CS Professional · Banking and Insurance - Laws and Practice · Professional Opportunities
Vikram Rao, a company secretary, plans to become an IRDAI-licensed insurance broker through a company he promotes. A client sues, alleging that Vikram's company placed cover only with an insurer paying higher commission despite a cheaper suitable policy. Which duty has most clearly been breached?
The breached duty is acting in the client's best interest with unbiased advice. A broker must recommend suitable cover on merit, not by favouring higher commission. There is no duty to maximise insurer premium, share commission with the client, or restrict placement to one insurer.
- ADuty to act in the client's best interest and give unbiased adviceCorrect
- BDuty to maximise the insurer's premium income
- CDuty to share commission equally with the client
- DDuty to avoid placing business with more than one insurer
Explanation
A broker owes the client a duty of care and unbiased advice, which includes recommending suitable cover on merit rather than for higher commission. There is no duty to maximise insurer premium or to share commission equally. Placing with several insurers is allowed for a broker.
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