Which of the following best describes fiduciary duty in insurance?

Fiduciary duty in the context of insurance refers to the legal and ethical obligation that an agent or broker has to act in the best interest of their clients. This duty encompasses the responsibility to prioritize the client’s interests above their own, which is fundamental in trust-based relationships such as that between an insurance advisor and their clients.

When the focus is on taking action based on the client’s interests, it implies that an advisor should provide recommendations and guidance that truly serve the needs and goals of the client, even if it may not generate the highest commission for the advisor. This principle is critical in fostering trust and ensuring that clients receive advice that is tailored to their unique situations and needs.

The other options, while related to the practices in the insurance industry, do not accurately capture the essence of fiduciary duty. Generating commissions, informing clients about products, and disclosing commission structures are important aspects of an insurance professional’s role, but they do not fully encapsulate the depth of fiduciary responsibility, which emphasizes the need to safeguard the client's best interests consistently and transparently.