No clear consensus around advice, information and underinsurance
Brokers have opposing views around the provision of information or advice in relation to underinsurance, according to the findings of a recent poll by Insuranceshortfall.com.
More than one hundred and thirty brokers provided us with their comments after we asked the following question on our website in July 2017: If a broker was to suggest to a client they have their building sums insured professionally assessed by a ‘Regulated by RICS’ provider such as ourselves, is the broker providing INFORMATION or ADVICE?
We asked the question as there appears to be some confusion around brokers’ obligations to clients in connection with underinsurance. Around 40% of brokers interpreted the scenario as providing INFORMATION, while 60% said this was providing ADVICE.
Here is just a sample of the range of comments we received from brokers:
“This is a recommendation and not an instruction. Informing the client that they ought to use a service provider regulated by RICS is merely offering information that would benefit the client. I would not see this as provision of advice.”
“I see this as information. The danger in calling it advice is that if something goes wrong then the broker could be held liable."
“Clearly it's not as simple as the terms above, things are never as black or white, unfortunately. Even defining the two words is not something we would all agree on. I think the actual answer is both! Whatever the result of the poll, it is a good idea to have sums insured professionally assessed, ideally by a 'regulated by RICS' provider.”
“In my opinion it is good advice to ensure that the sums insured are correct and they don't suffer due to underinsurance. Not recommending could be seen as a failure of our professional duty.”
“It’s irrelevant whether it is viewed as information or advice. It should be the professional responsibility of any insurance broker to let the client know of their responsibilities and how they can achieve them.”
Trevor Smith, Director of Rebuild Cost Assessment Ltd, the company behind Insuranceshortfall.com commented: “The overall findings of our poll are really interesting as it would seem brokers fall into three distinct camps.
“A small number are concerned about even raising the issue of underinsurance with their clients as they fear this may be interpreted as providing ‘advice’ and put them at risk in some way. Others don’t perceive any risk as their view is they are only providing ‘information’. The final group, a small majority, believe they are offering what could be termed ‘advice’ but that this is positive as it ensures they are meeting their fiduciary duty to act in good faith at all times.
“Clearly there is a need for some clarity around this issue, particularly when it comes to ‘treating customers fairly’. As such, we will be talking to a number of parties over the coming months about this issue and passing on our findings.”
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