CAIB 4 Chapter 2- Study Guide Questions And Answers

CAIB 4 Chapter 2- Study Guide
Questions And Answers
Authorityeisetheelegalepowereofetheeinsuranceeagencyeorebrokerageearisingefrometheerelation
shipewithetheeinsuranceecompany.eIdentifye3etypeseofeauthoritye-eCORRECTeeANSWER-
1.eExpressedeAuthority
2.eImpliedeauthority
3.eApparenteAuthority

Brieflyeexplaineexpressedeauthoritye-eCORRECTeeANSWER-
Expressedeauthorityemayebeeanythingelegalethatetheepartieseagreeetoeeithereverballyeoreinew
riting.eBrokerageeagreementewithetheeinsuranceecompanyewillegiveeexpressedeauthorityetoet
hingsetheyecaneandecannotedo

Brieflyeexplainewhyefeeseshouldebeeaemajoredeterminingefactoreinewhethereorenotetoejoineane
operatingeaffiliatione-eCORRECTeeANSWER-
Areetheeservicesereceivedeworthetheecostebeingecharged?eAllechargeseshouldebeeknowneine
advanceesoethatethereewillebeenoesurpriseseonceetheeaffiliationehasebeeneformed.

Brieflyeexplainewhyeimpliedeauthorityeappearsesimpleeonetheesurfaceebuteitecanecauseeprobl
emsedueetoeitsenebulousenaturee-eCORRECTeeANSWER-
Whereethereeisedoubtetheebrokerageeshouldeclarifyetheesituationeinewriting.eNoteallecustomeis
etheesame.




Brieflyeexplainewhyemoreeemphasiseshouldebeeplacedeonetheeserviceseandesupporteprovide
debyeoperatingeaffiliationseratherethanethoseepromised.e-eCORRECTeeANSWER-
Supportemightelookeoutstandingeonepapereoreinecurrentepractiseebuteindividualseareebehindet
heesuccesseofeanyeaffiliation.eTheseepeopleeshouldebeeinvestigatedetoedetermineewhetheres
uchepeopleeinvolvedeineprovidingetheeserviceeareereliableeandeexperienceeinsuranceeprofes
sionals.

Brieflyeidentifyetheedecidingefactor(s)ethatewilledetermineetheebenefitseofeaelooselyekniteaffilia
tione-eCORRECTeeANSWER-1.eifetheeparticipantseareenotecompetitorse
2.eIfetheesubjecteisenoteoneethatewillegiveeoneepartyeaecompetitiveeedge

Demonstrateeyoureunderstandingeofeimpliedeauthorityebyeuseeofeaneexamplee-
eCORRECTeeANSWER-

Noebrokerageeagreementeoreagencyecontractewilleaddresseeveryepossibleecontingencyethat
emighteoccur.eThereforeelaweandecustomepermiteothereactsetoebeeundertakenewhicheareedee

medenecessaryeineconjunctionewithetheeexpresseauthority.

, Explainetheeconcepteoferatificatione-eCORRECTeeANSWER-
Whenebrokerageseexceedetheireexpressedeoreimpliedeauthorityetheyehaveeinefacteenteredein
toeaecontractethemselves.eIfeafteretheetransactionehasebeenecompletedetheeinsuranceecomp
anyewithefulleknowledgeeofetheeunauthorizedeacteacceptsewhatetheebrokerageehasedone,eitei
seaseifetheeinsuranceecompanyehasegrantedeauthorityeinetheefirsteplace.eThiseacceptanceeise
alsoeretroactiveetoewhenetheebrokereenteredeintoetheecontractethemselves.

Identifye2eadvantageseofetheelineeandestaffeorganization.e-eCORRECTeeANSWER-
1.eAreaseofeauthorityeanderesponsibilityeareeclearlyedefined.e
2.eAseeacheemployeeehaseaelineemanageredecisionsecanebeemadeequickly.eExperteadviceeis
ereadilyeavailableetoelineemanagersewhenetheyeneedeit.

3.eEncouragesebetterecommunicationeandeco-operationeoneallelevels

Identifye2ecommoneandepotentiallyeseriouseproblemsewhenefailingetoedefineeemployeeerelati
onships.e-eCORRECTeeANSWER-
1.eTheefailtureetoeclarifyeauthorityeanderesponsibilityerelationships.eTheefloweofeauthorityean
deresponsibilityemustebeeclearlyedefined.e
2.eWhenenoteenougheauthorityeisedelegatedetoeenableepeopleetoecarryeoutetheiredesignatede
responsibilities.

Identifye2elegalerequirementsetoeestablisheaesoleeproprietorshipe-eCORRECTeeANSWER-
1.elicensingebyetheeprovincialeinsuranceeregulatoryeauthorityeand,
2.Filingeinecomplianceewithetradeenameeregulationseifetheesoleeproprietor'senameeisenotethee
sameeasetheenameeunderewhichetheebrokerageeisebeingeoperated.

Identifye2ereasonseaebrokerageemayewishetoejoineaneoperatingeaffiliationse-
eCORRECTeeANSWER-1.eToedraweuponesupportefromewithinetheeinsuranceeindustrye

2.Toeappealetoelargereentities

Identifye2ereasonsewhyeaelawyereshouldereviewetheecontractebeforeejoiningeaneoperatingeaffi
liatione-eCORRECTeeANSWER-1.eToedetermineetheeresponsibilitieseofetheebrokerage
2.eToedetermineewhatebenefitse,ifeany,eareeguaranteedebyetheecontract.

Identifye3eadvantageseofeaecorporation.e-eCORRECTeeANSWER-
1.eLiabilityeiselimitedetoecorporateeassetseonlye=epersonaleassetseareeprotected.e
2.eTaxeadvantagese-ecorporateetaxerates
3.eBusinessedoesenoteliveeoredieewithetheeowner

Identifye3eadvantageseofeaepartnershipe-eCORRECTeeANSWER-1.eBroadereexpertise
2.eLiabilityeiseshared
3.eBusinessedoesenoteliveeandedieewitheoneeowner
(4.eEarningealletheeprofits)

Identifye3eadvantageseofeaesoleeproprietorshipe-eCORRECTeeANSWER-
1.eRightetoealleprofits