A Broker's Duty of Care: Gathering Information and the Requirements of the Insurance Act

Well, this is probably the first and last time you will learn about the Insurance Act without actually looking at it but be assured, there is method in our madness!

In the first place you are an insurance broker, not a lawyer, so let us leave the law to them. In the second place your client is not a lawyer (normally) so they cannot be expected to interpret the law.

Let us focus on what we need to tell the client to reduce the risk of a claim not being paid in full.

Is this a case for a warning?

We think it is, so make sure it is prominent and use your red triangle (or skull and cross-bones). You very much want your client to read about their responsibilities.

Where to put it?

This is up to you:

  • In a letter/email preferably on its own
  • On the page that asks for the premium (often a pointer to where to read about it)
  • In a glossary of significant and onerous terms

You are going to be giving a very abbreviated explanation (so the client understands) so always include a reference to where they can find the full detail in the policy document,

Where not to put it?

  • In your Terms of Business Agreement. Many brokers do this but the TOBA is the place to define your duty, not to discharge it. What law insists that a business-person reads their TOBA? By all mean include it in the TOBA if you want but always make that a second line of defence, not the primary.
  • Printed on the back of anything. Clients often still like paper and copy paper to colleagues and staff. Put it on the back and it may be missed (as it was in the Café de Lecq case!).
  • At the end of anything!

What to say?

This is up to you. On a case we are working on at the moment the explanation runs to three pages. Perhaps focus on PI risk management to protect your client. You need to get across a message to the client about their responsibilities, not to summarise War & Peace!

Try This:


1)      You have a responsibility to give underwriters information even if they have not asked for it. You need to give information which might affect how the insurer calculates your premium or imposes significant or onerous terms on you.

Answer all questions they ask and give any information that might be relevant. Ask us if you have any doubt.

If you do not comply with this, the insurer may have the right to reduce or reject any claim.

2)      You have a legal responsibility to make reasonable enquiries of anyone involved with your business who might have information which falls into the above definition at point 1)

(A)   Examples (not exhaustive) of information to disclose:

a.       Claims which have occurred

b.      Circumstances which may have occurred but which you did not claim for

c.       Circumstances which may have led to a claim

d.      Information about your business which is unusual for your trade

e.       Information about your premises or neighbouring premises which is unusual or risky

For any of your business interests or anyone involved with those business interests including partners, owners or directors:

f.        Criminal convictions or enquiries

g.       Any form of censure or potential censure such as fines or penalties (e.g. tax investigations)

h.      Any form of bankruptcy or arrangement with people you owe money to

(B)    Examples (not exhaustive) of people to include in your enquiries at inception and at each renewal:

a.       You and your family

b.      Your partners, directors and the owner of the business.

c.       Your Landlord

d.      Senior staff

e.       Staff who manage people or processes (Production, Delivery, Maintenance etc)

f.        Your professional advisers (land/property agents, accountants, solicitors etc)

Please note that you will have been asked many of these questions in your proposals/statement of fact. Make sure you answer those truthfully and accurately but please go further if needed. We are qualified to answer your questions so if you have any doubts get in touch with us.

You should read full details of your legal and contractual responsibilities at page XXX of your insurance policy.


How do you feel about that? Remember it is your responsibility (not ours) to create your own explanation. We are simply giving you informed ideas and examples. Remember the focus is on allowing the client to make an informed decision, not showing off your prowess in quoting extracts verbatim from Acts of Parliament or long-winded insurance documents.

Next week we are going to give you some real-life examples of information not gathered. The 14 weeks of study should have prepared you to know and understand what went wrong. Something you could not have done 3 months ago.

BEWARE! You may find them interesting and you cannot be competent without “The Knowledge”. This is what Chartered Status and the Exams are about. Proving you have the knowledge is a major part of protecting your clients and getting them to where they want to go. Add that to the application on the job (driving the taxi) and you will minimise the risk to your client and to your firm.

Can you imagine if your clients were advised on their insurance needs by someone without the knowledge? An Architect, a PhD in astrophysics or just someone who is important in our industry but with no assessed knowledge.

A situation the FCA should not be very pleased about!

Your job is to protect the public (some of about 65 million people in the UK at the last count), and your duty of care is probably only second to the National Health Service and the medical profession and certainly alongside solicitors, accountants and so on.

Treat your duty of care with a passion. If you get it wrong, the loss to your client is instantaneous and often devastating. A factory, a building, a breadwinner.

The fact that you sued is the effect of getting it wrong. The result of your negligence can be tragic.

In the case studies over the next few weeks, we are going to expose the behaviour of the practitioners who do not have the knowledge (without identifying them personally!) and we hope this will encourage all practitioners to study and to share their knowledge and ideas with colleagues.

You will be quite surprised at how many are senior people, educated people, and people from other professions, and they all have one thing in common: they have never had their knowledge assessed to a reasonable standard and they have put their clients at risk.

About the author

The opinions expressed in this article are the author’s own and do not necessarily reflect the view of UKGI.

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