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20 Cards in this Set

  • Front
  • Back

What are the advantages to having an

agreement with an insurance company?

1. Right to bind certain coverages

2. Eligibility to participate in profit sharing plans

What important things are included in every

broker agreement

1. Authority

2. Ownership of Expirations

3. Billing Procedures

4. Commissions

5. Termination

6. Hold Harmless

7. Privacy Act

8. EDI Provisions

9. Other Provisions

What are the two types of billing procedure?

1. Agency Bill

2. Direct Bill

What does agency bill mean?

What are the two methods of Agency Bill


The broker bills clients directly

1. Brokerage statement - broker identifies & pays all accounts due within a specific period

2. Insurance Company statement - insurance company bills the broker for the amounts due to it within a specific period

What is direct bill?

What does it eliminate?

The clients are billed directly to the insurer, who remits payment to the broker monthly

Eliminates having the broker bill the client, collect the premium, and remit the require amount to the insurance company

What are the disadvantages of direct bill?

1. Broker is deprived of the use of premiums normally permitted by other billing methods

2. Lack of control over the preparation and maintenance of policies

3. Loss of personal contact with clients

4. Inaccessibility to the insurance company's records

5. Can't review documents before being sent to client

What is a profit sharing agreement? What are some key elements to look at when negotiating one?

AKA Contingent Commissions

1. How much business is the broker required to write in a particular line of business in a specified period of time?

2. The lines of business excluded/included

3. How losses are defined

4. How profit is calculated

5. When the profit sharing will be paid to the broker

6. Is any credit given for growth over profitability?

7. How insurance company income is computer

What key factors should be considered when

selecting a new insurance market?

1. Marketing philosophy and practices

2. Claims Services

3. Policyholder Services

4. Financial Stability

5. Underwriting Procedures

5. How Many Insurance Companies?

What are 4 important aspects of an insurance market that should be considered?

1. Types of insurance product

2. Volume of business

3. Consistency and Stability

4. Compensation

What are three types of compensation that an insurance company may give a broker?

1. Commissions

2. Profit Sharing Agreements

3. Rewards

What aspects of policyholder services should be appraised and considered?

1. Procedural Matters (level of ease with which one can conduct business)

2. Support Services

3. Technology

What are some important procedural matters to consider?

1. Availability of premium financing plans

2. Average length of time to obtain a quote

3. Normal time to get a policy issued after order

4. How far ahead of (or after) expiration date renewals are issued

5. The turnaround time on policy changes

6. Normal length of time to credit the brokerage for cancelled policies

What does the PACICC plan do?

Ensures money is available for claims involving insolvent insurance companies.

Allows for 70% of unearned premium to a maximum of $700 to be returned to policyholders. Remainder may have to be paid back by the broker.

What underwriting procedures need to be

considered when selecting an insurance


1. Location of underwriting decisions

2. Underwriting Guidelines

3. Rate Levels

4. Competence and Continuity of Staff

What needs to be considered about the location of underwriting decisions?

1. If the broker must deal with a branch office, can decisions be made at that branch or do submissions have to be sent to the head office for final approval?

2. Are there different underwriters for each line of business or does one underwriter handle several lines?

3. Will the brokerages brokers have to deal with several underwriters on a major account, and if so hat can be done in the event of a disagreement with one of them?

4. Are applications judged on their individual merits or does the insurance company practice class underwriting?

What are the pros and cons of dealing with

fewer insurance companies?

+ When just a few companies are used, greater premium volumes can be maintained with each. This may reduce the effect of an unusually large loss on the overall loss ratio.

+ When brokers deal frequently with the same underwriters they can establish a relationship that will be valuable over time

-- reliance on single supplier could place broker in a vulnerable position if the relationship with the insurer deteriorated, the insurer withdrew from the province, became insolvent, or was purchased

What factors affect the suitability of a brokerage for an insurance company?

1. Premises

2. Financial Information

3. Type & Mix of Business

4. Other Insurers Represented

5. Loss Experience

6. Human Resources

7. Business Plan

8. Errors & Omissions Claims Record

What are the two key loss measures?

1. Severity of loss (its size)

2. Frequency of loss (number of losses)

What will an insurance company look for in a brokers business plan?

1. Indication of the areas in which the brokerage plans to grow

2. The amount of growth planned

3. The time frame in which the plan is to be achieved

4. The volume of premium coming from new clients

5. The volume of premium coming from existing clients

6. Targets for growth through enhancing existing client relationships

7. Targets for increasing retention rate

How can insurance companies and brokers keep relations positive?

1. Informal channels (personal contact)

2. Formal channels (newsletters, bulletins)

3. Special programs (i.e. allowing more responsibility for underwriting or claims)