C130 Chapter 1 Essential Skills for the Insurance Broker and Agent

C130 - STUDY 1 - The Insurance Intermediary / Page 1

Defining Insurance

1. Insurance is based on risk.

RISK        Possibility of loss or damage to property, or chance of incurring liability.

2. Individuals > transfer their risk to insurers by paying premium in exchange for protection.

POLICY    Contract in which insurer reimburses insured for specified losses.

CATEGORIES OF INSURANCE
    1) Social        Governments insure residents:    Employment        Health care   

Pensions            Worker’s Comp.

    2) Life / Health    Insurers insure policyholders:    Accident Sickness        Life
                            Disability           Pensions   

    3) P & C (General)    Insurers insure policyholders:   

Automobile        Aviation        Boiler & Machinery        Fidelity        Liability   

Marine        Property        Surety Bonds            Transportation

a) Personal        Property damage by insured perils, incur liability – auto / home.

b) Commercial        Property damage by insured perils, incur liability – business.

The Insurance Intermediary

1. Links insurers with consumers.
2. Identifies consumers needs, matches with available products, facilitates contracts.
3. Uses experience and knowledge in response to client claims, questions and service needs.
4. Licensed authority for individual product lines > AB – Accident & Sickness / General / Life.
5. Refers needs outside authority to other licensed professionals.

COMPARING AGENTS AND BROKERS
    Similarities:    1) Bring insured and insurer together under contract.
            2) Facilitate purchase of contract and service of account > changes / advice.
            3) Owe a duty of care to consumers and insurers they represent.

    Agents:        1) Sell / service for insurer who supports administration / product / training.
            2) Direct writers > agent employees / salary / insurer administers, owns book.

        3) Agency > independents / commissions / pay expenses / insurer owns book.

Brokers:        1) Sell and service for multiple insurers for salary and/or commission.

        2) Work for brokerages > corporation / partnership / proprietorship.

        3) Broker / brokerage owns book of business and client list.

        4) Power to cancel insurer contract / move book of business to other insurers.

    General Agents:        1) Manage single insurer’s business within specified territory.
                2) Authorized to appoint other agents, settle claims.
                3) May administer all of insurer’s business in one or more provinces.
                4) Referred to as provincial agency / manager.

    Wholesale Brokers:        1) Specialize in non-standard risks (golf courses/hotels/pro liability).
                2) Negotiate broad contract with insurer(s) with capacity to cover risk.
                3) Underwrite, issue policies, pay claims.
                4) Attract volume of business through experience and expertise.
                5) Maintain facility market for non-standard risks (nature / value).
                6) Insurer accepting risk confirms binding.
                7) Some provinces do not license or regulate.

NON-STANDARD RISKS            a) Tough to place due to claims history or exposure (fine arts).
                    b) Standard markets unable or unwilling to accept.
                    c) Higher degree of UW expertise required.
                    d) Higher capacity required = multiple insurers sharing risk.
           
Principal and Agent Relationship

1. Common Law:        AGENT    Employee or independent business person authorized to act on

behalf of principal in securing contracts or in contractual matters.

2. Defined under Civil Code:

MANDATARY    Employee or independent business person authorized to act on behalf of mandator in securing contracts or in contractual matters.

3. Intermediary > agent / broker / CSR / producer, at various stages in the contract, acts for:    

Insured  ID needs, recommend coverages, service.    Insurer  Applications /coverages.

4. Insurer > legally bound to obligations under insurance contract (promise to pay).

5. Agency/brokerage contract:        i) Written authority (binding / claims / policy issue / service).

ii) Identifies parties / outlines obligations, rights and duties.

iii) Regulated by Superintendent of Insurance (Insurance Act).

iv) Broker may have several, agent usually has one.

DUTY OF CARE

1. Legal obligation to consumers established under Common Law, Civil Code and statute.
2. Reasonable competent agent > average, responsible, well-informed and professional.
3. Stringent duty > established by precedent (Fines Flowers / Ridgewood Farms).
4. Agent objectives – identify insured’s needs, recommend best solution(s).
5. Shifts from insured to insurer at different points in the insurance process.
6. Affects what agent says, does and to what extent clients can rely on statements made.
7. Exercise utmost good faith, high ethical standards, act within agency/licensing authority.

Day-to-Day Responsibilities

1. Prospect for potential clients.        Identify and contact sources for new business:
1. Target marketing:        Sales strategy targets specific group.
2. Market segmentation:        Identify potential insureds to approach.
3. Advertising:            Choose most effective medium.
4. Cold-calling:            Phoning or knocking on doors to introduce self / services.
5. Referrals:            Existing clients recommend friends or family members.

Plan your approach > identify, research, recommend, provide service.

2. Qualify the client.        Prepare, research and meet with them:
1. Are they a part of the target market?
2. Can you, and do you want to, assist with their insurance needs?
3. Ask questions, probe for more information or clarification.
4. Respecting confidentiality (PIPEDA) earns client trust > more personal data.

3. Advise the client.        Using knowledge of process and products:
1. Review and compare current policies, use questionnaires or surveys.
2. Risk analysis > ID exposures / likelihood / adequacy existing cover / improvements.
3. Review options, explain extent of coverage, recommend and provide reasons.
4. Explain quotation or estimate subject to change if information is incorrect or missing.
5. Ethical duties > inform of all coverages/markets, if not available refer elsewhere.
6. Risk management > loss control and prevention advice, risk transfer strategies.

4. Facilitate the application for insurance.    Documents and forms:
1. Having available / fully and properly competing / promptly submitting.
2. Clarify what information is requested and why.
3. Emphasize importance of full disclosure.

5. Obtain instructions from the client.    Recommend, let the client decide:
1. Service > issue, amend/change, renew or cancel policies.
2. Method > in person, email, fax, phone or in writing (cancel/reduce/delete cover).
3. Maintain regular contact to stay current with client’s changing needs.

6. Negotiate insurance.    Terms and conditions with insurer:
1. New policies / endorsements / renewals.
2. Pre-qualify > review portfolio / match client’s needs <> insurer’s UW rules, guidelines.
3. Stay within binding authority outlined in agency/brokerage contract.
4. Review portfolio, gather data

7. Facilitate the claims process.    You are the first point of contact when loss occurs:
1. Reassure client you are there to help and counsel.
2. Avoid confirming (estoppel) or denying coverage.
3. Outline basic claims process and advise client of what to expect (documentation).
4. Advise client immediately if loss is obviously not covered, or that insurer will assess.
5. Notify insurer promptly.
6. Monitor progress of claim > update client.
7. Help adjuster / insured / insurer as requested.

Licensing and Regulatory Authorities

1. Agencies/brokerages subject to business laws > consumer / corporate / employment / tax.
2. Licensing qualification/requirements ensure consumers protected:

i) Testing / examination = minimum standards of industry / regulatory knowledge.

ii) Recommended course of study / Quebec > # of study hours required.

iii) Restricted license > transact business in specific classes only (General v. Life).

iv) Levels (1/2/3) > advancement based on education, experience, examination.

v) AB > annual renewals and mandatory continuing education requirements.

3. Regulatory authorities:

i) Sup’t of Insurance > AB Insurance Act and Regulations.

ii) Alberta Insurance Council (AIC) > licensing and continuing education requirements.

iii) AIC > Adjusters / General / Life – industry volunteers.

iv) Ontario > licensed through FSCO (agents) and RIBO (brokers).

Professionalism in Insurance

1. High standards in all disciplines instill trust and confidence in consumers.
2. Well-informed, comply with law and rules of insurance, maintain utmost good faith.
3. Understand duties, perform them effectively, ensure needs of insured and insurer are met.
4. Education and knowledge:

i) Insurance products, concepts, general industry, markets.

ii) Insurers > business tenure / $ stability / products / service / compare to competitors.

iii) Continuing education (AB-mandatory) keeps you current with trends and information.

iv) Media > trade publications / news services.

v) Membership in professional association = information and networking.

1. Ethics (AB - Code of Conduct) and client care:

i) Comply with provisions of Insurance Act and regulations.

ii) Act competently, be trustworthy, avoid deceit, fraud or misrepresentation.

iii) Pay premiums collected to insurer as per agency/brokerage agreements.

iv) Comply with legislation relating to placing insurance with unlicensed insurers.

1. Agent and broker duties:

i) Provide coverage best suited to client needs without influence of $ gain (commissions).

ii) Not take advantage of client’s lack of knowledge or inexperience.

iii) Hold information in strictest confidence.

iv) Competently perform services undertaken by being well-educated.

v) Insurers > honest, trustworthy, in agency/brokerage agreement, disclose material facts.

2. Utmost good faith:

i) Insurance professionals legally obligated to honesty, integrity and high ethical standards.

ii) Full disclosure to insurer of material facts > knowledge of agent = knowledge of insurer.

MATERIAL FACT    Any information that could affect the contract of insurance to the extent that, if it were disclosed, it would change the agreement between the insurer and insured.

iii) Emphasize importance of full disclosure to client, consequences of not doing so.

3. Privacy laws:

i) Federal > Personal Information Protections and Electronic Documents Act (PIPEDA).

ii) Information > relevant, held in strictest confidence, client must authorize release.

4. Errors and Omissions (E & O):

i) Agent acts or fails to act = loss not covered / insurer paying unintended loss.

ii) Document > write, sign detailed notes about all contacts – date / time / subject / action.

iii) Communicate > promptly and clearly in writing with insurers and clients.

iv) Fulfill obligations > act within authority and experience, defer to experts as needed.

v) Coverage unavailable > advise client ASAP, explain why, offer alternatives.

vi) Major causes of E & O claims is failure to:

1. Provide cover for exposures

+ ensure understanding of the nature of the risk.

2. explain effects of exclusions, exemptions and restrictions.

+ Highlight existence and effects of same, confirm discussions in writing.

3. place cover at all > not pursued / not available / estoppel / lost file.

+ Know coverages / marketplace, file management , consistent procedures.

4. provide correct cover > client requests one form, agent/broker arranges another.

+ Requests > careful transcribing,  confirm policy documents match.

5. provide cover in time > loss occurs between application and binding.

+ Forward all documents to insurer promptly, within required time.

C130 Chapter 2 Essential Skills for the Insurance Broker and Agent

C130 - STUDY 2 - Broker Skills – An Overview / Page 1

In a world of interruptions, interpersonal and organizational skills are paramount.

Customer Service

1. Common elements > accuracy / clarity / courtesy / professionalism / timeliness.
2. Adapt > client attitudes / expectations / mindsets / temperaments.
3. Balance needs > client (cover) and insurer (portfolio development).

Communication    Translate thoughts, opinions and ideas for others to understand.

1. Verbal Delivery:        1) Body language / delivery / tone.

2) Professional = pleasant and effective.

2. Active Listening:        1) Listening / interpreting / processing non-verbal clues.

2) Questioning and rephrasing parts you don’t understand.

3) Confirming you absorbed the information correctly.

+ Illustrates > value and respect for others even if you disagree.

+ Creates Trust > increases willingness to offer / share information.

+ Builds Rapport > common ground built by asking questions.

3. Knowledge > apparent in all forms of communciation, tailor to clientbackground / experience.
4. Clear Communication > understanding client expectations of price / product / service.

IN PERSON

1. Matching        Assuming some of body positions and/or posturing.
2. Mirroring        Similar actions are performed.
3. Match Style        Formal / informal, plain language, look for clues to understanding.

TELEPHONE

1. Challenge > no visual cues = reliance on rate of speech / tone / vocabulary.
2. Active listening assists/ verify understanding
3. Warning Signs > awkward silence / long pauses / client speaks quickly to gloss over.
4. Patience > explain need for data / give client time to think, formulate answer / rephrase.

1) Cultivate phone manners:

1. Greeting > courteous, non-confrontational / professional / welcoming.
2. Identity > ID self clearly ask for their name – correct spelling.
3. Adjust Style > match language / rate of speech / tone.
4. Active Listening > let speaker think, then respond by asking questions to verify data.
5. Smile > favourable response = comfort in dealing with you.

2) Observe telephone etiquette:

1. Prepare > calculator / files / forms / paper / pen or pencil.
2. Limit Interruptions > if more time needed, take only brief pauses.
3. Focus > individual client may need more help / set call goal – dicuss / meet / sell.
4. Practice > create checklist / make notes / rehearse presentation and ideas.
5. End Call > with summary of discussion and action to be taken on behalf of the client.

3) Document your discussion:

1. Record > all details, sign and date for chronological order.
2. Follow Up > copies of notes to relevant files.

4) Honour your commitments:    The client is legally entitled to your services:

1. Take appropriate action.
2. Keep Client Informed > delays / updates on progress.
3. Unable to Fulfill > advise client immediately / offer alternatives.

5) Professional phone messages:

1. Concise / Detailed / Professional.
2. Full name / contact numbers or email address / purpose of call.
3. Keep it short and to the point.
4. Balance Detail With Discretion > confidential information and privacy legislation.
5. Never bind over voicemail.

IN WRITING

1. Permanent documentation of business records.
2. Memorandum > email / fax / mail / formal letter.
3. Match Audience > technical level / tone.
4. Achieve Objective > clearly communicated and understood by you and your reader.
5. Effective Letter Writing:
1. Avoid cliches and metaphors heard or used many times before.
2. Avoid foreign phrases, scientific words, insurance acronyms and technical jargon.
3. Use short words where they can replace long words.
4. Delete unnecessary words.
5. Use active (John bought), not passive (was bought by Judy) voice.

6. Email:    1) Immediate, more conversation than correspondence.

2) Proofread (grammar / spell check) before sending to avoid embarassment.

3) Fast and convenient way to confirm arrangements / details.

4) Subject line should match content of the message.

5) Clear and succinct > exact details of subject matter.

6) Keep short > divide longer messages in to paragraphs.

7) Document > keep date-filed hard copies for your own records.

Handling Difficult Situations         Remain clam, clarify positions, stay focused.

1) Delivering bad news:

1. Reactions > differ with the individual – concerns = opportunity / silence = lost business.
2. UW decisions > elaborate or clarify, spend time explaining the insurer’s perspective.
3. Don’t Take It Personally > stay professional and focus on the issues.
4. Appreciate Feelings > emotions run high / time needed to resolve / treat with respect.
5. Sympathy > relating in a caring way + feeling sorry and sharing the feeling of loss.
6. Empathy > rational sensing / responding to emotions and feelings without agreeing.

RESPOND TO INDIVIDUAL CLIENT REACTIONS:

1. Help the client work through their emotions.
2. Show compassion for the difficulty, avoid dwelling on it.
3. ID questions or concerns / offer solutions.
4. Stress positives / tactfully and diplomatically guide to acceptable resolution.

2) Complaint resolution:    Valuable opportunity to communicate, learn = improved practices.

1. Listen Positively > avoid criticism / look for insights and new perspectives.
2. Be Objective > listen + ask questions + seek to understand = resolution or improvement.
3. Avoid Assumptions > avoid labeling client as “difficult” or “difficult to deal with”.
4. Express Regret > apologize if appropriate / avoid accepting blame / don’t highlight error.
5. Focus on Solution > client wants v. fair solution for insurer and client.
6. Follow Up > advise if other sources required and keep client informed of any progress.
7. Reach Understanding > negotiate – propose, let client modify until mutually acceptable.
8. Improve practices > can change business for the better, need to change?
9. Thank Client > opportunity to help / their initiative / chance to improve business.

Sales

1. Sell > products, services to clients / clients to insurers if non-standard risks.
2. Needs Analysis > listen / ID needs  / recommend a solution that matches their needs.
3. UW Guidelines > personal lines automobile and property v. commercial and business lines.

1) Sales Planning:        Develop strategic goals and plans for products, markets, operations.

1. Basis > strengths and weaknesses of individual brokers + types of business sold.
2. Insurer Preferences > appraoch with preferred risks / business lines / services.
3. Forecast > sales objectives as business amount written per target line / type of business.
4. Review > daily / weekly / monthly / quarterly.
5. Manager > implements / assists / monitors / adapts.
6. Broker > achieves goals using own sales plan to approach segment of target market.

TARGET MARKETS    Source of potential clients:

1. Segmented > age / business pursuits / coverage required / personal interests.
2. Lead > member of group of potential clients fitting profile as target market.
3. Insurance Markets > insurer(s) for whom the broker writes business.
4. Market Familiarity – target market(s) / UW practices / wordings.
5. Match Clients and Insurers > UW rules / coverages / structures / willing to insure.
6. Doubts > email or telephone insurer’s UW department = greater efficiency.
7. Non-Standard Business > alternate markets for unusual covers / high risks.
8. Wholesale Brokers > ID unique client needs / negotiate coverages with insurers.

QUALIFYING THE CLIENT    Solicit information:

1. Create Profile > name / address / phone / email / fax / family data / interests, hobbies.
2. Marketing > how they heard about you – magazine / newspaper / flyer / friend.
3. Objectives > quoting for – price (tire-kickers) / service comparison (serious interest).
4. Fit Target Niche > profile + exposures to risk + insurer products/services meet needs.

2) Selling:        Process of meeting client needs with products and services.

1. Knowing > research client / competition / insurers / market / policies / services.
2. Comparing > insurers and the products they offer.

PROCESS    1) Ask > open-ended questions to uncover exposures and needs.

        2) Match > needs with satisfiers (policy elements) in insurer’s products.

        3) Close > questions that lead to accepting your product.

WAYS TO SELL    Methods best suited to reaching your target market:

    1) Referrals        a) Effective > majority of business results from them.

                b) Prequalified > from same target segment as existing clients.

                c) Introduced > services and products already known.

d) High success rates in writing the account.

    2) Advertising        a) Generate Interest > choice of media / response mechanism.

                b) Invitation > call, email, fax or visit.

                c) Limited success rate in writing the account

    3) Walk-ins        a) Office > drop in to check you out.

                b) Common > government insurance provinces.

                c) Opportunity > arrange insurance for other needs.

                d) Limited success rate in writing the account.

    4) Cold Calling        a) Contact > person you do not know. (low success rate)

                b) Introduce > self / brokerage / products / services.

                c) Practice > approach and interpersonal skills.

d) Research > client / needs / business.

                e) Goal > get expiry dates for future contact.

                f) Document > date / contact / data / results.

                g) Follow Up > letter / phone call to further promote.

TRACKING EXPIRY (X) DATES    Forms a database of prospective customers.

1. Timing > contact 60 days before expiry date to offer services / quote.
2. Opportunity > offer quotes for other products if client interested.
3. Document > reasons for unsuccessful results – dissatisfied client / price.
4. Approach > vary with multiple contacts.

UP-SELLING        Selling an upgraded version of an existing or new policy.

1. Improves > coverage / terms / limits.
2. Client > understands peace of mind is worth the added premium.
3. Goals > client has adequate limits and proper coverage / avoid E&O claims.

CROSS-SELLING    Selling new products to new or existing customers.

1. ID Needs > auto = other exposures – health / life / property / umbrella.
2. Respond to Changing Needs > address change = tenants coverage.

COUNTERING SALES OPPOSITION    Convince client to share reasons why.

1. Dealing with objections:            a) Listen > to whole objection.

b) Understand > what objection is to.

c) Respond > thoughtful / interested / answer facts.

d) Adapt > facts and ideas to each objection.

e) Keep Them Talking > productive discussion.

2. Turning doubt into productivity:            a) Work With Reasons > nature and results.

b) Objective Proof > have it and offer it.

c) Open-ended ? > reveal reasons for doubt.

d) Practice > question bank and responses.

3. Addressing lack of interest:   

a) Misunderstanding > premium too high – why?

b) Compare > quoting same products / services.

c) Highlight > enhanced coverages / services.

d) Delay (bad timing) > Why? – offer solutions (call back).

e) Commitment > ready to decide at later date, or at least follow up contact?

f) Focus On > relationships / listening / respecting / thoughtful answers.

Workflow Management    Critical elements of effective and efficient agency/brokerage operations.

A) Time Management    Makes workflow easier to handle:

1. Organize Work Area > supplies close at hand / colour code materials or files.
2. Agenda Updated > scheduling and time planning information in one place.
3. Goals > identify and prioritize them.
4. Jobs > break down into constituent parts / sort / prioritize early in the day.
5. To-do Lists > proactive not reactive / plan time recognizing you may have interruptions.
6. Activity Lists > new business prospecting / renewals / endorsements / next actions.
7. Research > doing before client contact = effective use of time.
8. In-Basket > empty it daily.
9. Interruptions > find ways to reduce or eliminate unwanted ones – close your office door.
10. Paper Handling > handle paper or files once per task.

B) File Management            Handling, easily accessing incoming/outgoing information:

1. Documentation > record and file all activity (paper and system) chronologically.
2. Identification > all documents have client name / policy number / agent ID.
3. Standardized File Protocols > legible and easy-to-follow notes.
4. Legal Evidence > record all conversations – date / time / person / what was said.

ABEYANCE SYSTEMS        Avoid service problems that lead to disputes with clients.

1. Abeyance > temporary inactivity until date review or action required.
2. Methods > PC / wall calendar / weekly planner.
3. Timeframes > reasonable / realistic = urgency of response (data v. expiry).
4. Reasons        1) Follow Up > with prospect on new business quote.

2) X-dates > opportunity to quote new business.

3) Information > finish application (insd) / transactions (insurer).

4) Binder Issued > policy / endorsement to be issued by insurer.

5) File Review > before renewal date.

6) Cancellation > request from insurer.

7) Termination / Non-Renewal > advise insured.

MAINTAINING CLIENT FILES    Company standard = time to keep and how they are kept.

    Prescription – in law , is a time after which a cause of action ceases. In insurance, this is the time after which a claim may not be brought

1. Legislation > management sets procedures to comply with provincial statute.
2. Liability Policies > long-tail exposure (occurrence basis) = permanent retention.
3. Other Documents > appraisals / correspondence / memos / notes / claims / home evaluation guides /records
4. Privacy        1) Information > only released with client’s written permission.

2) Application > client signs permitting insurer to get information.

3) Court Order > information released with or without permission.

4) Security > safe storage / retrieval / destruction = protection.

5) Client Notice > give notice describing practices.

C) Policy Delivery        Policy is legally enforceable contract with the client.

1. Accuracy > confirm correct details / coverage requested / limits / deductibles.
2. Coverage Summary Sheet / cover letter.
3. Formality, remain professional – convey all information that the client will need and document your file
4. Encourage client to review the documents carefully – their responsibility