When you are entering into an insurance contract, you may well use the services of an insurance broker (see How to enter into an insurance contract). As well as assisting you in entering into the contract, the broker will handle and pass on all payments made between you and the insurance company. Brokers are subject to the requirements of the INSURANCE INTERMEDIARIES ACT 1994.
Insurance brokers are different from insurance agents in that brokers are not contracted with any insurance company and are in fact your agent. Nevertheless they do make their money by getting a commission from the insurance company.
As the insurance broker is your agent, he or she has both express and implied authority to enter into an insurance contract that meets the requirements you have stipulated.
Under the INSURANCE INTERMEDIARIES ACT 1994, an insurance broker who receives premiums from you under a policy that has been accepted by an insurance company must pay the premium to the company:
When an insurance broker receives money from an insurer to be paid to you under a claim, the broker must pay you the money within seven days, unless the money is in the form of a cheque, in which case the broker must send you the cheque immediately. The broker may, however, deduct any money that you owe under the policy.
A broker who doesn't comply with this requirement commits an offence punishable by a fine of up to $5,000 (if an individual) or $10,000 (if a company).
Under the Act you are protected if your insurance broker goes bankrupt:
Brokers must also keep a separate account â€“ called an "insurance broking client account" â€“ into which they must pay:
The broker holds the money in the account on trust, and brokers cannot pay money out of the account nor invest it, except as allowed by the Act.
If the broker becomes bankrupt or goes into liquidation, policy-holders who have filed claims are paid out of this account ahead of insurance companies that are due premium payments.
As well as the specific duties and restrictions to which insurance brokers are subject under the INSURANCE INTERMEDIARIES ACT 1994, a broker is also subject to the following general duties when advising and acting for you:
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