# 2. Demands and needs: duties and consequences of breach

URL: https://insurancelawestonia.ee/insurance-law-cpd/demands-and-needs/
Author: Dr Olavi-Jüri Luik, Partner, Head of Insurance Law, attorney at law (Advokaadibüroo WIDEN OÜ)
Last updated: 2026-11-11

> CPD module 2: identifying the customer's demands and needs, the roles of brokers and agents, and the consequences of deficient advice.

Module 2 of 20 · Theme: Foundations and distribution · Level: Foundation / specialist · Suggested study time: 120 minutes 

**In short.** This module deals with the distributor's duty to identify the customer's insurable interest and requirements, and with the consequences where this is not done or is done inadequately.

## Learning outcomes

After completing this module you will be able to:

- distinguish the duties of the insurer, the insurance agent and the insurance broker in identifying needs;
- explain why a particular cover does or does not meet the customer's needs;
- analyse breach of the advice duty, loss and causation.

## Key points

### Needs before product

Before concluding a contract the insurer must, on the basis of the information provided by the customer, identify the customer's insurable interest and requirements, recommend from its own contracts the one that best meets them and give adequate explanations (KindlTS § 221(1)). This does not apply to contracts concluded through a broker or to the contracts listed in VÕS § 427(2) and (3) (KindlTS § 221(2)). Filling in a questionnaire is no substitute for a real comparison of the customer's business, the cover, the exclusions and the deductible.

### Brokers and agents have different roles

An insurance broker must take all measures to ensure the best protection of the customer's interests (KindlTS § 184(1)); the broker informs the customer that it distributes contracts on the basis of an impartial analysis (§ 192(1)(2)) and identifies the customer's insurable interest and requirements before the contract is concluded (§ 192(2)(1)). An insurance agent acts in the interests of, or represents, the insurer and may act for several insurers only if the contracts distributed are not competing (§ 198(1)).

### Breach does not automatically mean full compensation

Where the duty is breached the customer may claim damages (VÕS § 115(1)), but loss and causation must also be proved (§ 127(4)). The actual situation must be compared with the situation that would have existed with proper advice (§ 127(1)): was suitable cover available on the market, at what price, and would the customer have taken it? An uninsured loss does not automatically equal the adviser's liability.

## Read before the quiz

Articles on this site:

- [Insurance distribution in Estonia: IDD rules for brokers, agents](https://insurancelawestonia.ee/guides/insurance-distribution-idd-estonia)
- [Avoiding coverage gaps in a cyber, crime and D&O programme](https://insurancelawestonia.ee/specialty-lines/handbook/coverage-gaps)
- [Reviewing policy wordings under Estonian law](https://insurancelawestonia.ee/guides/policy-wording-review-estonian-law)

Legal sources:

- [KindlTS §§ 184, 192, 198, 221](https://www.riigiteataja.ee/akt/KindlTS)
- [VÕS §§ 115, 127, 427](https://www.riigiteataja.ee/akt/V%C3%95S)
- [Insurance Distribution Directive (EU) 2016/97, Art 20](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32016L0097)

## Practical case

*Write down your own answer before opening the suggested approach.*

The main business risk of an online shop is an outage of its cloud service. The broker offers business interruption cover that is triggered only by insured physical damage. After a long cloud outage without any physical damage the insurer declines the claim. Draft five questions the broker should have asked and an outline for assessing the broker's liability.

Suggested approach

Questions: which IT and cloud services drive turnover; how long can an outage last before loss arises; what contracts exist with service providers and how is their liability limited; what insurance is already in place (cyber, business interruption); what deductible and waiting period are acceptable. Liability outline: duty (KindlTS § 184(1), § 192(2)(1)); breach (the need was not identified, or it was not explained that cover requires physical damage); loss (the uncompensated interruption loss); causation (was suitable cover, such as non-damage business interruption or a cyber extension, available at a reasonable price, and would the customer have bought it). A fall in turnover is not automatically recoverable loss.

## Self-check quiz

Answer the three questions and press "Check answers". An explanation is shown for each question.

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