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The insurance broker
Agent or broker?
There is a technical difference between an agent and a broker.
Agents are authorized to sell only the products of the companies
they represent. Brokers maintain relationships with several insurance
companies. It’s possible for a licensee to be an agent
for one line of insurance (for ex., auto insurance) and a broker
for other personal lines of insurance (such as homeowner’s,
tenants’, condo and other habitational policies).
Brokers and agents owe the same duty of care to the customer.
The licensee must adhere to the principle of utmost good faith
as set out in the Insurance Council of BC’s Code of Conduct.
That means that the person selling insurance should only recommend
products that meet the customer’s stated needs.
How insurance brokers balance the interests of insurance companies
and customers
 Agency relationships are common in many professional areas. In
law the insurance broker is the agent of the insured, and as
such owes the insured careful and prompt attention to instructions,
expert advice and competitive pricing of products. The law also makes brokers the agent of the insurer for certain
duties, including collection of premiums and the passing on of
relevant information obtained from the client.
The services an insurance broker performs
A broker’s services don’t end with the sale of the
policy; they start with the sale of a policy. These services include:
- Pre-sale due diligence that includes assessing needs,
obtaining quotes and making recommendations on the best coverage.
Depending on the property being insured, this might include performing
an insurance valuation, taking photographs or obtaining an inspection
report;
- Revising policies at renewal or mid-term if required;
- Ensuring claims are fairly handled; brokers make a positive
difference to the insured’s payout from the insurer in
a substantial number of claims;
- Heading off potential claims or coverage problems by being
hands-on with the customer;
- Being on the alert for material changes that will affect
the validity of policies, and recommending appropriate changes;
- Providing administrative follow-up, such as mortgagee changes,
certificates of insurance,
- Being available to insureds in the event of loss – especially
large, catastrophic loss – on a 24/7 basis.
How insurance brokerages are paid for their services
 Insurance brokerages get paid a commission by the insurance companies
whose policies they sell. Brokerages don’t set the prices
of insurance policies and they don’t set their commission
levels. Out of that commission brokerages pay for office expenses
and wages for employees. Commission is earned over the term of
the policy. If the policy is cancelled before the end of its
term, the policy-holder receives a refund, and the brokerage
only receives remuneration for the earned portion. When insurance
companies that sell direct to consumers advertise that they don’t
pay broker commissions, they neglect to say that a) they still
pay their sales staff, and b) they pay more to advertise to consumers
than brokerages typically do.
If you have a problem with your insurance policy or your broker
First of all, let the manager at the brokerage know about your
problem. In many cases problems arise from misunderstandings or
a lack of communication. Give the brokerage manager the opportunity
to correct the problem. Next, there are a number of organizations that can assist you,
depending on the nature of the problem:
How brokers protect and promote the public interest
- Market conduct: All persons engaged in the sale of insurance
must pass a pre-licensing exam and police clearance. Once licensed
they must adhere to the principle of utmost good faith, as
outlined in the Insurance
Council of B.C.’s Code of Conduct.
The Council will investigate legitimate complaints about the
conduct of a licensee under its jurisdiction.
- Disclosure of potential conflicts of interest: The
Marketing of Financial Products Regulation (a subset of the Financial
Institutions Act) sets out minimum standards of disclosure,
to be made verbally or in writing, of any details that could be
considered a conflict of interest. Examples of such potential conflicts
of interest could include a financial relationship between an insurer
and a brokerage, or a fee paid to someone who refers a customer.
In addition to this regulation, the common law of agency should
prevent any financial relationship between an insurer and a brokerage
from impacting on the impartial advice and service an insurance
broker provides to a customer. The insurance brokers’ duty
to place the risk in their clients’ best interests, and their
duty to disclose, supersedes any considerations of the brokers’ financial
obligations to one insurer over another. Any customer who feels
the licensee has failed in either of these duties can initiate
an investigation of the licensee’s conduct and possible disciplinary
action.
- High ethical standards: Members of the Insurance Brokers
Association of BC voluntarily adhere to levels of disclosure
and accountability over and above regulations. Members of provincial
brokers’ associations
across Canada have adopted a Consumer’s
Guide to P&C
Insurance Transactions.
In addition, the members of the
Insurance Brokers Association of B.C. adhere to a Code of Ethics,
which states in part:
“A member will strive to provide the
highest possible standard of service which the insuring public
is entitled to expect to receive from a well-qualified brokerage,
and will at all times hold the interests of the public paramount.”
- Expertise: All insurance brokers must meet mandatory continuing
education requirements during the term of their licenses to be
eligible for renewal. The IBABC is the primary provider of high-quality
pre-licensing and continuing education for the insurance brokerage
industry in B.C.
- Errors & Omission: It is mandatory in B.C. for insurance
brokerages to carry errors and omissions insurance. This insurance
covers the broker for any loss sustained due to rendering or failing
to render professional services.
- Privacy: It’s necessary to obtain private information
about a client in order to recommend the best coverage, and to
assess ongoing needs. Insurance brokers meet the requirements of
federal and provincial privacy legislation in the collection, storage
and sharing of personal information. For more information see Our
Commitment to Your Privacy.
- Advocacy: As experts with constant daily contact with the
needs of the public, insurance brokers are uniquely qualified
to promote the interests of their clients in a number of ways.
First and most important is when a client suffers a loss and
files a claim. Insurance brokers work on behalf of their client
to get the best possible compensation from the insurance company.
Brokers also serve on a wide range of committees, councils and
task forces with insurance companies, government and other stakeholders
to improve insurance policy wordings distribution systems. Insurance
brokers influence public policy by making recommendations to
government. (See Issues.)
- Dispute resolution: Consumers have access to ombudsman
services and low-cost resolution of disputes. The Insurance
Dispute Resolution Services of B.C. IDRSBC is an independent,
not-for-profit service that provides dispute resolution options
to the insuring public and the insurance industry. It offers
mediation, arbitration and mini-trial services as an alternative
to costly litigation. Several notable practicing and retired
judges, lawyers and insurance professionals provide their time
for a small stipend to resolve insurance-related disputes. It
was established in 1997 by the IBABC and continues to receive
arm’s-length funding and support.
Insurance brokers are active in their communities
 IBABC’s member surveys have shown that nearly all member
brokerage principals are involved in community activities, mainly
in business groups and amateur sports. Brokers often play a leadership
role, serving as chair or director.
Brokers are among the first to respond in emergencies. Many brokers,
especially in rural communities, keep fire-fighting equipment,
diving equipment and other emergency supplies in their offices.
Brokers are risk management experts and have a wealth of information
available on safety and security at home, at work and on the road.
For further information, go to www.bestinsurance.ca. Identifying an IBABC broker
For the best insurance at the best price, look for this symbol.
It is the registered trademark of the Insurance
Brokers Association of Canada (IBAC). Insurance brokerages that are full members
of the Insurance Brokers Association of BC are also members
of IBAC and have license to use the symbol. When you see the best-insurance symbol, you can buy with confidence,
knowing that the insurance broker is committed to providing high-quality,
personalized insurance products and services in your community.
Principals of IBABC-member brokerages average more than 20 years
of experience and are constantly upgrading their knowledge. There
are qualified member brokerages in communities across the country,
so if you move, you are assured of continued services by a true
professional who really cares.
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