FOI - Chapter 15

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Questions and Answers

Who is primarily responsible for the administration of the Insurance Act?

The Provincial Minister of Finance

The Insurance Advocacy Group

The Superintendent of Insurance (correct)

The Registered Insurance Brokers Council

Which statement accurately describes the licensing requirements for insurance brokers?

Passing an approved exam is mandatory for all applicants. (correct)

Only self-employed insurers need a sponsorship.

No background check is required for applicants.

An applicant can apply without being sponsored by a brokerage.

What distinguishes a Level I licensee in the STEP licensing system?

They are allowed to manage a brokerage firm.

They can transact auto insurance at any location.

They have unsupervised sales authority.

They can sell all types of insurance only within the brokerage office. (correct)

What is a requirement for obtaining an initial insurance license?

Being of good character/reputation. Signup and view all the answers

What level of supervision is required for a Level I licensee?

Supervision by a Level II or III licensee. Signup and view all the answers

Which province has established the Registered Insurance Brokers of Ontario Act?

Ontario Signup and view all the answers

What limitation exists for Level II licensees regarding brokerage management?

They are not allowed to own or manage a brokerage. Signup and view all the answers

How can Level I licensees perform insured transactions at auto dealerships?

They require a Mobile Auto Contract with ICBC. Signup and view all the answers

What is a feature of Level III licenses in the licensing system?

Licensees can sell all types of general insurance and manage a brokerage. Signup and view all the answers

What is the maximum duration of a license in most provinces?

3 years Signup and view all the answers

Which of the following must be true for a broker to insure property in a province?

The policy must be countersigned by a broker licensed in that province. Signup and view all the answers

What constitutes the basis for possible termination of a broker's license?

Guilty of misrepresentation or contravening the Insurance Act. Signup and view all the answers

What is considered illegal rebating in the context of insurance licensing?

Returning part of the premium to clients to influence their purchase. Signup and view all the answers

What type of license is necessary to sell travel insurance in Ontario?

Another license in addition to the current insurance license. Signup and view all the answers

Which of the following best describes the licensing term in British Columbia?

Licenses are continuous but require annual filing. Signup and view all the answers

What level of license allows unrestricted management and technical activities?

Level II (2) Signup and view all the answers

What may lead to the termination of a broker's license according to the Insurance Act?

Offering unlicensed insurance products Signup and view all the answers

Which principle is NOT part of the three key principles intermediaries must follow as per the CCIR report?

Awareness of Market Trends Signup and view all the answers

What constitutes a breach of integrity for brokers as outlined in the standards of conduct?

Having a criminal conviction unrelated to their work Signup and view all the answers

Which action reflects misuse of trust funds by a broker?

Delaying payment to insurers for personal benefit Signup and view all the answers

What is a consequence of placing insurance with unlicensed insurers?

Revocation of the broker’s license Signup and view all the answers

Which of the following is an ethical conduct standard required of brokers?

Maintaining transparency with clients Signup and view all the answers

What could be a reason for the revocation of a broker’s license besides failing to submit premiums?

Proving to be incompetent to transact agency business Signup and view all the answers

What does the obligation to disclose conflicts of interest entail for brokers?

Informing clients of any potential conflicts that may affect their decisions Signup and view all the answers

What is expected of brokers regarding their knowledge and services?

They must maintain competence and provide diligent service. Signup and view all the answers

Which of the following would be considered conduct that does NOT meet the standard of quality of service?

Failing to inform a client about significant changes in policy conditions. Signup and view all the answers

What is required of brokers when making recommendations to clients?

All assumptions and details should be clearly communicated. Signup and view all the answers

What practice is explicitly discouraged for brokers regarding insurance sales?

Engaging in tied selling. Signup and view all the answers

What must brokers disclose to clients if they receive incentives for placing business?

That they received an incentive, but not the amount. Signup and view all the answers

Which of the following is NOT an example of conduct that does not meet the advisory standards?

Providing clients with clear and accurate policy information. Signup and view all the answers

How should brokers handle communications with clients?

All communications should be handled with thorough details. Signup and view all the answers

What does the term 'tied selling' mean in the context of broker conduct?

Selling one type of insurance only if another is purchased. Signup and view all the answers

Why is confidentiality important for brokers in their relationship with clients?

It fosters full and unreserved communication. Signup and view all the answers

What must brokers do if their fees exceed the premium charged by the insurer?

Clearly indicate the fee in writing. Signup and view all the answers

Which of the following best describes an 'unconscionable' fee?

A fee that cannot be justified. Signup and view all the answers

What should brokers aim to preserve in the eyes of the public?

The integrity of the insurance industry. Signup and view all the answers

What obligation do brokers have regarding breaches of insurance regulations?

To report matters that could cause serious damage. Signup and view all the answers

What is a common goal of professional associations for brokers?

To enhance the professional image of their members. Signup and view all the answers

What is a characteristic of the code of conduct for provincial brokers associations?

It can differ from government standards. Signup and view all the answers

How should brokers communicate with their clients according to standards of conduct?

Professionally at all times. Signup and view all the answers

Study Notes

Regulation of Brokers and the Insurance Act

Regulation of insurance intermediaries is governed by provincial laws, specifically each province's Insurance Act.
Administration duties are assigned to the Superintendent of Insurance, Superintendent of Financial Institutions, or Commissioner depending on the province.
In provinces like BC, AB, SK, and MB, Insurance Councils handle licensing, complaints, and disciplinary actions for brokers.

Licensing Standards

All individuals selling insurance must be licensed and sponsored by a brokerage or insurer.
Initial licensing requires good character and passing an approved examination; specifics vary by province.
A step licensing system exists in BC and Ontario with three levels, each granting different sales permissions and requiring supervision.

License Classifications and Terms

Brokers generally receive an "All Classes (Other Than Life)" license, requiring additional licensing for other insurance types, like travel insurance in Ontario.
License durations vary; Ontario has annual renewals while BC has continuous licenses with yearly updates.

Ethical Standards and Compliance

High ethical standards are essential; grounds for revocation include misrepresentation, failure to hold client premiums, and involvement with unlicensed insurers.
Ethical breaches like rebating, where brokers return part of the premium to induce purchases, are illegal in most provinces.

Code of Conduct and Client Interaction

Codes of Conduct set by Insurance Councils and professional associations emphasize integrity, competence, quality service, and transparency in client relationships.
Brokers are required to maintain confidentiality with client information, ensuring trust and compliant communication about policies and fees.

Public Perception and Professionalism

Brokers play a crucial role in shaping public perceptions of the insurance industry, requiring a commitment to transparent and professional behavior to uphold industry integrity.
Reporting regulatory breaches is necessary to prevent further issues, ensuring professionalism is upheld within the brokerage community.

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Description

This quiz focuses on Chapter 15 of the Insurance Act, which outlines the regulation of brokers and insurance intermediaries. Students will need to recall important concepts discussed in class, particularly the administration responsibilities under the Act. Test your understanding of these key regulatory frameworks.