The Relationship Between Insurers, Insureds And Insurance Brokers

Important High Court judgment provides clarification

In this article we look at the issues that arose and some issues for the market.

As reported in our e-alert on 6 January 2012, the Court of First Instance in Hong Kong has handed down an important judgment that upholds the long established commercial practice of an insurance broker acting as agent for the insured and not as agent for the insurer. The court's judgment in Hobbins v Royal Skandia Life Assurance Ltd & Anor, HCCL No.15 of 2010, also refers to the trade practice surrounding the payment of commissions by insurers to insurance brokers with respect to the business brokered on behalf of a client (the insured). The judgment finds that commissions paid by an insurer to an insurance broker are not illegal secret profits, unless in excess of what is normally paid in the insurance market.