Insurance brokers must be wary to make relevant inquiries that may affect an underwriting decision.
This is particularly relevant when using online quoting systems that do not ask clear questions about certain risks.
Insurance brokers must not lose sight of their duties and obligations
The insurance broker is fundamentally the ambassador of the insurance industry to the consumer of insurance products. They have the widest knowledge of insurance market cycles, insurer appetite and consumer sentiment towards the industry. As ambassadors of the industry for an array of service providers, it is important that brokers are supported when discharging their obligations and duties.
Brokers must make adequate inquiries regarding risk
The approach to transacting insurance online will vary depending on insurer appetite. However, generally, online platforms are becoming the status quo when conducting “low risk” cover.
Where a broker uses such systems, it is not enough that they simply advise their client of their duty of disclosure: the broker’s duty to the client remains that it must make adequate inquiries regarding the risk being presented to insurers.
The broker must provide underwriters with necessary information that is relevant to the risk being underwritten. This is the case even if an online quoting portal – or any proposal for that matter – does not clearly ask a specific question of the insured. The burden to make inquiries of such risk and disclose the existence of such risk increases where at industry level, such questions are normally a key factor in whether or not an insurer would write or accept a risk being presented to it.
Brokers must make inquiries, document responses and send them to the insurer
The writing is on the wall: some risks are not suited to online portal arrangements. In the event of any doubt, brokers should make inquiries with the insured and document these inquiries. They should ensure that such correspondence is sent directly to the relevant insurer, even if it takes longer to do so, or a higher premium will subsequently be quoted, and especially where the insurer is offering a higher rate of commission for transacting business on its online portal.
Despite all the operational and transactional benefits of online transacting, it is imperative for brokers to revert to fundamental principles of utmost good faith and duty of disclosure when placing risk with insurers.
Online broking checklist
If in doubt, double check the assessment with the client
✓ Document every stage of the risk assessment
✓ Send details of every stage of the assessment to your insurer
✓ Print off any risk assessments, even ones done online, and get the client to sign the hard copy
✓ Never let the ease of online systems cloud basic broking principles and best practice
