Last week's MOT test described a broker's visit to a client. And here are all the things that John the broker did wrong. Did you pick up on every mistake?
John was a very proud young man. Having spent a year in the insurance industry, he had just passed his CII FIT test and thus being qualified as competent to advise clients (and use the letters "FIT" on his calling card)
Error: The FIT test is an aid to measuring knowledge and understanding of underlying insurance facts and principles (and a very good one). It is not a qualification and does not confer the right to "initials", but it is the sort of independent assessment that you might consider useful as a measure of knowledge and understanding for any level of practitioner to be taken, say, every three years. It does not confirm competence, but linked to a good ongoing assessment system it is a useful guide, particularly if CII let you know the questions you get wrong.
His supervisor had allowed him a day release from the household call centre to see if he could sell a shopkeeper's policy....John was not too sure about commercial business....As it turned out, the insurance company rep could not make the appointment, but John did have the rating manual so he was pretty confident he could muddle through.
Error: Should this person be undertaking this call unsupervised? This is non-compliant (GISC and FSA).
As it turned out, the antique dealer was more of a jeweller.
Inconsistency: Was Bill a jeweller or not? If he was, it is likely that this cover would be best suited for ajeweller's bloc type arrangement. We need to check, but it is likely that the binding authority excludes jewellers.
He could basically lump everything under one stock item without any real need for a list.
Inconsistency: Is the underwriter getting the full picture or is John "squeezing" a jeweller into an antique dealer description to fit the binder?
John's firm had a binding authority up to £50,000 stock value at any one premises. Bill's stock added up to about £60,000 . John pointed out that at that level of stock he would have to refer the matter to the underwriters so it might be better for him to insure for a little less than £50,000 as the insurers would only want him to install more expensive security if they knew the true value.
Error: This is a clear case of non-disclosure, but more seriously it could also be held to be fraudulent. Can you remember the difference between the remedies than an insurer has?
Bill was grateful for the advice, but mentioned to John that he had heard that if one does not insure for the full amount the insurer might reduce a claim if it occurred.
John was very bullish on this one as this was a question that had come up in his assessments and he was confident that this was probably one that he did not get wrong. "No problem" chirped John, "all jewellery is insured on an agreed value basis so if that is the amount you state, that is what the insurer accepts."
Error: Not all jewellery is insured on an agreed value basis and anyway, even if it is, the underwriter may have his/her view on the value.
Bill had some recollection of an article in the national press, which said that all insurance was subject to something referred to as "average".
Inconsistency: Not all policies are subject to average
Although the business did not quite seem to fit the rating manual, (money carryings were particularly high and John had never really dealt with security precautions before so was not sure about the standard of the locks), it was agreed that the package seemed reasonably suitable.
Error: If it did not quite fit, John should be looking at alternatives rather than "squeezing" Bill's cover into an unsuitable contract or he should tell Bill where it is not suitable.
Completing the proposal form was quite straightforward and Bill seemed to be quite experienced having been an antique dealer for more than 30 years. Added to this, Bill seemed somewhat conscious about time so John did not annoy him with explanations or bombard him with any other literature than the two-sided prospectus that he and his boss had prepared as a resumé of cover.
Error: Oh dear! Bill may have 30 years' experience as antique dealer, but there is no evidence of his knowledge of insurance. A resumé of cover is not enough. John must explain cover, onerous conditions, exclusions, obligations etc. Bill must be able to make a reasonably informed judgement about whether to effect this insurance or not.
Bill did point out that while he had never had insurance on his business before, he had suffered quite a number of small shop-lifting losses of under £100, but they agreed that as there was no claim made these were not material.
Error: For safety John should tell Bill to disclose these "number of small losses" irrespective of whether a claim was made or not.
Bill also mentioned that he had had two serious household burglary claims, one involving armed intruders, but John advised that household claims of a business owner are not material to a business insurance underwriter either.
Inconsistency: In this case the household claims may well be material to the underwriter. Remember that moral hazard attaches to an individual as well as a business and the loss history of directors/partners (including previous businesses) may be material. Always be careful if you are insuring an entity which is a continuation of another business, but in another name (called the Newco syndrome). There may be skeletons in the Oldco cupboard that the proposer wishes to hide.
John borrowed the binder cover-note book from his boss's office and confirmed cover to the antique dealer that evening, catching the 7pm post.
Inconsistency: Is John a named signatory to the binder?
What was even better was that he found he had over-quoted by just over £100. As the client had accepted the figure of £1,100 in total this meant that a contract for services had been agreed and there would be an additional sum going to his earnings target.
Error: This is "grossing up". John must tell Bill about the difference.
So how did you get on? Let us know if you have any comments.
If you want more of the same, this is just one example of the type of assessment that will be appearing in Broker Assess which has been launched by CII and Biba. For more information contact brokerASSESS@cii.co.uk
Using this CPD page
For the vast majority of practitioners and indeed support and supervisory staff in our industry, CPD is about regular learning and study that is planned, recorded, timed and evaluated.
If you are a member of a professional body with a CPD requirement then there will be certain rules regarding the quality and nature of study material, and the way in which it is recorded.
For staff of GISC members this means recording on your individual training file what the learning was, who provided it and when.
It might be structured, such as a course, a learning programme or exam study. But it can be unstructured. This form of study encompasses reading the trade press, technical material or taking part in activities to support your professional body.
Some CPD requirements are points related (a little antiquated) and others require a time value to be allocated.
For example, it might take one hour to read Insurance Times each week. Most of that could be put as a time value but, in reality, perhaps only an half hour was devoted to learning something. The rule is to be honest with yourself and record the time that is relevant.
Always take time to make a note of what you felt you gained from the activity. This is useful information for anyone else considering the same activity.
In response to the popularity of our CPD programme each week's CPD page can now be downloaded from our website. We will be preparing a binder for you to keep these in alongside the results of the exercises.
To download a PDF of this article as it appears in the magazine click here .