Broking is a profession. If you are a broker, then you are
at law a member of a profession. You make recommendations to a customer and as
such give advice. There is no much difference between an insurance broker and
other professionals like lawyers, doctors, accountants and quantity surveyors. The
devil lies in the details.
An insurance broker is an independent insurance agent who
works with many insurance companies to find the very best available policies
for his or her clients. There is a whole lot of difference between personal
lines and commercial lines insurance. This article would look at the duties of
an insurance broker in relation to commercial lines business. If you work for a
broker, it is important that you realise that you are working for a
professional firm, and whiles you do what you are doing, you will be held
liable at law. You have duties and responsibilities.
In the course of your duties, you must act with reasonable
care, skill and diligence. Much of a brokers work stems from this. This means
you can do the job you do to a legal standard of reasonable competence. Simply
put, you are expected to act in a manner that is acceptable by a “reasonable”
insurance broker. Your job employer should give you a job specification. This
often describes your duties, required knowledge, skills and abilities and
minimum qualifications you should have to do your job and the standard you are
to meet. Majority of these would enable you to be competent. Competence is
something you can really achieve if you don’t let your customer down. It is the
duty of the broker to highlight the risk and also advise the client on
alternative ways to mitigate risk. In commercial insurance business you will be
required to know the class of insurance business you will recommend, to the
extent that you will ideally tell them about it without any errors. You will be
expected to know how knowledge weaves into the subject. Also you will be
expected to apply that knowledge and understanding in a real life situation. If
you can do this then you will always be competent. Your duty to a client is to
do your best to remain reasonably competent and to reach a standard of skill
that all your college brokers will regard as competent.
It is the duty of a broker to gather sufficient information
to allow a fair presentation of the risk to the underwriters and to recommend a
policy which suitable to the customer’s demand and needs. A broker must not go
on forensic inquiry but he should use the skill of a reasonable broker i.e.
proposal form of insurers and also additional skills to go on further enquiry.
A broker is expected to keep up to date with laws and
regulations and it is no excuse to say that only you only need to know what the
insurer asks. This will enable you not to let customers down. Can you imagine
being treated by a doctor who bases their advice on what they learnt for their
exams about 30 years ago? From the above, a broker must have good knowledge of
different types of businesses, how the risks relate to the type of insurance
you are recommending and what the underwriter would need to know to rate the
risk. Remember as well as acting for your client, you are the eyes of and ears
of the underwriter, especially where the insurer is not arranging for a survey
for that risk.
A key expectation of a customer is that a claim will be
paid. A customer will always have in mind what they think they want, but the
reason why they always approach a broker is to cover the things that they may
not have thought about. An insurance broker should be able to give a customer
sufficient information for them to be able to make an informed decision about
the recommended insurance. Always consider if the insured must do anything for
the policy to be effective i.e. the insurer will have no right to turn the
claim down or reduce the sums.
Your client must disclose all material facts both at
inception and renewal. A material fact is one which will influence the judgment
of a prudent underwriter in deciding whether to accept the risk and if so at
what terms of cover and at what standard rate of premium. Have you drawn the
attention of conditions and warranties, if any, which are often buried deep in
the policy wording? If so, does he understand the effects on non-compliance?
Customers must understand adequacy of sums insured and average. Client must
understand the consequences of underinsurance. Avoid the trap of valuing a
client’s property. You are not a professional valuer. You must ensure that your
client understands the doctrine of utmost good faith. Declare any information
which is relevant to the risk, including what might be considered sensitive.
Example, previous claims made. Must explain how and where the insured is
expected to contribute to a claim i.e. policy excess or deductible. In
commercial lines, there is most of the time confusion about insurable interest.
Example, a parent may own a building and his or her son operates the business.
This could be different insurable interest for the building and contents. It
must be resolved at the proposal stage. Insurable interest is the legal right
to insure arising out of a financial relationship recognized at law, between
the insured and the subject matter of insurance. Simply put whose name must be
on the policy. Advising the customer about the breach is also important as
advising the terms of the policy. Without both parts the broker has not
completed the duty of explanation to the customer.
One of the common complaints of by customers when a claim is
being repudiated is that they did not understand what they were buying. Make a
judgment as to whether the customer understood what they were buying. Asking
the customer as to whether they understood what you have explained is one
thing. You will be the best judge of whether the message is will understood.
There is a myth that every insurance broker is an expert in
insurance. That is not so.
You have duty to keep records of good and reasonable
standard. A professional record is one which records details of relationship
with a customer, which in the event of disappearance of the person or people
conducting that relationship, are of the standard that a peer practitioner (
someone from the industry or similar standard of competence) can refer to those
records and continue the relationship without referring to anyone else. This
will include but not exhaustive, clear record of information gathering,
presence of risk, advice given, explanations given, telephone conversations,
meetings, who, where, when and what was discussed. Sign and date it. Quality
records are a deterrent for those who want to blame the insurance broker if
something does not go as expected. Remember the golden rule of modern day
business, “If it is not written down, it did not happen”.
Remember that at renewal, the whole process starts again. It
is a new contract and all obligations must be renewed. For commercial clients,
you may not always deal with the same person. It may be that a senior staff
member may be the contact person whom you deal with. If that person leaves, you
cannot assume that his replacement is familiar with insurance or indeed
familiar with the insured’s own program. Try and seek a meeting with him or her
and point it out as you did with his predecessor. This has important values.
You would have done as much as you can to make sure that the person responsible
for insurance in the firm is up to speed with the insurance program. Also as
part of his induction, you have provided him with key information he needed to
know. Finally you would have made your mark, with the contact, thus mininising
the potential of seeking someone he might have dealt with in his previous
position.
