Agreement between Underwriter and Insurance Broker

Agreement setting out the details of the agreement including: commission, interim cover, period of agreement etc. An insurance underwriter evaluates insurance applications to determine if the risks for which people seek cover are insurable and at what premiums.

In general, underwriters work in any field where businesses charge money for assuming other people’s risks, such as banks where they assess loans and determine interest rates.

When you underwrite you are essentially promising to restore, at a fee, an entity after the occurrence of a specific risk. The term has its origins in marine insurance where an insurer would write their name under the stated risk for which they are promising to cover a ship owner.

In modern practice, however, an underwriter commonly refers to a person employed by an insurance company to evaluate insurance applications and to determine what premiums the insured should pay. But most of the work is done using software and actuarial data. The underwriter will only intervene in special cases.

On the opposite end, an insurance broker is an intermediary who advises and procures a policy or contract of insurance on behalf of an individual or organization. Their allegiance is to the insured, not the insurer.

Insurance brokers are trained in risk analysis and use their expertise and experience to advise people on which policies to buy. Their duty is to make sure the insured get fairly priced and adequate insurance cover.

Rights and Obligations in terms of the Agreement

The parties have the right:

• to request each other to provide the service in accordance with the contract and brokerage/underwriter terms;
• in case the broker/underwriter violates the contractual terms, the other party is entitled to use the legal remedies provided for in law.

The Parties are Obligated to:

• inform each other, with a sufficient time margin, whether they wish to enter into the contract or renew the existing contract before the next insurance period, that is, enter into a contract for the new period;
• submit at least the following information to request insurance offers (data regarding the insured assets, insurable interests and requirements for the insurance contract):
- details and description of the insured object, as well as documents upon the broker’s request;
- the list of insurance risks and additional risks;
- all risk circumstances which have had an impact on the insured object before and that may have a future impact on the object due to the location or method of use(including natural forces);
- the correct insurance value or recovery or replacement value of the insured object;
- details regarding previous insured events that have occurred with relation to the insured object;
- the preferred insurance territory and co-insurance rate;
• check, whether all details concerning the broker and the underwriter specified in the agreement are correct;
• notify each other when choosing the most suitable insurance offer within a reasonable time;
• notify each other immediately of changes in the agreement details.

Important Aspects to Note:

The parties are entitled:
• to receive information from the client about the client’s insured interests and insurance requirements according to the brokerage terms and inquiries;
• to inspect the assets before entry into the insurance contract, if necessary;
• to request the insurance premium to be paid according to its invoice or another document;
• not to pay an insurance premium for the client, if the client has failed to pay in a timely manner.
• in case the client has not paid the insurance payment according to the broker’s invoice in a timely manner or the client withdraws from the brokerage contract or if the client cancels the contract extraordinarily, to submit an application to the insurance undertaking in the client’s name to withdraw from the insurance contract, cancel the insurance contract extraordinarily or make it premium-free by applying for transfer of the refundable insurance premium on its bank account if the Broker has paid it on its own account;
• in case the client fails to give the parties correct and sufficient data about the assets or if the client fails to pay the insurance premium on the Broker’s bank account in a timely manner, the parties have the right to withdraw from the brokerage contract by not fulfilling the brokerage obligations.

The Parties are Obligated to:

• provide the client with the insurance broker’s service and other related services under the terms and conditions set out in the insurance broker’s contract and brokerage terms based on the client’s application;
• provide services with the professionalism, independence and due diligence characteristic of insurance brokers;
• act in the best interest of the client, offer the client insurance contracts which meet the client’s insured interests and inform the client sufficiently of the offered insurance products;
• upon renewal of the insurance contract, submit insurance offers to the client in a timely manner, considering that in case of a lack of other client information, the broker shall submit an offer based on the insured interests and requirements of the client determined in the previous insurance previous, giving the client the opportunity to complement and specify it with the purpose of not leaving the client’s assets without insurance cover.

Liability

The parties are liable for failure to fulfil the obligations laid down in the contract and are obligated to compensate the other party for failure to perform in terms of the contract or for damages caused by improper fulfilment of the contract. Damages shall be compensated for, if these are sufficiently proven by the other party.

The parties are not liable for damages caused by force majeure, a third person independent of the parties’ activity or an event the exclusion of which could not have been reasonable expected from the parties.

Upon reviewing the compensation for damages requirement, the parties proceed from the principle that if the broker has practiced due diligence to the client, having fulfilled, among other things, all the notification obligations set out in legal acts and submitted the client with sufficient explanations and warning, it shall be liable for damages caused to the client by insurance broker’s activity only as far as the client expressed its insured interests and requirements to the insurance contract based on comparative offers or another application. The parties are not liable for neglecting an interest not disclosed thereto by the client.