Study 2: Commercial Insurance Stakeholders

Question 1

What is an agent?

Answer 1

A person who is employed or authorised to act on behalf of another. Agents can be independent or direct writers.

Question 2

What is a captive agent?

Answer 2

Agents who place all their business with one insurance company.

Question 3

What is a rate manual?

Answer 3

A manual containing rates and underwriting rules for use by a company’s staff, agents, and/or brokers.

Question 4

What is a line guide?

Answer 4

A listing of the maximum amounts of exposure an insurance company is prepared to accept on various classes of risk.

Question 5

What is loading?

Answer 5

An additional charge included in an insurance rate to reflect a hazard not contemplated in the basic rate for the class.

Question 6

What is an adjuster?

Answer 6

One who investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies and negotiates payments and settlements.

Question 7

What is a claimant?

Answer 7

One who makes claims.

Question 8

What is a managing general agent (MGA)?

Answer 8

An independent business operation given authority by a number of insurance companies to solicit business on behalf of such companies. Responsibilities include recruiting, training and supervising agents.

Question 9

What is a moral hazard?

Answer 9

A hazard arising from the character, interest, habits, and lack of integrity of the insured or person concerned.

Question 10

What are the two most common classification systems used by Canadian insurers?

Answer 10

North American Industry Classification System (NAICS) and Standard Industrial Classification.

Question 11

What are 5 roles of insurance professionals?

Answer 11

1) Brokers/agents
2) Underwriters
3) Commercial claims professionals
4) Risk Analysts
5) Managing general agents (MGAs)

Question 12

What is the difference between a broker and an agent?

Answer 12

Brokers work with clients and help them find the best options for products to meet the business’s insurance needs. Agents generally represent one insurer and operate according to agreements with that insurers. Agents can be independent or exclusive.

Question 13

Which 2 parties are intermediaries in the insurance transaction responsible for?

Answer 13

The insured and the insurer.

Question 14

What is the first step for individuals wishing to become a broker?

Answer 14

They must first complete a licensing exam.

Question 15

Which 4 areas must commercial insurance brokers be proficient?

Answer 15

1) Communication
2) Research
3) Negotiation
4) Time Management

Question 16

Why is communication an important skill for the commercial insurance broker to have?

Answer 16

Because the broker must have the ability to ask the right questions to effectively gather the necessary information from clients; doing so is necessary to be able to determine loss exposures and to present an accurate and comprehensive picture of the risk.

You must also have the ability to help clients understand the coverages and restrictions or excluded coverages by providing clear but thorough explanations.

Question 17

Why is research an important skill for the commercial insurance broker to have?

Answer 17

Because the broker must have the ability to find the coverage best suited to the client’s needs and budget. They must be able to provide innovative and cost-effective solutions for clients. Businesses often have unique circumstances and do not fit into a specific category; this ability is often necessary to piece together different policies to provide complete coverage for a given operation.

Question 18

Why is negotiation an important skill for the commercial insurance broker to have?

Answer 18

Because the broker must have the ability to arrive at a satisfactory arrangement for both the insurer and the insured.

Question 19

Why is time management an important skill for the commercial insurance broker to have?

Answer 19

Because the broker must have the ability to remain organised, prioritise tasks, and ensure accurate documentation is maintained through the process. They must also be able to demonstrate reliability by being on time for appointments.

Question 20

What are the 3 considerations in which an underwriter will reject a risk?

Answer 20

1) The risk is of a class not permitted by the line guide or in some other ways fall short of the minimum requirements specified in the line guide
2) Market conditions or competitive considerations could make a risk unacceptable
3) The risk, on its own merits, is too flawed to be accepted, and it is not possible to negotiate terms on which the risk can be made acceptable

Question 21

What are 4 considerations an underwriter may negotiate to make a risk more acceptable?

Answer 21

1) Deductibles 2) Premium rates 3) Modifications of coverage 4) Implementation of recommendations by the loss control department to improve the risk

Question 22

What are 4 unique characteristics of the underwriter?

Answer 22

1) Analytical and critical thinking 2) Math & statistics

3) Communication 4) Attention to detail

Question 23

What are 5 responsibilities of the claims professional?

Answer 23

1) Confirming their authority 2) Checking policy coverage 3) Supplying insurer with relevant documentation 4) Investing in the claim 5) Keeping the insurer and insured informed

Question 24

Where can the licensing requirements for an insurance professional be found?

Answer 24

The insurance acts of each province and territory.

Question 25

What are 6 duties of risks analysts?

Answer 25

1) Identifying loss exposures 2) preventing loss 3) reducing loss 4) loss financing 5) educating corporate managers 6) acting as a resource to other managers

Question 26

What is a classification system?

Answer 26

A classification system that groups industries to make the following activities better: business analysis, marketing, business listing, data mining, and investment decisions.

Question 27

What is NAICS Canada?

Answer 27

North American Industry Classification System Canada is a classification system developed by Canada, the US and Mexico to classify and separate companies into industries that are defined by the same or similar production process.

Question 28

What is a SIC code?

Answer 28

Four digit codes that categorise companies by the type of business activities they engage in.

Question 29

What are the top 5 Canadian industries?

Answer 29

1) Real estate and rental leasing 2) Manufacturing 3) Mining, quarrying and oil and gas extraction 4) Construction 5) Finance and insurance

Question 30

What are 5 of the most common business characteristics that affect the placement of commercial insurance?

Answer 30

1) Size 2) Location 3) Expertise 4) Claims history 5) Regulatory requirements

Question 31

What are 4 ways that an insurer can assess risk size?

Answer 31

1) Annual revenue 2) Number of employees 3) Place of business 4) Equipment

Question 32

What are 3 factors about a company's location that insurers will review?

Answer 32

1) Geographic location 2) Urban versus rural location 3) Environmental factors

Question 33

What are 4 factors about expertise that the underwriter might ask about?

Answer 33

1) Business Owner's training and history 2) Length of time in business 3) Stability 4) Credibility

Question 34

What are 3 things that the underwriter will review about the claims history?

Answer 34

1) Patterns 2) Frequency of losses 3) Potential for future losses

Question 35

What are the 4 essential workplace skills?

Answer 35

1) Collaboration 2) Active listening 3) Asking effective questions 4) Delivering difficult messages