Level 2 Management – RIBO Questions and Answers Already Passed

Level 2 Management – RIBO Questions and Answers Already Passed What are the provisions and responsibilities of direction and supervision of the principal broker? 1. To ensure all registered insurance brokers who are employees or partners comply with this act, regulations and by-laws 2.Ensure all brokers who are employees are provided the necessary information respecting insurance for them to act in accordance of the code of conduct and be competent as outlined by the act 3. All registered insurance brokers act in accordance with the code of conduct as outlined in the act 4. Trust accounts and books are maintained in accordance with regulation 5. Ensure E&O and fidelity insurance policies are maintained 6. Ensure filings are made and fees and assessments are paid on time 7. Ensure no director, partner or employee who is not a broker, does not act as a broker 8. Ensure procedures and processes are in place to ensure items 1-7 are upheld Define and explain the brokers duty of care, specifically in the legal context of errors & omissions. Regulation 991, Section 14 code of conduct outlines a framework for a broker's duty of care. -The broker has a fiduciary responsibility. They are held to a higher standard of skill and knowledge. -Be competent as defined in the act. They must have knowledge and skills expected of a broker of comparable skill. -A broker is responsible to advise client's of coverage, properly explain coverage and give advice on where a client may be at risk and the client's insurance opportunities to mitigate the risk. Failure to do so could constitute brokerage E&O exposure -The broker must be candid and honest when dealing with a client -The broker must safeguard the property of others -The brokerage must hold in confidence client's information. Personal information must be handled with care and privacy compliance must be upheld. -The broker owes a duty of care to the insurer as well. For example, ensuring binding authority is followed. risks aren't bound outside of the prescribed authority. Trust money may be invested in the following types of investments 1. Deposits, guaranteed investment certificates and other forms of indebtness, that are: -issued by a bank listed in schedule I or II of the Bank Act, a trust or loan corporation, a credit union, the Government of Canada or a Province of Canada -that have a term not exceeding 5 years -that permit the repayment on demand of the principal sum 2. Treasury bills or other instruments evidencing indebtness, -that are issued or guaranteed by the Government of Canada or a Province of Canda -issued for a period of 30 days or less 3. Mutual or pooled funds that invest only in short-term money market instruments 4. Banker acceptances 5. Short-term debt securities issued by non-financial corporations for a term of 1 year or less - need the highest rated credit quality What is the importance of the balance sheet? A brokerage's financial situation is revealed by the balance sheet, which gives the details of the financial health of the brokerage at a point in time. On the left hand side of the balance sheet, the assets column shows the firm's resources. The right-hand side of the balance sheet shows the firm's liabilities and the owner's equity: the obligations of the company and the origin of its resources. Talk about how liabilities and assets are further broken down (current and long term) What is the importance of the Profit and Loss Statement? Shows funds flowing into the firm—its income—from sources such as premium collections, commission payments, interest earnings, and fees, among others; the firm's expenses (accounts current, i.e., premiums due insurers, salaries and benefits, and rent, among other things); and the difference between the two, which is the firm's profit. An income statement reflects the fact that profit is affected by the timing of receipts and expenditures as well as by their magnitude. What is the importance of the Statement of Changes in Financial Position Cash Flow Statement Completes the financial picture, explains both how and why the company's cash position has changed during the year by showing where financial resources have come from and how they have been used, including, among other data, the incoming and outgoing cash from operations, capital injections and repayments; changes in the value of credit, debt, loans, and fixed assets; and the financial effects of mergers and acquisitions and taxation. Describe the use of financial incentive plans as a key component in performance management. Equity Ownership Plans Stock Purchase Plans Employee Benefit Plans Profit Sharing Plans Group Insurance Plans Retirement Plans All of these play a factor in attracting new staff and retaining current staff. Guiding principals of trust accounts, books and records are... Good financial process and control will enable a Principal Broker to have an accurate and current snapshot of the brokerage's trust position. • The Member must be able to meet all of the trust obligations at all times in accordance with Regulation 991, Section 16(6). • The Trust Account must be maintained in accordance with the RIB Act, Section 32 and Regulation 991, Sections 16, 17, 18 and 21. • Books and records must be maintained on a current basis. • Equity requirements must be maintained in accordance with Regulation 991, Section 19. • All queries from RIBO relating to trust accounts and books and records must be responded to within the time frames established by RIBO. What are the minimum policy limits for the brokerage's E&O and fidelity bond? E&O is $3,000,000 Fidelity is $100,000 The due date for the form 1 position report is 90 days after the most recent fiscal year end and 90 days after 6 months after fiscal year end. The due date for the member's renewal application form is... August 31 The due date for continuing education hours is... September 30 Any change in information must be reported in this # of days of the change. 30 Insurance Broker as defined in the RIB Act is... Any person for compensation, commission or other thing of value, with respect to persons or property in Ontario, deals directly with the public and, a) acts or aids in any manner in soliciting, negotiating or procuring the making of any contract of insurance or reinsurance whether or not the person has agreements with insurers allowing the person to bind coverage and countersign insurance documents on behalf of insurers b) provides risk management services including claims assistance where required c) provides consulting or advisory services with respect to insurance or reinsurance, or d) holds himself, herself or itself out as an insurance consultant or examines, appraises, reviews or evaluates any insurance policy, plan or program or makes recommendations or gives advice with regard to any of the above. What are some considerations for a supervisory plan for the brokerage? -Is there are current policies and procedures manual for the brokerage and does it include a plan of supervision of staff (licensed and unlicensed) -Is all relevant information/material available and known to all registered staff? (i.e., intranet, sharepoint) -Are the responsibilities of the deputy PB prescribed in writing -Does the firm monitor compliance with brokerage policies and procedures -Are the staff required to report instances of non-compliance to the PB? -Are there procedures in place to ensure that complain queries are responded to in a reasonable time frame? Does the PB follow-up with the individual broker to ensure queries have been responded to? -A firm which has had significant deficiencies identified may be subject to increased reporting requirements or more frequent spot checks or other sanctions What are the guiding principals of appointing a deputy principal broker? The powers and responsibilities of the principal broker can be assigned to a DPB, but the PB is still accountable and responsible for the brokerage. The powers and responsibilities assigned by the PB to the deputy, must be assigned in writing. The assignment of responsibilities must be detailed and precise. 7.2 (1)(2) A member qualifies to be designated as a principal broker if the member... (a) is not in default of paying any fee due under the Act (b) is not at the same time of the notification made subject of a complaint referred to the discipline committee or subject of disciplinary proceedings (c) is not the subject of an outstanding order of the discipline committee. (d) is not restricted to acting under supervision (e) is the sole proprietor or an employee of a sole propietorshup, is a partner or a director of the corporaton, as appropriate Product suitability best practices are... 1. Know your client — the facts and assumptions that support your recommendations require you to first gather appropriate information from the client. 2. Undertake a thorough client needs assessment before making your recommendations. Such an assessment should reflect factors such as the underlying risk, the client's objectives and the complexity of the product being sold. By way of example, a large commercial risk would typically require a more in-depth assessment than simple automobile coverage. A higher risk automobile client, however, may make a more fulsome assessment advisable. 3. Confirm the goals of your client. This will help you avoid any miscommunication that could lead to unsuitable recommendations. If so, document that you are working with information provided by the client, or that the client has requested a specific product or service. 4. Discuss with your client any product comparisons that were carried out and why a particular product is recommended. 5. Ensure the client file reflects the collection of information from your client, your analysis of their needs, available products and the reason for your recommendations. A broker should be able to explain how the recommended product or service addresses the client's needs. 6. Document your reasons for recommending a product. There should be enough information in the file to show why a particular recommendation was made. 7. Particularly for commercial accounts, consider the value of a survey or a checklist of important coverages that a client might reasonably expect in a like situation. 8. In situations where the product is offered without advice, brokers should inform the client that no advice is being offered. 9. Competence is paramount. A broker owes a duty to his or her clients to be competent to perform the services undertaken on their behalf. Where you do not have the expertise to adequately service your client's particular risk, refer the client, or consider engaging the services of a broker who possesses the necessary expertise. True of False, the facility associate does allow broker fees to be added to the policy. False; this is not allowed. Disclosure of facts indicating potential conflict of interest A client is entitled to any information about a broker's business relationships that are relevant to the transaction. A business relationship means the broker could benefit directly or indirectly. The intent is that the benefit of the business relationship could influence the brokers decisions. The client has a right to know about this potential influence and the impact it could have on the transaction. Example, if a broker has shares in an insurance company and the broker was considering placing the customer with that insurer, the broker would have to disclose that interest and business relationship in writing to the customer, regardless of the amount of interest or shares. (previously the share requirement was greater than 10%, but this has been amended to any ownership is required to be disclosed). PB & DPB education requirements 10 hours -minimum 5 are management -the remaining may be management or technical NON-ACTIVE MEMBER FIRM Non-Active Firm Class of Member This class of member applies to all members and to all applicants for membership whose corporate structure falls within the following parameters: (i) Clusters with a dominant corporation doing the trading and holding the insurer contracts. (ii) Corporate partnerships where two or more corporations join together to form a partnership. (iii) Individual tax corporation created to have commissions paid into it for tax purposes and to claim benefits. PEST Analysis Political -laws (cell phone use) -regulation that impacts a class of insurance Economical -financial downturn -car sales -hard market; soft market Social -unemployment -shift to dual income households -shifting purchasing behaviours - consumers have more information in a digital age -changing insurance applications; gender identity Technological -Adopting technology; engaging with consumers how they want to engage: walk-in service; website, phone, chat, text SWOT Analysis strengths -advantages over competitors weaknesses -disadvantages relative to competitors opportunities -elements in a company's external environment that allow it to formulate and implement strategy to increase profitability threats -external environment elements that threaten or take away profitability