Study 1: Insurance and the Intermediary - MC Flashcards Preview

C130 Essential Skills for Agent/Broker > Study 1: Insurance and the Intermediary - MC > Flashcards

Flashcards in Study 1: Insurance and the Intermediary - MC Deck (10)
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1
Q
Which type of risk can be insured?
A. Illegal risk
B. Pure risk
C. Speculative risk
D. Moral risk
A

Pure risk

Rationale: Pure risk entails a chance of loss but no chance of profit. Insurance is concerned only with
pure risk.

2
Q

What are the three (3) broad categories of insurable risk?
A. Personal risks, property risks and liability risks
B. Property risks, commercial risks and farm risks
C. Liability risks, commercial risks and marine risks
D. Personal risks, property risks and commercial risks

A

Personal risks, property risks and liability risks

Rationale: Many kinds of risks exist, and there are also many kinds of insurance. These are generally
divided into three broad categories:
1. Personal risks, 2. Property risks, 3. Liability risks

3
Q

Which of the following actions can a general agent perform?
A. Appoint public adjusters
B. Sell and underwrite risks for one insurance company only
C. Appoint other agents
D. Create insurance rates and calculate premiums to be charged for categories of risks

A

Appoint other agents

Rationale: A general agent has authority from a company to manage all of that company’s business
within his or her territory, to appoint other agents, and to settle claims.

4
Q

Which of the following statements is true of brokers?
A. They can be independent or direct writers.
B. They work in the online environment only.
C. They have a very broad coverage allowing them to underwrite, issue policies, and settle claims.
D. They act on behalf of the insured, placing business with insurance companies.

A

They act on behalf of the insured, placing business with insurance companies.

Rationale: A broker is an independent businessperson who may place business with any number of insurers. This individual seeks out clients (insureds) to bring about the most beneficial match between each client and the insurer that best meets that client’s insurance needs.

5
Q

Identify the true statement about agent and broker authority.
A. In an implied agency agreement, all terms have been specifically stated and agreed upon.
B. Binding authority is the capacity to confirm to applicants that all incurred losses will be covered.
C. Agents and brokers obtain their authority from the agreement entered into with their insurers.
D. Policy premiums belong to the agent or broker, while the commission belongs to the insurer.

A

Agents and brokers obtain their authority from the agreement entered into with their insurers.

Rationale: Insurance agents’ and brokers’ responsibilities to their principals are usually stated in the agreement between the insurer and the agent or broker.

6
Q

Material facts
A. are the least important information given to the insurer.
B. can guarantee a claim payment.
C. are not required by agents or brokers.
D. must be disclosed by the applicant if asked about.

A

must be disclosed by the applicant if asked about.

Rationale: Material facts must be disclosed by the applicant if asked about.

7
Q
As an insurance enterprise, an insurance agency is regulated by the authority provided within the
A. Insurance Companies Act.
B. Highway Traffic Act.
C. Criminal Code of Canada.
D. Insurance Act.
A

Insurance Act.

Rationale: As an insurance enterprise, an agency operation is regulated by the authority provided within
the insurance act of the relevant province or territory.

8
Q
Which jurisdiction is mainly responsible for licensing requirements?
A. Federal
B. Municipal
C. Provincial
D. Civil
A

Provincial

Rationale: Since insurance is a provincial and territorial matter, the licensing requirements are
determined by each jurisdiction.

9
Q

The client requested one form of coverage but the broker or agent arranged another, and the client’s
claim was denied. What is this an example of?
A. Failure to provide correct coverage
B. Failure to provide coverage in time
C. Failure to place coverage at all
D. Failure to explain effects of endorsements

A

Failure to provide correct coverage

Rationale: This is an example of a broker or an agent failing to provide correct coverage and could cause
an E&O claim.

10
Q

Agents and brokers have duties to both their insurers and the clients they service. Which of the
following duties is owed to the insurer?
A. Not to be swayed by remunerative gain
B. To competently perform services undertaken, which requires them to be well educated and
indicates the need for continuing education
C. To hold information in strict confidence
D. To be honest and trustworthy

A

To be honest and trustworthy

Rationale: Brokers and agents have a duty to insurers to be honest and trustworthy; stay within the terms
of the broker agreement; and disclose all relevant facts to the insurer, particularly those deemed to be
material facts, even if it will make placing the risk difficult.