What action must a broker take if the director disapproves a placement of insurance?

When a broker receives a disapproval of an insurance placement from the director, the appropriate course of action is to refund the policy fee to the policyholder. This is crucial because if the insurance placement is not approved, the broker cannot provide the coverage that the insured was seeking, and any fees collected in relation to that policy should be returned to maintain transparency and trust in the transaction.

Maintaining ethical standards and customer satisfaction hinges on the broker’s responsibility to act fairly and justly in such situations. Refunds ensure that the insured does not incur costs for a service that cannot be fulfilled. In many jurisdictions, failing to refund such fees can lead to reputational damage, potential legal issues, and regulatory scrutiny for the broker.

While notifying the insured of the decision is also important, the immediate financial responsibility typically lies in refunding fees. Other choices, such as charging a nominal fee for administrative costs or reapplying with a different insurer, do not directly address the obligation to the policyholder after a disapproval is issued.