Insurance Brokerage Practice, Ethics and Professional Conduct
These questions test the broker's legal role, the prohibitions attached to the licence, and professional conduct under Philippine law.
Role and duties
A broker is the insured's agent, not the insurer's. Duties: loyalty, skill and care, disclosure of all remuneration from any source, placing only with IC-authorised insurers, presenting accurate risk information, monitoring renewals, assisting claims, holding client money in trust and remitting promptly, keeping records, and maintaining professional liability cover.
Prohibitions
Rebating any part of the premium or commission; sharing commissions with unlicensed persons; misrepresenting policy terms; placing cover with unauthorised insurers; using collected premiums as working capital; and submitting an application the client has not verified.
Ethics framework
Fiduciary standard, confidentiality under the Data Privacy Act (RA 10173), anti-money laundering duties under RA 9160 as amended (customer due diligence, record-keeping, suspicious transaction reporting), fair competition, no twisting or churning, and upfront disclosure of conflicts of interest.
Worked example
A client says "just place it with the cheapest quote". The cheapest comes from an insurer with a weak claims record and a flood exclusion, for a flood-prone warehouse. The professional response: document the instruction, present the coverage differences in writing, recommend adequate cover, and keep the client's informed decision on file. The broker's duty is advice and disclosure, not price alone; silence after a known coverage gap invites a professional liability claim.
Traps
- Assuming the broker can bind the insurer without authority.
- Treating a cover note as a permanent policy.
- Disclosing a conflict after placement instead of before.
- Believing that "everyone does it" sharing of commission with unlicensed referrers is acceptable.