Insurance Agents & Brokers Act

Application of Act

• The Insurance Agents and Brokers Act extends to contracts of insurance that are both actual or proposed. Contracts of insurance need to be proper and apply to a specific states and territories where the law extends. The act also states that the proper law of an actual or proposed contract is the law of the state or territory where the contract applies.
  
  

Exceptions

• The Insurance Agents and Brokers Act contains specific exceptions where an actual contract or proposed contract does not apply. This includes any type of contract that includes any form or type of reinsurance. Also included as an exception is an insurance contract that has been signed by a health benefits organization while performing its natural course of business. The act also does not apply to contracts that involve joint insurers.
  
  

Intermediaries

• An insurance intermediary as defined by the act cannot enter into a contract of insurance as an agent of an insurance company unless authorized in writing by the insurer. This act also has specific penalties that apply for insurance intermediaries that violate the act. Penalties include a fine of $1,000 or imprisonment for 6 months per individual person or a $5,000 fine for a corporation.
  
  

Insurer Liability

• An insurance company is responsible for the actions of an agent that occur with an insured. This includes the conduct of an agent and if they acted in good faith within the scope of their authority. An agent or insurer that violates the act will suffer penalties. These can include a fine of $1,000 or imprisonment for 6 months if an individual violates the act. A corporation that violates the act will face a violation of $5,000.
  
  

Repeal of Act

• The Financial Services Reform Act of 2001 (see Resources) effectively repealed the Insurance Agents and Brokers Act of 1984. This act introduced a single licensing requirement that applies to a product issuer or insurance company. This includes insurance companies that provide life insurance and general insurance policies. Product issuers can also include a bank or other institution that operates as a financial institution and sells products to their clients.