The Law Handbook 2024

956 Section 10: Accidents, insurance and compensation that the term relied on by the insurer is permitted by the IC Regulations. There is significant overlap between consumer insurance contracts and prescribed contracts. It is likely that future reforms will roll the two concepts into one. Insurance agents and brokers Who are insurance agents and brokers? Insurance agents (also called authorised represent- atives) and insurance brokers are involved in marketing and selling insurance policies to the general public. Sometimes, there is a tendency to confuse their roles. Insurance agents act for insurance companies. They market and sell insurance policies for an insurer or insurers under an agreement with those insurers. Agents are normally paid commission by the insurer. On the other hand, insurance brokers normally represent the interests of consumers and will advise on a range of available insurance products to meet a consumer’s needs. Policyholders need to be mindful of the roles of agents and brokers. If a policyholder finds that the cover provided under an insurance policy is insufficient or coverage for a claim is declined by an insurer, then they should pay careful attention to the responsibility of the agent or broker in arranging that insurance. Parts 4 and 5 of the Insurance Code require insurers to ensure their employees and authorised representatives receive adequate training in respect of their insurance policies and services. Insurers are required to measure the effectiveness of their training and continually monitor the performance of their staff and representatives. Insurance agents and brokers and the Corporations Act Licensing Under Part 10.2 of the Corporations Act 2001 (Cth) (‘ Corporations Act ’), most insurance brokers must be licensed. A broker can only use the descriptions ‘insurance broker’, ‘general insurance broker’ or ‘life insurance broker’ if authorised to do so through a condition in its licence. Under the Corporations Act, agents do not need a licence if they are authorised representatives of a licensed insurer. Disclosure requirements The Corporations Act imposes additional disclosure requirements on agents, brokers and insurers who market and sell domestic insurance. A financial services guide must be provided by licensees to retail clients as soon as possible. These guides contain information about commissions and the dispute resolution procedures available to policyholders (pt 7.7). Insurance agents and brokers must give consumers a product disclosure statement at the earliest possible time. Where an insurance policy has been recommended by an insurer or broker before the contract is entered into, the Corporations Act also requires the consumer to be provided with a ‘statement of advice’. This statement informs the consumer of the basis upon which the recommendation is made and discloses any potential conflicts of interest that may arise in the giving of the advice (pt 7.7). Duty of disclosure Insurers’ responsibility to inform Under section 22 of the IC Act, before an insurance contract (not a consumer insurance contract) is entered into, the insurer must clearly inform an insured person, in writing, of the general nature and effect of the duty of disclosure, including the consequences of non-disclosure. An insurer that has not complied with section 22 may not exercise any rights in respect of a non- disclosure unless the non-disclosure was fraudulent. The insurer is responsible for proving that it has complied with section 22. Duty to disclose For an insurance contract that is not a consumer contract, section 21 of the IC Act requires an insured person to disclose every matter known to them – or that a reasonable person in the circumstances could