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Asking my broker

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What should I be asking of my insurance broker?

Kindly note that with the passing of the FAIS Act 37 of 2002, complaints against Intermediaries are to be dealt with by the FAIS Ombud whose further contact details can be obtained from his website:www.faisombud.co.za

Please note:-

  1. An insurance broker is NOT an Insurance Company or registered as an insurer under the Insurance Act. He or she normally acts as YOUR agent in seeking and obtaining insurance cover on your behalf from an insurer.
  2. You are ENTITLED TO KNOW at the outset who the insurer is and the name of the insurer, sometimes called the underwriter, which should appear on every policy or policy schedule which you receive from your broker. You are also entitled to receive a complete copy of the policy document from the Insurer concerned within 30 days of the inception date of the cover.
  3. A broker is not automatically entitled to receive payment of premiums in respect of insurance arranged for you. Only a broker specifically authorised by the insurer may collect premiums and it is only if payment has been made to such an authorised broker that you are entitled to assume that the insurer has been paid the premiums under the policy. Recent amendments under the Insurance Act have made it illegal and an offence for an unauthorised broker to collect premiums. If in doubt establish who the insurer is and contact them to confirm the broker's authority to collect premiums.
  4. You must distinguish between a broker and an UNDERWRITING MANAGER. An underwriting manager is the authorised agent of a particular insurer or insurers to act for the insurer/s in receiving proposals, accepting them, issuing policies on their behalf and handling claims under the policies. ONCE AGAIN, you are entitled to know WHO THE ACTUAL INSURER IS and to a complete copy of the policy, including the schedule, which reflects the name of the insurer involved. Descriptions such as "Various Underwriters" or "Lloyd's of London" are not sufficient.
  5. An underwriting manager is not entitled to alter your insurer without either your consent or the consent of your broker. Whether your broker is entitled to agree without consulting you, in the absence of written authority, is also open to doubt.
  6. Some brokers act as brokers and also as underwriting managers. Whilst it is not against the law to do this, it creates difficulties which are not to your advantage. For example, your broker is supposed to do his/her utmost in support of/to assist you in regard to claims which you make on your policy in dealing with the insurer. If s/he is also the underwriting manager to the insurer, this creates a possible conflict of loyalties. It also opens up an area of liability on his/her part to which s/he might not be exposed where s/he simply acts as your broker and an area of liability on the insurer's part for acts done or omitted by the broker, for which the insurer would not be responsible in the normal course.
  7. Recently certain scams came to light within the Industry. Simply put, certain brokers and underwriting managers were purporting to act as the authorised representatives of registered insurers for the purpose of actually arranging and issuing policies and handling claims where in fact there was NO UNDERLYING INSURER or where the authority originally given by the alleged underlying insurer had been cancelled or had expired.

What this meant was that a criminal offence under the Insurance Act had been committed and that members of the public who thought they were insured were in fact not insured at all and were left in the unhappy position of having substantial claims for damages against organisations in liquidation with no money to pay the claims.

The Ombudsman receiving such complaints has to advise those people that there was no insurer for him to approach and that the broker or organisation responsible to them in law was not worth approaching because it was in liquidation.