The obligations that are placed on us, Insurance Brokers, are onerous, and this is so because we are regarded as professional people. We as a result, must at all times exhibit the necessary skill and expertise that is commensurate with our profession.
As professionals we provide a service of such importance to our clients that our failing to do so can result in serious financial losses for them. We induce our customers to enter into a relationship with us by promoting our services as professionals and consultants. Failure on our part to properly discharge our duties may make us liable for professional negligence.
We approach the insurance market on behalf of our clients and prospective clients, doing the “shopping around for the best deal” for them, saving them the hassle.
The nature of a Broker’s obligation keeps changing from the moment an approach is made to a prospective client, during our appointment and at the termination of our services. These are summarised below:-
When a Broker, whether seeking business or having been appointed by the client, is reporting on existing insurance placed elsewhere than through his office he is not an agent for the Insurer in respect of any aspect of that transaction (even though he may have a very large account with the Insurer for other cases.
If he is reporting at his own peril, he is agent neither for the Insurer nor of the Insured who cannot at such stage be termed his (the Broker's) client. There is therefore no legal relationship at all between any of the parties, save to the extent that the prospective client has given the Broker a letter of authority to approach existing Insurers for details of the existing cover. To that extent, the Broker is the agent of the prospective client for the bare task of extracting technical details of existing cover.
Once he receives a letter of appointment, he is an agent of the Insured. However, under the new Regulations of the Financial Services Commission, in collecting the Premium, he acts as an agent of the Insurer. Therefore, once your Broker has received the Premium, the Insurer is obligated to provide the cover.
The Broker’s aim is to select the Insurer or panel of Insurers in terms of extent of cover given premiums, terms of contract and claims settlement on the one hand and security of the Insurers on the other as well as to provide the cover that the client needs. He has a duty to recommend what covers should be purchased, but the final decision rests with the Insured. While the Broker does not warrant the security of the Insurers, he may be held liable to his clients, if that security was already known to be questionable.
He checks the Policy wording. The Insurance Broker has a continuing duty to ensure that the policy wordings he proffers to the Insured are suitable to the Insured's needs. He has an even stronger duty where he provides the wording for the Policy or for a clause attached to the Policy and that is equally so whether the wording is common to many Insurers, or whether a policy or clause has been specially drafted by the him for one particular Insured.
The duty of disclosure and Utmost Good Faith is revived at renewal. It is often overlooked that at the renewal date of a non-life Insurance a fresh contract is being entered into and that all the duties of good faith, disclosure and the like revive to the extent that any of their aspects had been in abeyance during the currency of the cover period just ended.
A broker must interview the client or prospect to ascertain his needs. That Interview is of vital importance, as he will seek to determine which policies to recommend and to customize the various covers under those policies according to the needs of the client or prospect. A Broker has no blueprint to follow with the corporate client or prospect, as each case is different; nor can he dictate what the Risk Manager is to provide by way of information. This depends upon the initiative and ingenuity of the Insurance Broker combined with his own diplomatic skills in obtaining maximum information.
Insurers depend on us to provide information on the risks being covered. They often need our help to properly underwrite the Risk. We are in contact with the client, they usually are not therefore a Broker must also show good faith in divulging to the Underwriter both favourable and unfavourable information concerning the risk. Underwriting attitudes are of utmost importance, so they must also be discussed.
Our wider exposure to the market also helps the underwriter and the client, changing environmental conditions, competitiveness and new developments in the market and the possible provision of lower cost, more favourable terms of additional cover should be brought to the notice of the Underwriter as well as the Risk Manager in order that the best decision may be reached.
Other continuing duties:-
The Broker must be aware of changes and or developments and the need for added protection during the currency of the policy year. While the Broker's most prominent duties, once cover has been obtained, lie in the fields of adequacy policy wordings and competent renewal procedure, many other duties arise during the currency of the various Insurance contracts.
When a Claim arises, that is when we are tested as to the quality of our professionalism. The client depends very heavily on us to make sure he is fairly treated and that the claim payment is made in a reasonable time. We assist with the completion of the necessary forms, advise on what information to provide, and follow up on all stages of the claims procedure. We sometimes appoint the Loss Adjuster on behalf of the client or Insurer at times and negotiate the amount paid in settlement.
A Broker recognises and respects the fact that he can be discharged from his position at the discretion of the corporate clients. The reverse never occurs.
A broker must comply with the wishes of the corporate clients and is not in a position to dictate the terms and conditions of reference.
The corporate client is entitled to complete confidentiality on the part of the Broker. It must be remembered that products and processes are often of a secret nature and should not be discussed with outsiders.
