Chapter 5 - Insurance Distribution and Intermediaries Summary Notes Download
Chapter 5 - Quiz view
More definations
Chapter 5 - Quiz view
Terms | Definitions |
|---|---|
 What is the difference between a broker and an agent? | A broker is an independent person who may place business with any number of insurers while an agent represents one company. |
| Define a general agent. | A general agent has authority from a company to manage all of the company's business within his or her territory. |
| What is the difference between an independent agent and an exclusive agent? | an independent agent sells for many companies whereas an exclusive agent sells for one |
| How do direct writers deliver their product to the consumer? | Company employees do the selling and are paid salaries plus commission |
| Define an insurance intermediary. | An insurance intermediary is a person authorized by another to act on his or her behalf |
| Provide an example of a mandate under Quebec law. | A mandate is a contact by which a person called the mandator (principal) commits a lawful business to the management of another called the mandatary (agent) |
| What is a mandatory? | A mandatory is an party (agent) which is managed by the principal party. |
| Who or what determines the relationship between insurers and their agents/brokers? | the principal and agent relationship |
| Who licenses insurance agents/brokers? | licensing is controlled through the provincial insurance regulator. |
| Define self-regulation. | Self-regulation is the regulation of agents/brokers by a council of reps from the industry instead of regulation by the government |
| What are the FOUR (4) main areas of concern with respect to the regulation of insurance intermediaries? | -Qualification - Licensing - Operating requirements - Renewal of Licenses |
| Candidates for brokers'/agents' licences are examined in what TWO (2) main areas? | - knowledge of the insurance business - government regulations pertaining to insurance intermediaries |
| What is an agency/brokerage agreement? | agency/brokerage agreements or contracts set out the terms and conditions under which an agent or broker will bring business to the named insurance company. |
| From whom do agents/brokers obtain their authority with respect to the insurance they sell? | brokers/agents obtain their authority from the agreement or contract entered into with their insurers. |
| Distinguish between express and implied contracts. | an express contract is one in which the terms have been specifically stated and agreed to by both sides orally or in writing. An implied contract is one in which the parties have acted that it is understood that a principal-agent relationship existed despite no expressed statement by either. |
| Define binding authority. | Is the permission to confirm coverage before submitting it to an insurer. |
| Why must a broker have at least two bank accounts? | Brokers must have two accounts to distinguish between premiums collected which must be remitted to the insurer and operating funds which are used to run their business. |
| What are the purposes of the insurance trust account and the operating account? | The trust account contains funds that are to be remitted to the insurer. They are premiums collected by the brokerage from policyholders. The operating account contains funds that are used to operate the business. |
| How is commission determined? | Commission is determined between the intermediary and the insurer in the agency agreement. |
| What is the main function of an insurance intermediary? | Intermediaries facilitate the completion of contracts. |
More definations
Terms | Definitions |
|---|---|
| What is the difference between an agent and a broker? | A broker is an independent business person who may place business with any number of insurers. An agent represents one company only. |
| Is TD Insurance an example of an exclusive agency company or a direct writing company, and define your choice. | TD Insurance is a direct writing company. Direct writers deal directly with the public and usually employ a sales force to sell the policies it writes. |
| Name three of the four main areas of concern in the regulation of insurance intermediaries. | - Qualification - Licensing - Operating requirements - Renewal of license |
| Name four of the seven basic items covered in an agency / brokerage agreement. | - the parties to the agreement - classes of business to be written - binding authority - premium collection and credit terms - remuneration - termination - other addenda (e.g. incentive bonuses) |
| Define an implied contract. | An implied contract is one in which the parties have acted in such a way that it is understood that a principal-agent relationship exists, even though there may have been no expressed statement by either. |
| What is the definition of a mandate under the Civil Code of Quebec? | A mandate is a contract by which a person called the mandator (principal) commits a lawful business to the management of another called the mandatary (agent), who accepts the obligation to perform it. |
| In the insurance business, an intermediary may be: a) a broker b) an agent c) an employee of a direct writer d) a and b e) all of the above | e) all of the above |
| What is binding authority? | The capacity to confirm to applicants that they have coverage against certain losses. |
| What is a binder and what is a cover note? | A binder is the confirmation that insurance coverage is in effect. It can be oral or written. A written binder may also be referred to as a cover note. |
| Name and define the two kinds of bank accounts broker / agents must have. | Brokers / agents must have a separate trust account and a separate operating account. A trust account is used for the collection of premiums for payment to insurers. An operating account is the general business account. |
| Define sole proprietorship. | A sole proprietor ship is a business owned by one person. The owner is totally responsible for the administration of the business and all debts. |
| Name two of the four advantages of a sole proprietorship. | - easy to set up - flexibility and freedom of actions - subject to the least amount of government control - based solely on the reputation of the hard work and determination of the owner. |
| Define partnership. | A partnership is two or more people carrying on a business jointly. |
| Name two of the four disadvantages of a partnership. | - unlimited liability - possible disputes between partners - limited means of obtaining capital -lack of continuity |
| What is a corporation? | A corporation is an artificially created separate legal entity. It exists only on paper but legally has the same status as a person. A corporation can take legal action, hold assets, and incur debts in its own name without involving the assets of its owners (shareholders). |
| Name two of the four advantages of a corporation. | - limited liability - continuity - tax status - easier raising of capital |
| What is a commission and how is it determined? | Commission is the share of the premium allowed to the broker / agent for having produced the business. It is stated as a percentage of the premium and is stipulated in the agency agreement. |
| Why is liability a potential concern for sole proprietorships and partnerships? | Owners of sole proprietorships and partnerships (unless limited partners) have unlimited liability for the debts of the business. This means that if the business fails, owners / partners could also lose all personal assets. |
| What is the basic function of an insurance intermediary? | The basic function of an insurance intermediary (agent / broker) is to assist in the completion of insurance contracts between their clients and insurer. |
| Name three of the five factors that intermediary production is dependent on. | - product knowledge - production target - prospecting and selling - time control - curiosity |