Insurance Intermediation: Broker and Agent Roles, Duties, Conflicts of Interest, Remuneration and Disclosure
Roles
An agent acts for one or more insurers and may bind them; a broker acts for the client, advises independently, and must present a fair analysis of the market (or disclose the basis of selection). Both must be FSC-registered, meet professional-qualification requirements, hold professional indemnity cover, and act honestly, fairly and professionally in the client’s best interest.
Duties and disclosure
Before conclusion, the intermediary must disclose: identity and status (agent/broker), the insurer(s) represented, the nature of remuneration (commission, fee, or other), any conflict of interest, and the demands-and-needs assessment. Remuneration disclosure is a frequent exam point: commissions must be disclosed in a comprehensible form, and inducements must not impair the duty to act in the client’s best interest.
Conflicts of interest
Conflicts arise from commission structures, tied arrangements, or ownership links. The intermediary must identify, manage and disclose them; where a conflict cannot be managed, it must be avoided.
Traps
- Calling an agent “independent” - only brokers can claim independence.
- Forgetting that brokers must disclose the basis of their market analysis.
- Assuming remuneration disclosure is optional - it is mandatory.
- Confusing the IPID (product information) with the demands-and-needs statement (suitability).
Worked example
A broker recommends Insurer A but receives a higher commission from Insurer B. The broker must disclose the commission and the basis of selection; if the conflict cannot be managed, it must recommend the suitable product regardless of commission. Rule of thumb: disclose status, remuneration and conflicts before the client signs.