Chapter 2 - Role of the broker in meeting client needs Flashcards
(49 cards)
What are the 5 core broking functions (traditional broking services)?
Provision of products and services - demands and needs
Negotiation and placement
Selection of insurers
Claims negotiation, collection and payment
The design and operation of insurance programmes
How does a broker establish a client’s demands and needs?
Asking questions via a proposal form (a demands and needs statement) - agreed by all parties and for regulator
Informal basis - telephone calls, clients visits
What is the purpose of a suitability statement?
Customers can make an informed choice about whether or not to buy a specific insurance contract and whether a contract continues to meet their needs
The customer’s demands and needs;
How the recommendation addresses these demands and needs; and
The reasons for the recommendation
Are insurance contracts, contracts of utmost good faith (uberrimae fidei)?
Yes - Rozanes v. Bowen (1928)
What is the definition of a material fact under Marine Insurance Act 1906?
Every circumstance is material which would influence the judgement of a prudent insurer in fixing the premium or determining whether he will take the risk
aka A material fact was something that had a bearing on the risk insured
Why did the Consumer Insurance (Disclosure and Representations) Act 2012 come into force?
Marine Insurance Act 1906 was perceived as unclear and unfair
Insurers able to avoid settlement of claims
What does the Consumer Insurance (Disclosure and Representations) Act 2012 say?
Consumers are only required to take reasonable care not to make a misrepresentation when providing information before a contract is entered into
Insurers can avoid settlement of claims if misrepresentation was either deliberate, reckless or careless
If you are in doubt whether a topic of material facts is material, should you disclose anyway?
Yes
Should a client’s loss experience need to be disclosed to underwriters?
Yes - claims and uninsured losses that have occurred
When was the Insurance Act 2015 effective from?
12 August 2016
Who does the Insurance Act 2015 apply to?
Commercial (non-consumer) insurance policies
What does the Insurance Act 2015 do?
Amends insurance law in three main areas:
Pre-contractual duty of disclosure and the effect of misrepresentations at that stage;
The effect of warranties contained in the policy; and
Insurers’ remedies for fraudulent claims
How does the Insurance Act 2015 modify the duty of utmost good faith in insurance contracts?
Introduces the duty of ‘fair presentation’
Commercial proposer must:
Disclose to insurers ‘every material circumstance’ which the insured knows or ought to
know; or
Provide the insurer with ‘sufficient information’ to put a prudent insurer on notice that it
needs to make further enquiries into those ‘material circumstances’
What is the definition of a material circumstance?
A circumstance or representation is material if it would influence the judgement of
a prudent insurer in determining whether to take the risk and, if so, on what terms
Include information known by the insured’s senior management and the persons responsible within the business for arranging insurance - also broker
What is an example of what is not a material circumstance?
Confidential information acquired through a business relationship unconnected to the contract of insurance
Must be made in ‘good faith’
When does an insured not need to disclose material circumstances?
Already known, or ought to have been known, by the insurer i.e., readily available or info that should have been passed on within an underwriters
When will an insurer be entitled to avoid a policy entirely under the Insurance Act?
Fraud - there are statutory remedies for insurer’s in the Act
Breach of duty of fair presentation is ‘deliberate or reckless’
Insurer can show that it would not have entered into the contract had it known the information or would only have done so on different terms
Can an insurer contract out of the Insurance Act 2015?
Yes - previous law on disclosures would apply
Need to be transparent about impact of contracting out otherwise will not apply
What is the impact on warranties under the Insurance Act 2015?
Insurer’s liability will be suspended from the time of the breach until the breach is remedied
Breach has to be in relation to the claim/loss - insured has to prove there was no impact
When are proposal forms used to gather client information?
Specialised risks e.g., professional indemnity
What are the advantages and disadvantages of a proposal form?
Advantages:
Comprehensive method of collecting data - client signs
Remind client of duty of disclosure, consequences of non-disclosure, material facts
Discuss other needs - new business
Disadvantages:
Clients dislike completing a form - broker responsibility
Standardised questions may not be relevant
When is a statement of fact used to gather client information?
Home, car, straightforward SME business
What are the advantages and disadvantages of a statement of fact?
Advantages:
Selling and buying insurance is simpler
Disadvantages:
Assumptions can be made by insured or insurer
When is an insurer’s questionnaire used to gather client information?
Risk is too large or complex for standard proposal form
