Understanding insurance obligations: the insurance company, the broker and the customer
Understanding Insurance Obligations
The importance of a broker’s responsibility as an educator is often overlooked however, brokers play an essential role in bridging the information gap for customers who do not know or understand the intricacies of insurance law and how they affect their policies.
Brokers provide customers with the sense of comfort that they do not need to know the details of insurance law or the technical aspects of insurance. This sense of comfort sometimes makes customers mistakenly think that they can be unaware of their obligations. However, this is not the case, because each party to a contract or agreement has obligations and it is important for each of the parties to understand their role and obligations in any agreement, irrespective of whether they avail themselves of the services of brokers or intermediaries. It is thus important to reflect on each of the parties’ obligations.
Insurers design products and their associated terms and conditions, and then market these products either directly or through a broker or intermediary. When this product is sold through intermediaries, it is important that they understand in detail what is being provided in terms of the product, who the target market is, what is covered and what is expressly excluded under the insurance cover or policy. This is critical as the insurer has the obligation to ensure the intermediaries selling its products are clear on each of these aspects. Insurers must ensure that intermediaries are provided with the necessary information and training so that customers who buy the product understand what they have purchased and have made an informed decision.
Insurers face the further obligation of having to make available, both to brokers and to customers, information that will educate them on what can realistically be expected as indemnity relative to the product they have purchased.
Intermediaries play an important role in the insurance ecosystem and are regarded by customers as experts in their field. The role that they play, and are remunerated for, is that of being an extension of the insurance company. Along with the insurer, intermediaries have the duty to ensure that the customer is treated with fairness. Firstly, they must conduct a needs analysis to establish the customer’s requirements. This means conducting the actual analysis, advising on the best and most suitable cover for each profile of the customer and finally determining premiums that are fair and competitive.
Other obligations that the intermediaries have included keeping the customer informed before, during and after the sale of a policy, of any relevant or material information that would affect his/her cover. Intermediaries must maintain contact with customers throughout the lifecycle of the policy. In addition, they should always ensure that they have a detailed and thorough understanding of the products they sell; they need to have extensive knowledge of exactly what is and what is not covered under a policy. Overall, intermediaries need to fill the knowledge gap, as they have access to information that customers have no way of accessing.
Customers generally do not have knowledge of the technical aspects of insurance policies. This means that reliance on the broker and the insurer for information is to be expected. However, there is also some information that a broker and insurer will never have unless it is fully disclosed by the customer. Having an accurate and complete view of the customer, his/her needs and circumstances is important to ensure that the intermediary and insurer can adequately assess risk.
On their part, customers always need to question exactly what they are paying for and find out exactly what is covered in terms of their contract, ensuring that they never sign anything unless they are clear on exactly what is being provided. Keeping all documents in a place that can be easily accessed as and when required is also of high importance. During the lifecycle of the policy, it is critical for customers to always provide the intermediary with any changes in their personal circumstances or cover requirements.
The information above should be the basis upon which an insurance product is sold; expertise, education and awareness are provided; and disclosure is made. Ensuring this will lead to customers who know what they have paid for and exactly what they can expect from their insurance policy.
Article written by: Sedick Isaacs, Head of Business Support Services