1. Sam is a new mortgage broker with your firm, explain to him in your own words his four responsibilities when developing and presenting strategies to his customers.
2. Explain the difference between generic and specialist knowledge. Give three examples of each and explain why it is important to know the difference between the two.
3. What are the roles performed by both APRA & ASIC in relation to Insurance Markets?
4. Name and describe two categories of general insurance products from those discussed in this unit.
5. Darren is a mortgage broker with Tier 2 qualifications and is assisting Samantha to complete her home and buildings insurance application. What two principles covered by the Insurance Contracts Act does Samantha need to consider?
6. Adam has an appointment with Rachel who is an authorised Tier 1 representative from Thistown Brokers to discuss possible options for future investments products and life insurance.
7. List four circumstances when a Duty of Disclosure does not apply under an insurance contract.
8. Please answer the multiple choice questions in the table provided. Please choose the most appropriate answer.
9. Name one mortgage broking industry code of conduct and one code of practice.
10. What do underwriters do in relation to their pricing of risk products?
12. Identify and explain in your own words two participants in the insurance advisory market (excluding underwriters).
Four responsibilities of mortgage broker are:
Maintain clear written policies and procedures to be followed:
The mortgage broker will ensure the clients that proper documentation and all the prescribed procedures will be performed.
Ensure proper management and control of all licencing and registration documents:
He should ensure the client that all the documents will be kept safely and will be updated timely.
Ensure adequate level of supervision:
The clients will be guided and supervised as and when needed and the quires will be sorted on time.
Ensuring customers that their queries will be addressed and resolved timely:
All the questions obstructing the mind of the clients will be answered duly by the mortgage broker and all the quires will be addressed.
Generic knowledge is defined as differential psychology this is actually customarily valued knowledge transferred by a variety of non-specialist media. This covers a wide range of subject and is a component of crystallized intelligence. This is associated with the experience of any person and also the general intelligence of the person. This excludes highly specialised learning’s as that is to be done while generating a specialised context for any particular thing. This specialised learning can be obtained with information limited to a single medium and by extensive training.
For example:
Specialised knowledge means the knowledge about any particular thing like any service, research, equipment, techniques, management and many other interests. Specialised knowledge is considered as an advanced level of knowledge or expertise.
For example:
The Australian Prudential Regulation Authority (APRA) main aim is to protect the interest of their policy holders, depositors and fund members. Their role is to promote the prudent behaviour of insurance companies, banks, superannuation funds and other financial institutions.
Australian Securities and Investments Commission (ASIC) is an independent body that acts as Australia’s corporate regulator. The main roles of ASIC are to protect Australian consumers, creditors and investors and to regulate and protect the companies and implementation of financial service laws.
Business insurance is to be done to protect the company from the loss or risk that is associated with the business. The businessman can choose to set up and take the policy as per the requirements of business. Business insurance ensures that the public with whom we interact in the business need to be protected from the risk the business owner faces. Different types of business need different policies to protect their assets and also protection against the legal liabilities. There are two compulsory business insurance these are:
The two principles that Samantha need to consider are:
The insurer must have provided all the documents that are true and the property for which the insurer is taking insurance must be acquired in utmost good faith. He need to take an assurance from the insurer that all the documents are true and in good faith.
The Insurable interest of insure must be mentioned in the application form and he need to analyse all the documents and related papers of the property and then the ownership of the insurer in regard to the property must be analysed.
The mortgage broker need to present different strategies and solutions to clients for the selection of appropriate type of policy. The documents that Rachel needs to offer to Adam prior to offering any form of service are:
Product knowledge by product disclosure statement (PDS):
In PDS the features of the product, fees that will apply, the benefits and risks of investing, commissions that may affect the client’s returns, information about companies handling and cooling off rights and other information that is material to clients the client’s decision to invest are disclosed.
Provide statement of advice (SOA):
This is given when any personal advice is given to any retail client. It also states the advice that is to be given to the client and also the advice if any he/ she is going to give to the client in near future.
Financial Service Guide:
This is provided to the client before the service is provided. This encloses what services are being offered and how the advisers operate, how the adviser is paid and how complaints are dealt with.
General Advice Warning:
The GAW is a general warning that must be oral warning.
Four circumstances when duty of disclosure is not applicable are:
|
Question |
Answer |
|
1 |
B |
|
2 |
D |
|
3 |
A |
|
4 |
B |
|
5 |
B |
|
6 |
C |
|
7 |
A |
|
8 |
A |
|
9 |
d |
|
10 |
b |
Mortgage and Finance Association of Australia
|
Code of Conduct |
Code of Practice |
|
1. To establish professional standards for its members when dealing with their clients, and to promote ethical and fair business practices (Orton, 2007). |
1. Comply with all applicable laws and regulations (Lea, 2010). |
Underwriters determine the premium rates to be charged and the level of cover provided to each policy. The underwriting guidelines set out that which risk is to be insured and as if standard policy terms will apply or whether there is any need for special conditions. Underwriters collect premium amount from all those who get insured and cover their risk from the amount of premium they receive.
The participants in insurance advisory market are:
Regulatory Authorities:
They act in a supervisory capacity over the insurance industry. The prudential insurer is Australian Prudential Regulation Authority (APRA) this means that it focuses in the sound financial management of insurance companies.
Insurance agents and brokers:
Insurance Agents and Brokers deal with a number of insurers and may act on behalf of their customers (insured) in their dealings.
|
Products |
Characteristics |
Deposit product |
Non-cash payment products |
|
EFTPOS |
This is an electronic payment system involving electronic fund transfer. |
– |
Yes |
|
Savings account |
It is an interest bearing savings account |
Yes |
– |
|
Term Deposit less than 2 years |
The money can be withdrawn after the term has expired |
Yes |
– |
|
Debit Card |
Plastic money that can be used instead of cash |
– |
Yes |
|
BPAY |
This is an electronic bill payment system in Australia |
– |
Yes |
|
Cheque |
Paper money that can be used instead of cash |
– |
Yes |
|
Offset |
The amount that balances the effect of an opposite one. |
– |
Yes |
References:
Lea, M., 2010, February. Alternative forms of mortgage finance: What can we learn from other countries?. In Moving Forward in Addressing Credit Market Challenges: A National Symposium.
Orton, L., 2007. Financial literacy: Lessons from international experience. Canadian Policy Research Networks.
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