Chapter 7 Flashcards
(15 cards)
Provide details about a company employed agent
Insurers employee
Compensation- salary, bonuses, commission
Book of business belongs to insurer
Provide details about a independent agent
Self employed
Compensation- commission, base salary
Agency contract with individual insurers
Book of business belongs to agent unless otherwise stipulated
Provide details about a exclusive (captive) agent
Independent businessperson
Places business with single insurer
Insurers first right refusal
Exclusive contract
Provide details about a sub-agent
Agent appoints to perform functions undertaken by the agent for the insurer
Appointing agent is responsible
Authority is granted by the agent
Book of business belongs to agent
Explain what a broker is
An independent businessperson
Match client needs with product
Broker owns client list
Compensation- commission, fee for other services
Other services- liaison, actuarial loss control, or captive-management service
Explain what a wholesalers is
Used for difficult to place or specialty risks
Compensation is split between broker or agent
Market cycle- certain accounts may go the wholesale and speciality market
Explain who the MGAs and MGUs are
In the international market, the wholesaler market includes managing general agents (MGAs), managing general underwriters (MGUs) and speciality market business
Authority- appoint agents, policy administration, accounting services, claim
Insurer- buys infrastructure and expertise
Reason- smaller operations=lower expenses
Compensation- commission and fees
What are examples of wholesalers program business?
Professional liability insurance for veterinarians
General liability insurance- roofing contractors or night clubs
Liability insurance for hospitality industry
Property and liability package policies for student housing
Why is number of producers representing an insurer important?
Too few- lost lines and blocks of business
Too many- overstretch resources
A due diligence review usually includes what elements?
(Hint 8 elements)
Network analysis-growth plan, capacity got growth, ability to sell, mix of business
Ownership-other investors? Who has controlling interest? New owner goals?
Financial analysis- is the capital adequate? Are they a long-term partner?
Business plan- what has the producers record been? Does it fit in the growth plan?
Business processes- organizational structure, efficient processes, provisions
Staff- priority of clients interest, disclosure of conflict of interest
Information technology- source of systems, compatible system
Other insurers- who are the other insurers?
What are the risks with delegating underwriting authority?
Inadequate risk assessment
Lack of consistency and standards
Potential for fraud and misconduct
Conflict of interest
Regulatory compliance challenges
When granting underwriting authority what is included in the planning for implementation stage?
Identity any weaknesses or issues
Take corrective actions if any
Consider greater authority, if necessary
Implementation plan features
Dedicated resources
When granting underwriting authority what is included in the employing audit control stage?
Replication of their procedures
Producers being monitored
New producers rely on insurers
Risk with startups
When granting underwriting authority what is included in the assigning resources stage?
Limited authority
Justifying resources
Sharing resources
Individual attention
When granting underwriting authority what is included in the complying with insurer standards stage?
Context and authority level must be clear
Policy administration standards
