CAIB 1 - Chapter 7 Questions with correct Answers

What are 3 actions which demonstrate a brokers unethical conduct? - Answer- to sell more insurance than is needed, to sell higher priced coverages when equivalent coverage is available for a lower price, to recommend policies with a higher commission. What are 3 qualities of a professional? - Answer- commitment to higher ethical standards, have a high standard of educational preparedness with mandatory continuous education, have a formal association regulating power over its members What responsibilities do brokers owe their clients? - Answer- to provide coverage best suited to the client, to hold the affairs of clients in strict confidence, to be competent and diligent. What responsibilities do brokers owe insurers? - Answer- to abide by the agency agreement, to adhere to binding authority, to deal honestly with money and to disclose all material facts What responsibilities do brokers owe fellow brokers? - Answer- to use fair methods of solicitation, to encourage public respect and to not harm the reputation of a fellow broker State 3 common E&O causes - Answer- inadequate coverage, misrepresentation and description errors, cancellation and renewal errors Provide 4 examples of inadequate coverages - Answer- failure to provide proper coverage, failure to advise of restrictions/exclusions, failure to provide coverage, mistake in coverage Provide 3 examples of renewal errors - Answer- not renewing at all, not renewing with adequate coverage, not warning of pending expiry State 3 instances where brokers would be held liable to the insurer for claims paid due to misrepresentation - Answer- where the insurer would not have accepted the risk, where the insurer may not have accepted the risk, where the insurer would have accepted but with higher premium What are 5 things brokers can do to reduce E&O's? - Answer- ensure all staff are acting within their scope of competence, take all steps to determine clients' needs, be advisers; not deciders, know coverages & insurers, stay within binding authority What are 5 procedures to reduce E&O's while claim handling? - Answer- report the claim immediately, inform client of their responsibilities, do not authorize repairs, if the loss is clearly not insured; advise them, follow up What is the key source of broker credibility in an E&O claim? - Answer- documentation Provide 2 examples of record keeping that help defend E&O claims - Answer- conversation & telephone logs, letters of confirmation What does E&O insurance cover? - Answer- coverage is provided for claims that arise out of any negligent act, error or omission of the broker or its employees while acting as an insurance broker What is not covered on E&O policies? - Answer- Dishonest, fraudulent or criminal acts Define "Step Licensing" - Answer- a system that requires a higher degree of knowledge for each increasing step Define "Ethics" - Answer- the principles of conduct governing an individual or group Define "Professionalism" - Answer- a professional is one who possesses a special skill or knowledge Define "Self Regulation" - Answer- The right of an ind