Insurance Intermediaries: Licensing, Conduct and Obligations
Insurance Intermediaries: Licensing, Conduct and Obligations tests how agents and brokers are authorised, whose interests they represent, and the conduct rules that apply when they sell and service policies.
Who is who
- An agent acts for the insurer and can usually bind cover within delegated authority. A tied agent represents one insurer or group; a multi-tied agent represents a panel.
- A broker acts for the client, advises on needs and places the risk with insurers. The label matters: it determines duties, disclosure and whose acts bind whom.
- Apparent authority can bind an insurer where the agent's conduct led the client reasonably to believe authority existed, even if internal limits were exceeded.
Licensing and fitness
- Individual registration or licensing, minimum qualifications and a pass in the regulatory examination, fit-and-proper declaration (criminal record, insolvency, regulatory sanctions), renewal and continuing professional development.
- Firms need professional indemnity (errors and omissions) cover and adequate supervision of staff.
- Licences are class-specific; advising on life products usually requires life authorisation in addition to general insurance.
Conduct obligations
- Know the client: collect accurate information, assess needs and affordability, recommend suitable products, and record the advice.
- Disclose status, insurer relationships, remuneration and commissions on request; avoid conflicts or manage them transparently.
- No misrepresentation of benefits, exclusions or returns; no rebating of commission where prohibited; no premium collection outside authorised channels.
- Client money must be segregated and remitted promptly; records kept for the statutory period; confidentiality maintained.
- Report suspicious transactions and customer complaints; cooperate with the regulator.
Worked example
An agent sells a single-premium investment-linked policy to a retiree whose stated need is capital protection, without a needs analysis, because the commission is high. This breaches suitability, disclosure and record-keeping duties. The insurer may be liable for the agent's conduct, and the regulator can fine, suspend or withdraw the licence. Commission clawback and customer remediation may follow.
Traps
Calling a broker the insurer's agent. Assuming apparent authority is unlimited. Overlooking the need for separate life authorisation.