I10 4 Understand The Key Legal and Regulatory Issues affecting Insurance Brokers Flashcards by Annie Larthe

Which document will the Financial Conduct Authority require a firm of insurance brokers to regularly submit to provide evidence of compliance with its regulations?

A. The annual reports and accounts.

B. The initial disclosure document.

C. A Retail Mediation Activities Return.

D. A suitability statement

C. A Retail Mediation Activities Return.

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The Insurance: Conduct of Business sourcebook (ICOBS) states that an insurance broker, when explaining to a client why an insurer has been approached, must

A. demonstrate that all insurers have been approached.

B. demonstrate that the quotations are reasonable based on the client’s circumstances.

C. provide the client with a list of the leading insurers in the market sector and those which have been approached.

D. tell the client the basis of the broking procedure used.

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In accordance with the Insurance: Conduct of Business sourcebook (ICOBS), what must an insurance broker disclose to a potential client regarding the premium to be paid?

A. The amount of commission within the premium.

B. The full premium calculation, including loadings and discounts.

C. The premium with any fee shown separately.

D. The premium both with and without Insurance Premium Tax.

C. The premium with any fee shown separately.

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The Financial Conduct Authority’s approach to supervision requires insurance brokers to

A. deal only with insurers who are members of the Association of British Insurers.

B. identify and reduce risks which may affect its clients.

C. improve the level of qualifications of its team.

D. submit details of complaints on a monthly basis.

B. identify and reduce risks which may affect its clients.

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What type of insurance broker is the Financial Conduct Authority responsible for regulating?

A. All overseas insurance brokers who place insurance risks with UK insurers.

B. Only those insurance brokers who conduct general insurance mediation activities.

C. Only those insurance brokers who conduct insurance mediation activities in the UK.

D. Only those insurance brokers who place consumer insurance

C. Only those insurance brokers who conduct insurance mediation activities in the UK.

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What type of insurance broker is the Financial Conduct Authority responsible for regulating?

A. All overseas insurance brokers who place insurance risks with UK insurers.

B. Only those insurance brokers who conduct general insurance mediation activities.

C. Only those insurance brokers who conduct insurance mediation activities in the UK.

D. Only those insurance brokers who place consumer insurance

C. Only those insurance brokers who conduct insurance mediation activities in the UK.

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What does the regulator require in order for firms of insurance brokers to demonstrate the competency of employees?

A. Annual appraisals.

B. Continuing professional development.

C. Success in approved examinations.

D. The issuance of suitability statements

B. Continuing professional development.

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In order to satisfy regulatory requirements, what is the minimum number of years for which an insurance broker must keep training records?

A. 3 years.

B. 5 years.

C. 7 years.

D. 10 years.

A. 3 years.

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Where an employee of a firm of insurance brokers suspects that a client may be involved in money
laundering, what action must initially be taken?

A. Cease any business transactions with the client.

B. Confront the client.

C. Freeze any assets held by the broker on behalf of the client.

D. Report the suspicion.

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Why is an insurance broker required to check the sanctions list?

A. To avoid placing business for a prohibited client.

B. To check a client’s financial assets.

C. To establish in which territories a business client operates.

D. To verify the legal existence of a business client.

A. To avoid placing business for a prohibited client.

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Why is an insurance broker required to check the sanctions list?

A. To avoid placing business for a prohibited client.

B. To check a client’s financial assets.

C. To establish in which territories a business client operates.

D. To verify the legal existence of a business client.

C. To establish in which territories a business client operates.

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A client telephones an insurance broker to request details of the data that is held about him. What data, if any, must the broker provide?

A. Full details of the data must automatically be provided.

B. Full details of data following a check to confirm the client’s identity.

C. A summary of the data.

D. Such data cannot be provided.

B. Full details of data following a check to confirm the client’s identity.

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For how long may an insurance broker retain personal data about a UK policyholder?

A. For the policy period only.

B. For a maximum of 10 years only.

C. Only for the time period that is required for its purposes.

D. Until the death of the policyholder only.

C. Only for the time period that is required for its purposes.

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What type of proposer should an insurance broker treat as a consumer?

A. A proposer who is a partner in a firm.

B. A proposer who is a sole trader.

C. A proposer who owns their business.

D. A proposer who requires insurance for their own possessions

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The Financial Conduct Authority’s rules relating to identifying client needs, product information and
claims handling are stated in the

A. Consumer Insurance Act 2012.

B. Insurance: Conduct of Business sourcebook (ICOBS).

C. Insurance Mediation Directive 2012.

D. Terms of Business Agreement.

B. Insurance: Conduct of Business sourcebook (ICOBS).

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The Financial Conduct Authority’s risk-based approach to the supervision of insurance brokers means that resources are directed to those firms

A. believed to pose the greatest risk to commercial clients.

B. believed to pose the greatest risk to consumers.

C. underwriting catastrophe exposures only.

D. with a high risk of financial failure only.

B. believed to pose the greatest risk to consumers.

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Where an insurance broker carries out regulated activities without authorisation, this is

A. acceptable provided it is a Lloyd’s broker.

B. acceptable provided it only places reinsurance.

C. a civil offence.

D. a criminal offence.

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Which body is responsible for the regulation of Lloyd’s brokers?

A. British Insurance Brokers’ Association.

B. Council of Lloyd’s.

C. Financial Conduct Authority.

D. Prudential Regulation Authority.

C. Financial Conduct Authority.

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A. A full refund in all circumstances.

B. A full refund, providing no claims have been notified.

C. A pro-rata refund, providing no claims have been
notified.

D. No refund will be received.

C. A pro-rata refund, providing no claims have been
notified.

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In which document does the Financial Conduct Authority require that an insurance broker discloses its address and authorisation status?

A. demands and needs statement.

B. initial disclosure document.

C. insurance policy.

D. statement of facts.

B. initial disclosure document.

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One of the requirements that the Financial Conduct Authority places on a firm of insurance brokers to ensure competency of employees dealing with consumers, is that they must

A. be supervised in their role for a period of no less than three months.

B. be supervised until they demonstrate the necessary level of competency to carry out the activity.

C. complete five hours of structured continuing professional development per month.

D. obtain an insurance qualification.

B. be supervised until they demonstrate the necessary level of competency to carry out the activity.

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A copy of a client’s passport has been obtained by an insurance broker for proof of identity checks. For what period of time, if any, should this be retained?

A. It should not be retained as this would be a breach of data protection regulations.

B. 12 months.

C. 5 years.

D. For as long as the policyholder remains the insurance broker’s client

C. 5 years.

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What penalty could be imposed on an insurance broking firm if it is found to be working with a sanctioned entity?

A. The loss of its Financial Conduct Authority authorisation only.

B. A large fine only.

C. A prison sentence only.

D. A large fine or a prison sentence.

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What information does the Employers’ Liability Tracing Office (ELTO) require an insurance broker to obtain from a commercial client?

A. Claims experience.

B. Directors’ names and addresses.

C. Employer reference number.

D. Name of insurer

C. Employer reference number.

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An insurance broker will maintain a gifts and hospitality register to comply with A. bribery legislation. B. data protection legislation. C. Financial Conduct Authority requirements. D. money laundering requirements.

A. bribery legislation.

Under the Data Protection Act 2018, what is the maximum fine as a percentage of global turnover, that can be imposed on an insurance broker if there is a data breach? A. 2% B. 4% C. 5% D. 10%

B. 4%

What action, if any, should an insurance broker take if requested by a policyholder for details of his personal data held within the broker’s files? A. The data can be provided on the payment of a fee. B. The data must be provided with no charge. C. The policyholder must be asked to obtain permission from the Information Commissioner’s Office. D. There is no obligation to disclose the data.

B. The data must be provided with no charge.

Which body requires insurance brokers to maintain the competency of their employees? A. British Insurance Brokers’ Association. B. Council of Lloyd’s. C. Financial Conduct Authority. D. Prudential Regulation Authority

C. Financial Conduct Authority.

At what stage in the money laundering process might an insured request an early cancellation and a return of premium? A. Due diligence. B. Integration. C. Layering. D. Placement.

B. Integration.

When does the Financial Conduct Authority require an insurance broker to ensure that good customer outcomes have been delivered? A. At all times and in connection with all insurance customer operations. B. Only when providing an insurance customer with advice. C. Only when providing an insurance customer with advice, a quotation and after sales procedures. D. Only when providing an insurance customer with a quotation and after sales procedures.

A. At all times and in connection with all insurance customer operations.

An insurance broker accepts a contingent commission arrangement with an insurer. Which situation best describes what this agreement is? A. If a policy is cancelled mid-term, the insurer can recover a pro-rata element of any commission that was paid to the broker. B. An overriding commission payment will be paid to the broker subject to a certain level of business being achieved. C. The insurer agrees to rebate commission because of a previous accounting error. D. A broker can place cover on a 0% commission basis.

B. An overriding commission payment will be paid to the broker subject to a certain level of business being achieved.

In accordance with the law of agency, which of the following statements is correct? A. An agent can have only one principal at any one time. B. An insurance broker has both client and insurer as their principal at the same time. C. An agent can have more than one principal at any one time, providing all parties agree. D. A delegated authority relationship permits more than one principal at any one time.

A. An agent can have only one principal at any one time.

Which instance would not normally be seen as a broker inducement which could give rise to a conflict of interest? A. Where a broker attends an expensive corporate event at the insurer's expense. B. When an insurer grants 15% commission to a broker on a £3,000 household policy. C. When an insurer gives a cash gift to a broker to assist with growth plans. D. When an insurer provides a 0% loan to a broker in return for a high level of support

B. When an insurer grants 15% commission to a broker on a £3,000 household policy.

In your role as an insurance broker, you have a range of legal duties. Under the law of agency, each of the following is a key legal duty that is required of you with the exception of the duty of: A. Due skill and care. B. Good faith. C. Accountability. D. Remuneration.

D. Remuneration

When considering terms of business agreements [TOBAs], which of the following would you expect to see in a TOBA between an insurer and a client but NOT in a TOBA between an insurer and a broker? A. Broker's authority. B. Ownership and access to data and records. C. Conflict management. D. The availability of compensation.

D. The availability of compensation.

A broker is granted approval by an insurer to operate a delegated authority on a property scheme. A customer requires cover for a property and requests that the cover notes the interest of ABC Bank. When the broker places cover within the delegated authority agreement, which option best describes the role of the broker? A. The broker is the principal and the insurer is the agent. B. The broker is not an agent in this scenario. C. The broker acts primarily as agent of the insurer. D. The broker acts primarily as agent for the bank.

C. The broker acts primarily as agent of the insurer.

An insurance broker is able to bring a principal and a third party together in a contractual relationship. Which of the following is the principal? A. The underwriter. B. The client. C. The insurance broker. D. The insurer.

B. The client.

An insurance broker secures cover on behalf of their principal – the customer. The broker receives the completed policy documents which are held in trust before being sent to the customer. This relationship is best described as a: A. Temporary relationship. B. Fiduciary relationship. C. Trusting relationship. D. Holding relationship.

B. Fiduciary relationship.

Although agents are bound by their principal’s instructions, insurance brokers are usually permitted to delegate tasks that: A. Require decisions of judgment on the principal’s behalf. B. Involve speculation regarding the principal’s legal status. C. Involve guesswork of a principal’s circumstances. D. Are purely mechanical in their nature

D. Are purely mechanical in their nature

A customer requests a commercial quotation from a broker. The broker creates a full quotation along with accompanying documentation. The customer accepts and the broker arranges cover accordingly. In which instance is the broker entitled to commission? When the broker: A. Supplies a quotation in a timely manner. B. Can evidence a client’s questions were competently answered. C. Can prove they were the effective cause of any transaction. D. Can evidence they did not misrepresent any information.

C. Can prove they were the effective cause of any transaction.

The Financial Conduct Authority’s risk-based approach to the supervision of insurance brokers means that resources are directed to those firms A. believed to pose the greatest risk to commercial clients. B. believed to pose the greatest risk to consumers. C. underwriting catastrophe exposures only. D. with a high risk of financial failure only.

B. believed to pose the greatest risk to consumers.

Where an insurance broker carries out regulated activities without authorisation, this is A. acceptable provided it is a Lloyd’s broker. B. acceptable provided it only places reinsurance. C. a civil offence. D. a criminal offence.

D. a criminal offence.

Which body is responsible for the regulation of Lloyd’s brokers? A. British Insurance Brokers’ Association. B. Council of Lloyd’s. C. Financial Conduct Authority. D. Prudential Regulation Authority

C. Financial Conduct Authority.

In order to comply with the Financial Conduct Authority’s Contract Certainty Code of Practice, within how many days should an insurance broker issue full documentation to clients? A. 7 days for consumers and 14 days for commercial customers. B. 7 days for consumers and 30 days for commercial customers. C. 7 days for both consumers and commercial customers. D. 30 days for both consumers and commercial customers.

B. 7 days for consumers and 30 days for commercial customers.

When incorrect documents are received from an insurer, in what circumstances, if any, can the insurance broker send them to the client to enable it to meet contract certainty timelines? A. In all circumstances. B. In no circumstances. C. Only if the broker has manually amended the documents and kept a copy on file. D. Only if the broker has obtained the insurer’s agreement to make any potential corrections.

D. Only if the broker has obtained the insurer’s agreement to make any potential corrections.

A commercial client renews its property owner’s insurance policy and cancels the cover within 14 days as it has found a cheaper alternative. What premium refund, if any, is it most likely to receive? A. A full refund in all circumstances. B. A full refund, providing no claims have been notified. C. A pro-rata refund, providing no claims have been notified. D. No refund will be received.

C. A pro-rata refund, providing no claims have been notified.

In which document does the Financial Conduct Authority require that an insurance broker discloses its address and authorisation status? A. demands and needs statement. B. initial disclosure document. C. insurance policy. D. statement of facts.

B. initial disclosure document.

One of the requirements that the Financial Conduct Authority places on a firm of insurance brokers to ensure competency of employees dealing with consumers, is that they must A. be supervised in their role for a period of no less than three months. B. be supervised until they demonstrate the necessary level of competency to carry out the activity. C. complete five hours of structured continuing professional development per month. D. obtain an insurance qualification.

B. be supervised until they demonstrate the necessary level of competency to carry out the activity.

A copy of a client’s passport has been obtained by an insurance broker for proof of identity checks. For what period of time, if any, should this be retained? A. It should not be retained as this would be a breach of data protection regulations. B. 12 months. C. 5 years. D. For the as long as the policyholder remains the insurance broker’s client.

C. 5 years.

What penalty could be imposed on an insurance broking firm if it is found to be working with a sanctioned entity? A. The loss of its Financial Conduct Authority authorisation only. B. A large fine only. C. A prison sentence only. D. A large fine or a prison sentence.

D. A large fine or a prison sentence.

What information does the Employers’ Liability Tracing Office (ELTO) require an insurance broker to obtain from a commercial client? A. Claims experience. B. Directors’ names and addresses. C. Employer reference number. D. Name of insurer.

C. Employer reference number.

A. bribery legislation.

Under the Data Protection Act 2018, what is the maximum fine, as a percentage of global turnover that can be imposed on an insurance broker if there is a data breach? A. 2% B. 4% C. 5% D. 10%

B. 4%

B. The data must be provided with no charge.

C. Financial Conduct Authority.

The basis of how commission can be withdrawn by an insurance broker from an insurer’s money account is usually detailed in A. a demands and needs statement. B. a key features document. C. the Client Assets Sourcebook. D. a Terms of Business Agreement.

D. a Terms of Business Agreement.

B. believed to pose the greatest risk to consumers.

D. a criminal offence.

C. Financial Conduct Authority.

C. A pro-rata refund, providing no claims have been notified.

B. initial disclosure document.

B. be supervised until they demonstrate the necessary level of competency to carry out the activity.

C. 5 years.

D. A large fine or a prison sentence.

C. Employer reference number.

A. bribery legislation.

Under the Data Protection Act 2018, what is the maximum fine as a percentage of global turnover, that can be imposed on an insurance broker if there is a data breach? A. 2% B. 4% C. 5% D. 10%

B. 4%

What action, if any, should an insurance broker take if requested by a policyholder for details of his personal data held within the broker’s files? A.The data can be provided on the payment of a fee. B. The data must be provided with no charge. C. The policyholder must be asked to obtain permission from the Information Commissioner’s Office. D.There is no obligation to disclose the data.

B. The data must be provided with no charge.

C. Financial Conduct Authority.

At what stage in the money laundering process might an insured request an early cancellation and a return of premium? A. Due diligence. B. Integration. C. Layering. D. Placement.

B. Integration.

When does the Financial Conduct Authority require an insurance broker to comply with the fair treatment of customer requirements? A. At all times and in connection with all insurance customer operations. B. Only when providing an insurance customer with advice. C. Only when providing an insurance customer with advice, a quotation and after sales procedures. D. Only when providing an insurance customer with a quotation and after sales procedures.

A. At all times and in connection with all insurance customer operations.

For what purpose does a firm of insurance brokers send a Terms of Business Agreement to a client? A. It contains the client’s insurance quotation. B. It details the services that the broker will provide to the client. C. It provides a summary of the client’s insurance coverage. D. It states the client’s insurance requirements

B. It details the services that the broker will provide to the client.

What does the duty of obedience require an insurance broker to do when acting for a client? A. Act in the client’s best interests at all times. B. Avoid any conflict of interest. C. Keep accurate records of monies handled. D. Perform all of the client’s lawful instructions in a timely manner.

D. Perform all of the client’s lawful instructions in a timely manner.

Under the principle of tort, for what are insurance brokers legally responsible to their principal? A. To abide by all statutory requirements. B. To achieve contract certainty. C. To exercise reasonable care. D. To maintain Continuous Professional Development records.

C. To exercise reasonable care.

During the claim process, when may a conflict of interest occur at a firm of insurance brokers? A. When a claim payment is received from an insurer. B. When a loss assessor and a loss adjuster are both involved in a claim. C. When notifying an insurer of a claim. D. When two or more clients are involved in the same claim.

D. When two or more clients are involved in the same claim.

Why might a conflict of interest arise if an insurance broker has a delegated authority agreement, which includes a profit commission, with an insurer? A. Business can only be placed with an insurer specifically requested by the client. B. Business may be placed with other insurers who quote preferential terms. C. Only good quality risks may be placed under the delegated authority. D. Only sub-standard risks may be placed under the delegated authority.

C. Only good quality risks may be placed under the delegated authority.

In which document will an insurer detail the level of authority that is provided to an insurance broker? A. The demands and needs statement. B. The policy wording. C. The suitability statement. D. The Terms of Business Agreement.

D. The Terms of Business Agreement.

I10 4 Understand The Key Legal and Regulatory Issues affecting Insurance Brokers Flashcards

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