Chapter 7

Question 1

define ethics

Answer 1

the principles of conduct governing an individual or a group

Question 2

a brokers license may be revoked if the broker:

Answer 2

• is guilty of misrepresentation, fraud, deceit, dishonesty
• contravenes any provision of The Insurance Act or equivalent
• unreasonably fails to pay premiums collected
• places insurance with unlicensed insurers
• proves to be incompetent or untrustworthy to transact insurance

Question 3

What is a broker’s duty to clients?

Answer 3

• provide coverage best suited to clients needs, and to not take advantage of clients lack of experience/knowledge
• Hold affairs of client in strict confidence in compliance with privacy laws
• to be competent to perform the services undertaken on the client’s behalf
• serve clients in a conscientious, diligent, and efficient manner

Question 4

What is a broker’s duty to insurers?

Answer 4

• abide by terms of agency agreement
• adhere to binding authority granted by insurer
• deal honestly with monies held in trust for the insurer
• disclose to insurer all material facts about a risk

Question 5

What is a broker’s duty to fellow brokers?

Answer 5

• use fair methods of competition
• encourage public respect of the broker’s vocation
• co-operate in every reasonable way for the betterment of the industry
• treat fellow brokers with respect
• to not harm reputation of fellow broker

Question 6

characteristics shared by all professions include:

Answer 6

• commitment to high ethical standards
• high standard of educational preparedness and training, with mandatory continuing education
• formal association or society with regulation power over it’s members
• public recognition as a profession.

Question 7

The largest single cause of E&O claims is Inadequate coverage.
What can cause this?

Answer 7

• failure to provide proper coverage
• failure to advise clients of exclusions, excemptions, etc
• failure to place coverage
• mistake in coverage
• placing coverage too late
• not correctly advising as to availability of coverage

Question 8

6 common causes of broker errors and omissions claims

Answer 8

• inadequate coverage
• misrepresentation
• cancellation/renewal errors
• policy change errors
• processing delays
• agency agreement violations

Question 9

3 examples of when mishandling renewals can lead to an E&O

Answer 9

• not renewing at all
• not renewing adequate coverage
• not warning of pending expiry

Question 10

measures that help brokers prevent E&O claims

Answer 10

• ensure they are acting within their level of competence
• properly determine their clients needs
• be advisers, not deciders
• know coverage and insurers
• time required to place coverage
• keep within biding authority
• office procedures should be established to ensure all policy expires are accounted for
• double check requests for policy changes
• be sure insureds are aware of special restrictions or limitations on their insurance
• be sure insureds are advised in writing of any changes in policy coverages, conditions, or limits.
• insureds must know that they are not insured for everything that may happen.
• brokers should conduct a periodic file audit

Question 11

steps brokers must take when notified of a claim

Answer 11

• report immediately to insurer
• inform insureds that they will be contacted by an adjuster and remind them of duties imposed by policy
• do not authorize the insured to proceed with repairs nor make any statement that would commit the insurer to a particular course of action
• if a loss isn’t covered, inform the insured of that fact
• follow up periodically with the insured to ensure settlement is progressing.
• maintain proper claims records
• be helpful to insured while at the same time, avoiding interference
• maintain integrity and professionalism