Chapter 8 - Role Of A Broker

Question 1

Principal, agent, third party

Answer 1

Principal - client
Agent - broker
Third party - insurer

Question 2

3 ways relationship of principal and agent may arise

Answer 2

Consent - terms of business agreements

Necessity - entrusted with someone else’s goods

Ratification - agent acts without authority

Question 3

Duties of an agent

Answer 3

Obedience
Personal performance 
Due care and skill
Good faith
Accountability

Question 4

Duties of a principal

Answer 4

Remuneration (commission)

Indemnity

Question 5

Undisclosed principal

Answer 5

Agent acting on behalf of principal
The principal may be undisclosed making it seem like they are acting on their own behalf
Agent must have authority to do this
Rarely encountered in LM

Question 6

Authority of an agent

Answer 6

Actual authority :
Express - terms of an agency agreement
Implied

Apparent authority:
3rd party unlikely to be aware of extent of authority
Ostensible - ceo having more authority than someone not on the board

Question 7

Agency may be terminated in 3 ways

Answer 7

Mutual agreement

By one party or the other

Death, bankruptcy, insanity

Question 8

Offering advice

Answer 8

Must apply for authorisation from FCA

Question 9

Appointed representatives

Answer 9

An individual or company appointed by an authorised person and may be acti n for an intermediary

TOBA determines roles and responsibilities

Principal takes responsibility for appointed representatives activities

Question 10

Wholesale and retail brokers

Answer 10

Wholesale - contact with insurer

Retail - direct contact with client

Question 11

Services of intermediaries to clients

Answer 11

Review clients needs
Advise whether risk insurable
Decide best market for risk
Negotiate terms and conditions 
Provide advice 
Negotiate renewals
Assist with claims

Question 12

Services of intermediary to insurer

Answer 12

Binding risks
Settling claims
Issuing docs
Collecting premium

Question 13

Delegated authority

Answer 13

Ability to grant immediate cover
Ease of operation
Profit sharing provisions

Question 14

Central recording of risk and payment of premium

Answer 14

• broker submits risk info (bureau) to Xchanging Ins-sure Services (XIS)
• Accounting and Settlement now used for vast majority providing mix of scanned docs and electronic docs
• info recorded on XIS system
• UMR given by broker
• system facilitates movement of funds from broker to insurer