summary of the principle of upmost good faith;
- The principle means that every person who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the insurance.