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42 Cards in this Set
- Front
- Back
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(a) Who is responsible for the administration of the insurance act in your province? |
BC – separate insurance councils
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Initial licensing requirements?
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Good character, reputation, pass approved exam
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Different levels of licence?
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Yes – I, II, and III CAIB
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Supervision requirements?
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Takes certain number of years to work unsupervised.
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License terms?
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2 years
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Class of license issued in your province and whether this license would be valid in other provinces
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Brokers generally get an All Classes (other than Life) license or are prohibited from selling other classes unless so licensed
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(a) Define “ethics”
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The principles of conduct governing an individual or group (moral duty, obligation to others).
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(b) Three temptations that could cause a broker to act unethically
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– To sell more insurance than is necessary
– To sell higher priced coverage when equivalent coverage is available to a lower price – To recommend the policy with the highest commission percentage |
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3. Six reasons why license to practice as an insurance broker may be revoked. If broker...
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(a) Is guilty of misrepresentation, fraud, deceit, or dishonesty
(b) Contravenes any provision of the Insurance Act/equivalent (c) Unreasonably fails to pay any insurer premiums collected and retained beyond term stipulated in Agency Agreement (d) Places insurance with unlicensed insurers without complying with legislation relating to unlicensed insurers (e) Proves to be incompetent or untrustworthy to transact insurance agency business for which the license has been granted (f) ??? (p. 7-3) |
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Three duties brokers owe their clients
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– Provide coverage best suited to their needs (regardless of premiums), not take advantage of client’s lack of experience/insurance knowledge
– Hold affairs of client in strictest confidence (unless authorized/req. by law or necessary to negotiate with underwriters) – Be competent to perform services undertaken on client’s behalf |
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Three duties brokers owe their insurers
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– Abide by terms of Agency Agreement
– Adhere to binding authority granted by insurer – Deal honestly with monies held in trust for insurer |
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Three duties brokers owe other brokers
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– Use fair methods of competition in solicitation of business, consistent with honour and dignity of profession |
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5. Three characteristics showed by all professionals, including brokers
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(a) Commitment to high ethical standards
(b) High standard of educational preparedness, training, with mandatory continuous education (c) Formal association/society with regulating power over its members |
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6. There have been a number of Canadian Court decisions that have imposed upon brokers a standard of duty of care to clients approaching perfection. Briefly outline the facts and decisions of the “Fine Flowers” case
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Business assured “fully covered” – broker failed to advise of water pump (and normal wear and tear) exclusion. Court held the broker to negligent
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7. Six common causes of broker errors and omissions claims
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(a) Inadequate coverage |
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(a) Which of the six is by far the largest cause of errors and omissions claims?
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Inadequate coverage
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three examples of inadequate coverage
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– Failure to provide proper coverage – brokers must understand exposure, make appropriate coverage recommendations
– Failure to advise clients of policy exclusions, exceptions, other disadvantageous terms – Aware of risk but inadequate cover because of exclusions overlooked – Failure to place coverage – Failure to follow up on application; i) Recommending against placing coverage on wrong assumption that the risk is already covered, ii) Failure to advise broker will not be pursuing application, iii) Clerical error = lost/misplacing client’s file |
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9. Almost ¼ of all errors and omissions claims are the result of misrepresentation and errors in description. Outline the facts and decision in the “Hornberg” case
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Broker wrongly represented that a business was under 24 hour watch, a warranty was incorporated, there was a loss, the coverage was denied, and the broker was held liable.
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10. Approximately 10% of all E&O claims involve the improper handling of policy renewals and cancellations. Give three examples where improper handling of renewals can cause problems.
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(a) Not renewing at all
(b) Not renewing adequate coverage (c) Not warning of pending expiry |
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Provide an example of an E&O claim for Policy Change Errors
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auto policy insures several vehicles. Vehicles are bought/sold. Accidents regarding not correcting coverage can happen
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Provide an example of an E&O claim for Processing Delays
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Client requested coverage, a fire started within 10min, still wasn’t covered. There was evidence of the broker placing coverage within 15mins
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Provide an example of an E&O claim for Agency Agreement violations
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When limits or underwriting guidelines are exceeded and a loss occurs, brokers usually responsible for payment.
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Six measures that will help brokers prevent E&O claims
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(a) Ensure acting within own level of competence |
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How can you ensure you're acting within your own level of competence?
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if any doubts to serve specialized need, direct client to another broker.
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How can you take all steps necessary to properly determine clients’ needs?
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learn all they can about clients and business (inspecting premises to determine loss exposure, research types of losses to which such risks are most susceptible
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How can you be an adviser rather than a decider (for clients)?
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present all available options, reduce chances of E&O claims. Deciders = run the risk that their decisions might not be correct. Always give options even if it seems unlikely/too expensive.
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How can you know your coverages and insurers?
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Coverage is constantly changing. Educational courses, industrial journals, seminars, other study methods. Before you advise that coverage is not available, you must be sure it’s not available from any source. If it later becomes available, you should notify insureds, but also you shouldn’t notify that it’s available unless you’re absolutely sure. Make sure you know the quality of insurers (If insolvent, you may be financially responsible).
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What can you do when it might take longer to place coverage?
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make sure client knows it might take longer than normal
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What will happen if you don't keep within bounds of Binding Authority?
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might be liable for loss, or need to reimburse insurer.
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Eight steps a broker should follow when they have been notified of a claim by an insured
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(a) Report claim immediately to insurer (might have permission to report directly to specific adjustment firm)
(b) Inform insureds will be contacted by adjusted and remind of duties imposed by policy (c) Do not authorize insured to proceed with repairs/replacement, or make any statement that would commit insurer to particular course of action (or stating to client that they’re insured when not absolutely sure.) (d) If certain loss not covered, inform insured (If you don’t, it can do damage to broker/client relationship.) (e) Follow up periodically to ensure settlement progressing (f) Maintain proper claims records (g) Be helpful to insureds while also avoiding any interference in adjustment of claims (h) Maintain integrity and professionalism |
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List several examples of what to remind insureds of after a loss.
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- they will be contacted by an adjuster
- protect property from further damage - retain damaged property for examination - notify police. - If applicable, not admitting liability. - If they don’t comply with all conditions, claim may be jeopardized.- |
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How to follow up periodically to ensure settlement progressing
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- contact 10 days after initial report and every 20-30 days after that.
- Note: policies may differ in the time permitted to insureds to submit proofs of loss. Brokers should be familiar with the Statutory Condition addressing this and that clients are well advised |
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How can you maintain proper claims records?
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Use a claims log.
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How can you be helpful to insureds while also avoiding any interference in adjustment of claims?
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Discuss concerns with adjuster or insurer’s claims department
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How can you maintain integrity and professionalism?
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Clients will sometimes look to broker for assistance in obtaining payment of claim even when it’s clear that no coverage exists. Brokers must avoid any involvement in such activities
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What is the best defence against an E&O claim?
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Documentation
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Why is the best defence against an E&O claim documentation?
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Credibility. Outcome of claim may depend on a broker’s word vs. that of insured/insurer bringing the suit
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(c) Two types of documentation that may help prevent E&O claims.
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– conversation/telephone logs
– confirming letters |
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In E&O policies, who is covered?
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Brokers
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In E&O policies, what is covered?
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Claims that arise from any negligent act, error, or omission of the insured or any person for whose acts the insured is legally liable. Limited to those arising from conduct of only business of insured as insurance broker.
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In E&O policies, what is excluded?
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Covers only honest E&O claims. Does not cover anything arising out of any dishonest, fraudulent, criminal, or malicious acts, or from failure to collect, pay, or return premiums
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In E&O policies, why is there a deductible?
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To ensure brokers are encouraged to develop measures aimed at preventing and controlling E&O losses.
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