An insurance broker is a person who mediates independently in the insurance operation between the insurance applicant (the "assured") and the insurance company, in return for a commission which he receives from the insurance company (the "insurer"). Accordingly, it must be pointed out that the insurance broker is different from the insurance agent who is assigned to act and sign on behalf of the insurance company or one of its branches. Although the broker receives his commission from the insurer, there are certain general duties which he must perform towards the assured.
Recently new federal legislation has been passed in the UAE regarding the establishment of an insurance board and organizing insurance practice in the UAE. The said law did not directly cover insurance brokers practices; however, Article 70 thereof states that such practices will be covered according to a regulation formulated by the Insurance Board which has been created according to the mentioned law. I believe that the mentioned regulation must cover the UAE brokers' responsibilities and duties towards their principals in effecting polices.
Generally, it is said that there are certain general duties which the broker must perform in effecting the policy. The broker must obey the assured instructions, use proper skill and care in carrying out such instructions and execute the required transaction.
Pursuant to Article (6) of the Ministry decree no (24) of 1985 as amended, UAE brokers undertake not to mediate in executing any policy without receiving a written application from the insured containing the required coverage requirements and limitations.
I believe that requiring written instructions from the assured according to Article (6) above minimized the number of disputes regarding the broker duty in obeying the assured instructions. However, the broker must use proper skill and care in carrying out such written instructions. Therefore, the broker must insure that all the clauses which are usual and ordinary are inserted into the policy. Also, it is crucial for the broker to ensure that the risk ensured is properly described in the policy, or else no money will be recoverable on the policy in event of loss. Thus, the insurance brokers are bound to know the law related to insurance operation and to act accordingly to the benefit of the assured.They are expected to present competent skills and diligence in their practice.
Furthermore, it is said that the broker is under obligation to execute the policy. In this regard, a question may be raised; what if a broker receives an applicants written instructions and for some reason wishes to cease doing business with the applicant and consequently simply does not respond to the request?
It is my opinion that when a broker is approached by an applicant requesting him to execute a policy, the broker is under obligation to either undertake the transaction as instructed by the applicant or to inform the applicant of his regret in not so doing by writing at the first possible opportunity and without delay, because, by ignoring the applicants request, the broker may deprive the applicant from the opportunity of applying to secure the insurance elsewhere within the required time. This is especially in light of the fact that insurance brokers are registered according to rules and regulations and thus should be available to carry out business with applicants.
In this regard, I believe that the new regulations which are expected to be passed in the near future according to Article (6) above, should clearly stipulate the duties of insurance brokers in effecting policies. Also, it should bind brokers to respond in writing to applicants' requests should they decline to carry out business with such applicants, just as applicants are bound to make their requests and instructions in writing.
By Yaman Hawamdeh
© Al Tamimi & Company 2007
