A broker is the legal agent of the insured for most purposes, while an agent is the legal representative of the insurer. This single distinction drives most of the conduct rules tested on the exam.
- A broker is registered under RIBA. The broker shops the market on the client's behalf, owes the client a fiduciary duty (loyalty, full disclosure, and independent advice), and is paid by commission from the insurer, by fee from the client, or by a combination of the two.
- An agent acts for one or a small panel of insurers, captive or multi-line, and represents those insurers' interests. Life agents in Ontario are licensed by FSRA, not by RIBO.
- The broker has two-sided obligations: a fiduciary duty to the client and contractual obligations to insurers whose products the broker sells (e.g., binding authority limits, accurate transmission of underwriting information, premium collection).
A broker who steers a client toward a higher-commission product when a better-suited cheaper product is available violates the fiduciary duty. This is the conduct the RIBO Code of Conduct's "best interest" obligations are designed to capture.
Common mistake: thinking the broker works for the insurer because the insurer pays the commission. The flow of money does not determine the agency relationship. RIBA does. The broker is the insured's agent regardless of which side cuts the cheque.
⚠️ Trap: Examiners use scenarios where a broker takes an instruction from the insurer (e.g., declining a renewal) that conflicts with the client's interest. The fiduciary duty runs to the insured, not the insurer, even when the broker is paid by the insurer.
Recall: To whom does a broker legally owe a fiduciary duty? What is the structural difference between a broker and an agent?