A Complete Guide to Insurance Brokers: All You Need to Know

Insurance Brokers: All You Need to Know

Eliminating intermediaries’ is the new buzz in market, but can you really do this especially while insuring yourself against individual or business risks? Some websites or apps can compare different policies and present you with options, but sometimes wisdom dawns late, especially when you need to make a claim. In this blog we will learn about Insurance Brokers, their role in representing you (the customer) while selling you the insurance products of different companies, how to find Insurance Brokers and the process of buying policies from them.

Who Is An Insurance Broker?

Insurance Broker is one who offers you personalized or customized solutions for your (customer) insurance needs. Insurance Brokers are licensed entities to offer you policies from multiple insurance companies and hence, unlike insurance agents, they represent the customers and not companies.

Insurance brokers also provide expert advice to customers regarding suitable insurance policies. They earn their brokerage from the company whose policy is selected/finalized by the customer. Insurance brokers also help customers in handling their claims.

Insurance Brokers are accountable to their customers. In case any customer faces any discrepancies in the services offered by the Insurance Broker, they can report it directly to the Insurance Regulatory and Development Authority of India (IRDA). If proven, IRDA cancels the license issued to the broker.

What Is Insurance Broking Company?

Insurance Broking Company or firm usually represent corporations in their deal with insurance companies. Insurance Broking Companies can offer best and lower prices to their corporate clients along with specialized and customized services.

Insurance Broking Company possess an insurance broking license. The chief officers of insurance broking companies are well-informed and expert professionals who are required to pass certain examinations.

Insurance Broker Vs Insurance Company

Since an Insurance Broker represents buyers of insurance products or services, they are meant to serve the interest of customers. Insurance Agents, on the other hand, are employed or trained by insurance companies and hence they may not provide with the best solution suited for the customer.

Hence in case of any violation of rules or a willful misconduct by the Insurance Broker, the Insurance Broking Company is held liable instead of Insurance company. Whereas, in case of Insurance Agents, the Insurance Company is directly responsible for any misinformation.

Categories of Insurance Broker

Insurance Brokers are categorized according to the insurance products they buy, sell or advise to their customers. There are three categories of insurance brokers.

Here are these 3 categories of insurance brokers:

1. Direct Broker

A direct broker is one who obtains insurance policies and assists customers with the policy buying procedure. The Direct Broker receives his fee and/or renumeration from the insurance company whose policy is opted by the customer.

Direct Brokers are further categorized as:

  • Direct Life Insurance Broker
  • Direct General (Non-Life) Insurance Broker
  • Direct Life and General Insurance Broker

2. Reinsurance Broker

A reinsurance broker, as the name suggests, is a broker who purchases reinsurance for his client by negotiating rates and selecting the best policy. He also provides claim consultancy, risk management services and other similar services permitted under IRDAI (Insurance Brokers) Regulations 2018. The insurer can be located in or outside India.

3. Composite Broker

Composite Insurance Brokers are licensed to provide services for both life and non-life insurance. The composite broker can also provide reinsurance services for their clients. The insurance companies and authorities are selective while issuing license of composite brokers.

How To Buy Policy Through Insurance Broker?

Purchasing the right insurance policy requires a lot of research on available market products which suits your needs. An insurance broker can save you these efforts and time.

  1. Check for the appropriate license issued by authorities to the broker
  2. Make sure you explain your needs and expectations from the desired insurance product
  3. Ask the broker to explain all terms and conditions, benefits of the policy, full facts of the products, scope of cover and exclusions in simple yet clear words
  4. Fill up the form yourself instead of signing on blank forms
  5. While making payments, insist on a duly signed receipt immediately
  6. After receipt of your policy, go through it and if you have any doubts about any terms, contact the broker immediately
  7. Also ask the broker about documents needed and procedures to be followed in case of making a claim.

Who Regulates and License Insurance Brokers in India?

Insurance Brokers are regulated and licensed by the Insurance Regulatory and Development Authority (IRDAI). Brokers can register on the website of IRDAI and apply for license in any one of the following categories – Direct (Life, Non-Life or Both), Composite and Reinsurance. Brokers are required to renew their licenses periodically (three years).

What Does Insurance Broker Do?

Insurance Brokers act as financial consultants to their clients. They advise their prospective clients – with full disclosures and transparency – and provide all material information related to the insurance product in order to enable the clients to take an informed decision. After the customer purchases the insurance product, the broker coordinates with the insurance company and the customer for policy and claim servicing.

Role of Insurance Brokers in Risk Management

Insurance Brokers, being consultants for their client’s insurance needs, need to gather information and understand the profile of the clients. Brokers negotiate with the insurance companies on behalf of their clients in order to come up with customized solutions including best terms and premium options for the clients.

 Insurance Brokers help mitigate risks by proposing risk management strategies based on the client profile. These risks may include credit risks, legal liabilities, accidents, natural disasters etc.

Benefits of Using an Insurance Broker

Here are a few benefits of having insurance broker:

  • Multiple insurance product options from different insurance companies
  • Factual comparison between insurance policies
  • Gets better offerings from insurance companies, hence results in premium costs saving
  • Claim assistance
  • Provides risk management assessment, strategy and assistance.
  • Saves time

You can also read this blog Top 12 Reasons: Why You Should Choose An Insurance Broker for more information on choosing the right Insurance Broker.

How Does Insurance Broker Cost?

Insurance Brokers earn commissions against selling insurance products. The maximum commission to be paid to Insurance Brokers is defined by the regulatory body IRDAI. The customer does not have to pay extra to the broker for buying the policies. Also, the Broker cannot charge additional fees in case of claim assistance.

How to Find an Insurance Broker?

The Insurance Regulatory and Development Authority of India (IRDAI) – the regulatory body – has a list of registered insurance brokers on their site. While selecting the Insurance Broker, you need to take several factors into consideration. For example, the expertise and industry exposure of the broker, the response time, claim settlement abilities etc. You can read more about it here How To Choose Insurance Broker In India?

Difference Between Insurance Agent and Broker

Insurance Agent represents a particular insurance company to sell its products to customers. They rely on the company for servicing demands of the customers and are less trained to understand the complex insurance products. Insurance agents are locally available and they can have a good personal bond with the customers.

An insurance broker represents the buyer and offers them policies from different companies. The broker has to have a bachelors degree and undergo 50 hours of training to get the broking license from the authorities. Besides marketing of insurance products, they also offer claims consultancy and risk management services to their customers.

How To Become An Insurance Broker In India

Insurance Brokers need to register with IRDAI and get license to solicit business from clients. Insurance Broker also requires to satisfy certain criteria such as undergoing adequate hours of theoretical and practical training recognized by Insurance Regulatory Authority of India (IRDAI) and passing the exam conducted by National Insurance Academy.

For more details please visit: How To Become An Insurance Broker In India

Summary

To summarize, Insurance Brokers are consultants for your insurance needs. They will research the best insurance products and advise you on choosing the best-suited option for you. Insurance Brokers are regulated and licensed by the regulatory body IRDAI. Make sure your broker is well-qualified and registered with the IRDAI.

Before making a decision on buying any insurance products, go through the terms and conditions, scope of cover and exclusion. Ask the insurance broker to disclose the full facts of the insurance product you are considering.

Related blog: Buying Insurance: Direct vs Brokers – What’s the Difference?

Considering the risks involved and its mitigation strategy, making the right decision on insurance products may seem to be a complex process. We can simplify it for you by offering solutions which are designed for you. Request a quote here from our contact us form.

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