27Debts of broker in relation to premiums etc.

##### 27 Debts of broker in relation to premiums etc. (1) Where: (a) money is received by a registered insurance broker from, or on behalf of, an insured or intending insured, or from another registered insurance broker on behalf of an insured or intending insured, as a premium or an instalment of a premium in connection with a contract of insurance or a proposed contract of insurance; (b) the risk, or a part of the risk, to which the contract or proposed contract relates is accepted by or on behalf of an insurer; and (c) the broker who so received the money is informed of, or otherwise ascertains, the amount of the premium or instalment to be paid; the broker who so received the money shall pay, in accordance with subsection (2), to the insurer by whom or on whose behalf the risk, or a part of the risk, to which the contract or proposed contract relates is accepted an amount equal to so much of the money as does not exceed the amount of the premium or instalment to be paid. (2) An amount payable by a registered insurance broker to an insurer under subsection (1) shall be paid: (a) subject to paragraph (b), within the period (in this section referred to as the relevant period) of 90 days after the day on which the cover provided by the insurer under the contract commences to have effect or the first day of the period to which the instalment relates, as the case may be; or (b) if it is not practicable for the broker to pay the amount within the relevant period—as soon after the expiration of that period as it is reasonably practicable for the broker to do so. (3) Where the amount of the premium, or of an instalment of the premium, payable in respect of a contract of insurance has not been received by a registered insurance broker at the expiration of the relevant period, the broker, unless the broker receives the amount before notifying the insurer in accordance with this subsection, shall notify the insurer in writing, within 7 days after the day on which the relevant period expired, that the broker has not received the amount. (4) Where: (a) money is received by a registered insurance broker from, or on behalf of, an insured or intending insured, or from another registered insurance broker on behalf of an insured or intending insured, as a premium or an instalment of a premium in connection with a contract of insurance or a proposed contract of insurance; (b) the risk, or a part of the risk, to which the contract or proposed contract relates is accepted by or on behalf of an insurer; and (c) the broker who so received the money has not been informed of, and has not otherwise ascertained, the amount of the premium or instalment to be paid; the broker who so received the money shall pay, to the insurer by whom or on whose behalf the risk, or a part of the risk, to which the contract or proposed contract relates is accepted, within the relevant period, or if it is not practicable for the broker to make the payment within the relevant period, as soon after the expiration of that period as it is reasonably practicable for the broker to do so: (d) in respect of a new contract of insurance, an amount not less than: (i) the amount of the money so received; or (ii) 75% of the amount fairly estimated by the broker to be the premium or instalment, as the case may be, that is to be paid; whichever is the smaller amount; or (e) in respect of a renewal of a contract of insurance, an amount not less than: (i) the amount of the money so received; or (ii) 75% of the previous year’s premium for the risk or of the last instalment of that year’s premium, as the case may be; whichever is the smaller amount. (5) Where: (a) the risk, or a part of the risk, to which a contract of insurance or a proposed contract of insurance relates is accepted by or on behalf of an insurer; (b) the contract of insurance or proposed contract of insurance has been, or is being, arranged or effected by a registered insurance broker, either directly or through another registered insurance broker; and (c) the first‑mentioned broker has not been informed of, and has not otherwise ascertained, the amount of a premium or of an instalment of a premium to be paid in connection with the contract or proposed contract; that broker shall, unless the broker is informed of, or otherwise ascertains, the amount of the premium or instalment to be paid before notifying the insurer in accordance with this subsection, notify the insurer in writing, within 10 days after the day on which the risk, or that part of the risk, was so accepted, that the risk, or that part of the risk, has been so accepted but that the broker does not know the amount of the premium or instalment to be paid. (6) Nothing in the foregoing provisions of this section prevents: (a) an insurer from making a contract or arrangement with an insurance broker providing for the broker to pay an amount to the insurer before the time by which the broker is required by the provision concerned to pay that amount to the insurer; (b) an insurer from authorizing an insurance broker in writing to pay on behalf of the insurer, out of the money received by the broker as a premium or instalment of a premium in respect of a contract of insurance arranged with the insurer, any charges required by law to be paid by the insurer in respect of the contract; or (c) an insurance broker from exercising any legal right available to the broker to deduct from any moneys payable by the broker to the insurer any remuneration payable by the insurer to the broker in relation to a contract of insurance. (7) If the risk, or a part of the risk, to which a contract or proposed contract referred to in subsection (1) or (4) relates is accepted on behalf of an insurer by an insurance intermediary other than the registered insurance broker who received the moneys from or on behalf of the insured or intending insured, then, for the purposes only of the application of the subsection concerned to the broker, payment of the premium, or part of the premium, as the case may be, by the broker to the intermediary shall be taken to constitute payment of the premium or part of the premium by the broker to the insurer. (8) Where a registered insurance broker is required to notify an insurer in accordance with subsection (3) or (5) and an insurance intermediary other than the broker has accepted the risk, or a part of the risk, to which the contract or proposed contract relates on behalf of the insurer, then, for the purposes only of the application of the subsection concerned to the broker, notification by the broker to the intermediary shall be taken to constitute notification by the broker to the insurer. (9) If: (a) a registered insurance broker receives money from, or on behalf of, an insured or intending insured in connection with a contract of insurance or proposed contract of insurance; and (b) at the end of 30 days after the day on which the money was received, the risk, or a part of the risk, to which the contract or proposed contract relates has not been accepted; subsection (9A) or (9B) applies to the broker. (9A) If the risk to which the contract or proposed contract relates has not been accepted, the broker must, within 7 days after the end of the 30 day period: (a) give notice in the approved form (if any) to the insured or intending insured that the risk has not been accepted; and (b) return the money to the insured or intending insured. (9B) If a part of the risk to which the contract or proposed contract relates has not been accepted, the broker must, within 7 days after the end of the 30 day period: (a) give notice in the approved form (if any) to the insured or intending insured of the extent to which the risk has not been accepted; and (b) return that part of the money that relates to the part of the risk that has not been accepted to the insured or intending insured. (10) Where a registered insurance broker receives money from, or on behalf of, an insurer for payment to, or on behalf of, an insured, the broker shall pay an amount equal to the money to, or on behalf of, the insured: (a) subject to paragraph (b), within 7 days after the day on which the broker received the money; or (b) if it is not practicable for the broker to pay the amount within that period—as soon after the expiration of that period as it is reasonably practicable for the broker to pay the amount. (11) Nothing in subsection (10) prevents: (a) an insured from making a contract or arrangement with a registered insurance broker providing for the broker to pay an amount referred to in that subsection to or on behalf of the insured before the time by which the broker is required by that subsection to pay that amount to or on behalf of the insured; or (b) an insurance broker from exercising any legal right available to the broker to deduct from an amount payable by the broker to the insured any money payable by the insured to the broker in connection with a contract of insurance. (12) An act done in contravention of subsection (1), (2), (3), (4), (5), (9) or (10) constitutes an offence against the subsection concerned notwithstanding that it was done with the consent of the insurer or of the insured or intending insured, as the case may be. Penalty: Imprisonment for 2 years. > Note: Subsection 4B(2) of the Crimes Act 1914 allows a court to impose an appropriate fine instead of, or in addition to, a term of imprisonment. If a body corporate is convicted of an offence, subsection 4B(3) of that Act allows a court to impose a fine of an amount that is not greater than 5 times the maximum fine that could be imposed by a court on an individual convicted of the same offence. (13) Where: (a) under subsection (1), (2), (3), (4) or (5), a broker is required to pay an amount to, or to notify, an insurer; and (b) under the contract or proposed contract of insurance concerned the insurer is an underwriting member of Lloyd’s; it is sufficient compliance with the subsection if the broker pays the amount to, or notifies, as the case may be, the Lloyd’s broker concerned. (14) In subsection (13), Lloyd’s has the same meaning as in the Insurance Act 1973.