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Letters of Authority and Letters of Appointment

NIBA Guidance on Insurance Broker Authority to seek information from Insurer(s) Post appointment or as part of pre appointment quoting process.

Based on member enquiries and NIBA's discussions with the Insurance Council, NIBA has developed this guidance to assist members in confirming the consent of clients to seek information from insurers (or their agents) on the insurance held by either:

  • the insurance broker's client post appointment – refer to Letter of Appointment; or
  • a potential client as part of a quoting process – refer to Letter of Authority to Review and Quote.

There are a number of risks that can arise for insurance brokers in relation to the above which are explained in the guidance to each example letter.

The example letters are by way of general guidance only and are not compulsory. NIBA promotes their use by members where appropriate (as amended to take account of your relevant circumstances).

To obtain a quotation for a prospective client:

the broker uses the ‘Letter of Authority to Review and Quote’ (LARQ)

BACKGROUND TO THIS DOCUMENT

This document is designed to provide a suggested form of authority that clearly sets out the scope of the enquiring insurance broker's power to request information from insurers pre appointment. It may assist in avoiding confusion and disputes between insurance brokers, clients and insurers.

Key Broker Risks - If a quoting insurance broker represents the scope of their authority to insurers in a way that is broader than what the client believes it to be, the insurance broker runs the risk of an action being brought against it for misrepresentation and may also be seen to have breached its AFSL licensing obligations, amongst other things. Clarity on the scope of authority is crucial to avoid this risk.

Key Insurer Risks - From an insurer's perspective, an insurer runs the risk of breaching its privacy, confidentiality and AFSL licensing  obligations, amongst other things,  in passing information on the insured to an insurance broker that has not provided a written authority from the insured to do so. The insured can assert no such authority was provided and the insurer should not have passed the relevant information to the insurance broker, especially where the insurer is aware that the insured has an existing insurance broker.

In addition, it is crucial for the insurer to only pass to the quoting insurance broker the information it is authorised to provide. The notice is designed to assist in this regard and provide some form of certainty.

IMPORTANT NOTICE
Please note however that the above information (including templates) and this authority is provided by way of general guidance only and is not compulsory. It should not be relied on as legal advice. It does not cover everything that may be relevant to you and does not take into account your particular circumstances. You must ensure that you seek appropriate professional advice in relation to this issue as well as to the currency, accuracy and relevance of this material for you.

When appointed:

the broker will have a ‘Letter of Appointment’ (LOA)  completed.

BACKGROUND TO THIS DOCUMENT

This document is designed to provide a suggested form of authority that clearly sets out the scope of an appointed broker's power to request information from insurers post appointment. It may assist in avoiding confusion and disputes between insurance brokers, clients and insurers.

Key Broker Risks - If an insurance broker represents the scope of their authority to insurers in a way that is broader than what the client believes it to be, the insurance broker runs the risk of an action being brought against it for misrepresentation and may also be seen to have breached its AFSL licensing obligations and duty to the client, amongst other things. Clarity on the scope of authority is crucial to avoid this risk.

Key Insurer Risks - From an insurer's perspective, an insurer runs the risk of breaching its privacy, confidentiality and AFSL licensing  obligations, amongst other things,  in passing information on the insured to an insurance broker that has not provided a written authority from the insured to do so. The insured can assert no such authority was provided and the insurer should not have passed the relevant information to the insurance broker.

In addition, it is crucial for the insurer to only pass to the insurance broker the information it is authorised to provide. The notice is designed to assist in this regard and provide some form of certainty.

IMPORTANT NOTICE
Please note however that the above information (including templates) and this authority is provided by way of general guidance only and is not compulsory. It should not be relied on as legal advice. It does not cover everything that may be relevant to you and does not take into account your particular circumstances. You must ensure that you seek appropriate professional advice in relation to this issue as well as to the currency, accuracy and relevance of this material for you.

Procedure Guide

  1. LARQs and LOAs should be signed by a director, financial controller, or owner of the business*. Any letter not signed by one of the above is likely to be deemed insufficient by an insurer for the purpose unless further enquiry satisfies the authority of the person signing to act on behalf of the business.
  2. An LARQ/LOA should be printed on client letterhead. Any client who does not have a letterhead must acknowledge the fact as follows:
    “Whilst this Letter of Authority to Review and Quote/Letter of Appointment is not on any letterhead, I attest to its authenticity and intent in my capacity as [insert position]
  3. An LARQ/LOA is not likely to be acceptable to an insurer if written on a broker’s letterhead 
  4. An LARQ will be signed and dated and should also include a validity period. 
  5. In any event an LARQ is invalid if not presented to an insurer within 90 days of the date of issue. 
  6. An LOA must be signed and dated and should also include a validity period. 
  7. In any event an LOA is invalid if not presented to an insurer within 90 days of the date of issue. 
  8. An LARQ or LOA must be produced in all circumstances other than:
    1. Domestic insurances
    2. Where the NIBA member can produce other documented evidence that the client has approached the broker 
      1. requesting a review and quotation of specific insurances, or 
      2. confirming the appointment of the broker, and 
      3. the document is signed by a director, financial controller or owner of the business and contains clear evidence of the intended validity period.

The Template Examples

Letter of Authority to Review and Quote

Letter of Appointment

The terms ‘…director, financial controller or owner of the business’ are intended to include those in a similar position of authority i.e. an Executive Officer, Company Secretary, CEO/General Manager , Chief Financial Officer or Accountant or an Insurance/Risk Manager or Consultant employed by the client to manage an insurance tender.