Insurer operations, distribution channels and intermediary relationships
What this domain tests
How insurers are organised, how products reach clients, and the legal and ethical duties that arise between insurers, intermediaries and policyholders.
Insurer operations
Product development, underwriting, claims, actuarial pricing, reinsurance, capital management, compliance and conduct. Insurers must remain solvent under RBNZ supervision and treat clients fairly under FMA conduct rules.
Distribution channels
- Direct: insurer call centre or website.
- Brokers and advisers: client-facing intermediaries; brokers typically act for the client, while agents may act for the insurer.
- Aggregators and MGAs: may provide systems, branding or binding authority.
Intermediary relationships
Intermediaries need clear authority limits, remuneration disclosure, conflict management and premium-handling rules. A broker holding premiums may hold them in trust; misapplication is a serious breach. Insurer–intermediary agreements should define delegated authority, commission, premium remittance, termination and client ownership.
Worked example
A broker with binding authority writes a commercial policy within its limit. It must disclose its commission, place the risk with a suitable insurer, remit the premium under the agreement and keep records. If it writes above its authority without referral, the insurer may dispute the binding; the client may still have rights against the broker for breach of duty.
Traps
- Assuming a broker is always the insurer's agent.
- Failing to disclose soft commissions or volume bonuses.
- Ignoring premium trust obligations.
- Exceeding delegated authority.
- Forgetting that the insurer remains responsible for conduct standards in its distribution chain.