What is a key fiduciary responsibility of a broker under the Insurance Act?

A key fiduciary responsibility of a broker under the Insurance Act is that unearned commissions must be held in trust for potential policy termination. This responsibility is essential because brokers act as intermediaries between clients and insurers, and they have a legal and ethical obligation to manage premiums and commissions transparently and fairly.

When a policy is issued, the broker receives a commission based on the premium paid. However, if a policy is canceled or terminated before its expiration, the broker may be required to return a portion of that commission to the insurer since the service for which the commission was earned has not been completed. Holding unearned commissions in trust ensures that the broker has the funds available to return to the insurer should the need arise, thus protecting both the client and the insurer's interests.

This fiduciary duty emphasizes the broker's responsibility to act in good faith and demonstrate integrity in handling financial transactions. By keeping unearned commissions in trust, the broker mitigates potential conflicts of interest and maintains proper financial management in their relationship with both clients and insurance companies.