Choosing an insurance broker is more than just comparing coverage and costs. It also entails investing legal and financial trust in a licensed intermediary who must follow specific regulatory guidelines.
Singapore’s insurance brokers are not simply sales agents; they are bound by laws that require them to act in their clients’ best interests, disclose relevant information, and manage data responsibly. However, many clients are unaware of the full extent of these legal obligations, or of the avenues available if a broker fails to meet them.
With that, discover the key responsibilities brokers must uphold and what clients can hold them accountable for when they compare insurance in the city-state.
1. Duty to Act in the Client’s Best Interest
Local insurance brokers are legally required to act in the best interest of their clients. This fiduciary duty includes providing impartial advice, disclosing any potential conflicts of interest, and ensuring recommendations are not swayed by commission structures or affiliations with insurers.
Once a broker steers a client towards a policy that offers higher commission but is unsuitable, this may be grounds for professional misconduct.
Clients can hold brokers accountable for negligence if there is evidence that their advice was not aligned with the client’s needs or if they failed to properly assess the client’s risk profile.
2. Obligation to Disclose Material Facts and Policy Details
Transparency is not optional; it is a legal obligation. Insurance brokers must clearly explain the terms, conditions, limitations, and exclusions of a policy before a client commits. They are also expected to disclose all material facts that may affect the underwriting of a policy or the insured’s ability to make claims.
Once a broker fails to point out significant exclusions or policy limitations, they may be liable for misrepresentation or non-disclosure, especially if the client suffers a financial loss as a result.
This instance is especially important when clients compare insurance in Singapore and rely on the broker’s guidance to select the most appropriate cover.
3. Compliance with Regulatory Licensing and Conduct Requirements
All insurance brokers operating in Singapore must be licensed by the MAS under the Insurance Act and comply with the Financial Advisers Act (FAA). These frameworks set standards for conduct, qualifications, financial solvency, and record-keeping. Failure to comply with licensing obligations, such as operating without a licence or employing unqualified representatives, constitutes a legal offence.
Clients should verify that their broker is MAS-registered and can report any suspicious or non-compliant activity to the regulator. Clients, in some cases, can recover losses if it’s proven that the broker acted illegally or without proper authorisation.
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4. Duty to Provide Accurate Documentation and Follow Instructions
Local insurance brokers are also legally responsible for processing applications accurately and in line with client instructions. Any deviation from client consent, such as submitting incorrect policy details, omitting requested coverages, or failing to submit proposals on time, may lead to liability claims.
For instance, if a broker misses a policy renewal or does not implement a requested change, and a claim is denied as a result, the broker could be held accountable for financial damages.
This instance reinforces the need for clients to document all instructions and verify finalised policy documents.
5. Duty to Maintain Confidentiality
Handling sensitive personal and financial information comes with strict data protection responsibilities under Singapore’s Personal Data Protection Act (PDPA). Insurance brokers must protect client data from unauthorised access, use, or disclosure.
Breaches of data confidentiality, such as sharing information with third parties without consent, can lead to regulatory penalties and civil claims.
Clients should review a broker’s data protection policy and report any data mishandling immediately.
6. Legal Remedies Available to Clients
Once a client believes an insurance broker has acted negligently, dishonestly, or illegally, several options are available. They can file a complaint with the broker’s firm, escalate it to the MAS, or initiate legal action for breach of duty.
Clients, in some cases, may also turn to the Financial Industry Disputes Resolution Centre (FIDReC), which handles claims of up to SGD 100,000.
It’s necessary to maintain records of all communications and documents to support any formal complaint or legal case.
Conclusion
Singapore’s insurance brokers sure have an essential consulting function, but it comes with legal responsibilities. From fiduciary duties and disclosure obligations to regulatory compliance and data protection, brokers must operate within a strict legal framework. Understanding these legal responsibilities can help ensure clients comparing insurance choose a broker who not only offers value but also acts with integrity and transparency.
Contact eazy today and start your evaluation with a broker who understands both your coverage needs and their legal responsibilities.
