Notes on
The Role of the Broker and Agent in Insurance Contracts in Ghana
In the context of insurance contracts in
Ghana, brokers and agents serve as intermediaries between the insured
(policyholder) and the insurer (insurance company). Their roles are distinct,
but they are both vital to the insurance process, helping individuals and
businesses understand, purchase, and maintain insurance coverage. These
intermediaries operate under the legal framework established by the Insurance
Act, 2021 (Act 1061) and other relevant regulatory guidelines issued by the National
Insurance Commission (NIC).
This document outlines the key
responsibilities, differences, and regulatory framework governing the roles of
insurance brokers and agents in Ghana.
1.
Overview of the Role of the Insurance Broker
An insurance broker is a
professional intermediary who acts on behalf of the insured, not the insurer.
Brokers provide advice, facilitate the selection of policies, and negotiate the
terms of the insurance contract. They are expected to operate independently of
insurers, focusing solely on the best interests of their clients.
a.
Functions of an Insurance Broker
Risk Assessment and Advice
Brokers assess the specific needs of their clients,
helping them understand the types and extent of coverage required.
They provide expert advice on the best insurance
options available from various insurers, considering the client's needs
and financial situation.
Policy Selection and Placement
Brokers have access to a variety of insurance
products from multiple insurers. They assist clients in selecting the
most suitable policy.
They help place the client’s risk with an appropriate
insurer and negotiate the best possible terms and premiums.
Claims Assistance
Brokers assist clients in the event of a claim by
guiding them through the claims process.
They act as a liaison between the insured and the
insurer to ensure the smooth and timely settlement of claims.
Premium Payment Facilitation
Brokers may assist clients with the payment of
premiums, ensuring that payments are made on time to maintain coverage.
Client Advocacy
Brokers act in the best interest of their clients,
advocating for them in all dealings with the insurer, especially in
resolving disputes or renegotiating terms.
b. Legal
and Ethical Duties of Insurance Brokers
Duty of Disclosure: Brokers are
obligated to disclose all relevant facts that could affect the client’s
decision or the terms of the insurance policy.
Fiduciary Duty: Brokers have a fiduciary
responsibility to act in the best interests of the client, placing the
client’s needs ahead of their own or the insurer’s.
Duty of Care: Brokers must exercise due diligence
in recommending and arranging policies, ensuring that the client’s needs
are met and that they are not misled by any material facts.
2.
Overview of the Role of the Insurance Agent
An insurance agent, on the other
hand, represents the interests of the insurer and acts on its behalf. Agents
are often employed by insurance companies or are independent contractors who
work exclusively with one insurer. Their primary function is to sell insurance
policies and facilitate the insurer’s offerings.
a.
Functions of an Insurance Agent
Policy Sales and Marketing
Agents are primarily responsible for promoting and
selling insurance products to individuals, businesses, or organizations.
They may also educate prospective clients on the
benefits and features of various policies, tailoring their advice based
on the insurer’s offerings.
Underwriting Assistance
Agents often assist with the underwriting process by
collecting essential details from the client, such as personal
information, health records, and claims history, to help the insurer
assess the risk.
Customer Service
Agents provide ongoing support to policyholders,
answering questions, assisting with policy renewals, and offering advice
on making claims or updating coverage.
They serve as the primary point of contact for the
insured in cases of policy amendments or disputes.
Premium Collection
In many cases, agents are responsible for collecting
premiums from clients and ensuring that the insurer receives payments in
a timely manner.
They may also handle policy cancellations or
non-payment issues.
b. Legal
and Ethical Duties of Insurance Agents
Duty to Act in Good Faith: While
agents represent the insurer, they must still operate in good faith and
deal honestly with the insured.
Duty of Disclosure: Agents must
inform the insured about the terms and conditions of the policy, including
any exclusions or limitations that may affect the coverage.
Obligation to Follow Insurer’s Instructions: Since
agents work for insurers, they must abide by the terms, conditions, and
pricing models set by the insurer when offering policies to clients.
3. Key
Differences Between Brokers and Agents
While both brokers and agents act as
intermediaries in insurance contracts, their roles differ in several important
ways:
Aspect
Insurance Broker
Insurance Agent
Representation
Acts on behalf of the insured (client).
Acts on behalf of the insurer.
Relationship
Independent, not tied to any particular insurer.
Typically tied to a specific insurer or a group of
insurers.
Selection of Policies
Can offer policies from multiple insurers.
Can only sell policies from the insurer they represent.
Compensation
Receives commission from insurers but also may charge
clients directly.
Primarily compensated through commission from the
insurer.
Advisory Role
Provides objective advice, aiming to serve the client’s
best interests.
Focuses on selling policies of the insurer they
represent.
4.
Regulatory Framework Governing Brokers and Agents in Ghana
a. The
Insurance Act, 2021 (Act 1061)
This Act regulates the activities of brokers and
agents in Ghana, ensuring that they comply with professional standards and
ethical practices.
It defines the roles and responsibilities of both
brokers and agents, including their obligations to the insured and the
insurer.
The Act also specifies licensing and registration
requirements for both brokers and agents.
b.
National Insurance Commission (NIC)
The NIC is responsible for overseeing the operations
of brokers and agents in Ghana, ensuring that they comply with regulatory
standards.
The NIC provides guidelines for the conduct of brokers
and agents and establishes licensing procedures.
It also handles complaints, misconduct investigations,
and disciplinary actions for both brokers and agents.
c.
Licensing and Professional Requirements
Brokers: In Ghana, brokers must be licensed
by the NIC and meet certain professional qualifications to operate
legally. They must also carry professional indemnity insurance to protect
clients from potential errors and omissions.
Agents: Insurance agents must also be
licensed, either as employees of a specific insurer or as independent
agents working with one insurer.
5.
Challenges Faced by Brokers and Agents in Ghana
Low Insurance Penetration
Insurance brokers and agents often face challenges in
convincing the general public of the benefits of insurance, especially in
a country with relatively low insurance penetration like Ghana.
Regulatory Compliance
Brokers and agents must navigate complex regulatory
frameworks and keep up with changes in laws and insurance products.
Failure to comply with licensing requirements can lead to penalties or
loss of business.
Miscommunication and Misrepresentation
There may be cases where brokers or agents provide
incorrect information, either unintentionally or due to a lack of training,
which can result in legal disputes or customer dissatisfaction.
6.
Conclusion
In Ghana, both insurance brokers and
agents play vital roles in the insurance industry, facilitating access to
coverage for individuals and businesses. Brokers act as independent advisors,
while agents serve the interests of insurers. Both parties must adhere to
strict regulatory standards to ensure transparency, fairness, and protection
for all stakeholders involved in the insurance process. Despite the challenges,
brokers and agents contribute significantly to enhancing insurance literacy and
promoting financial security in Ghana.
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