Overview The Multi State Cooperative Societies Act of 2002 was enacted to consolidate and amend...
An insurance broker represents the customer or the client before the insurance companies in order to secure the best possible deal for his/her client. The role of insurance broker is to assist his client in buying the best insurance policies to his clients from any company he finds to best serve the interests of his client, unlike an insurance agent who tries to sell products of the insurance companies on whose payroll they are listed.
This article discusses the quintessential role of Insurance brokers in Indian Insurance sector.
An insurance broker is a licensed professional who is a specialist in insurance and risk management. His primary responsibility is to represent his client/ customer in assisting their client in selecting the best possible insurance policy suitable to their needs. The insurance brokers provide expert advice to their clients on different insurance products offered by various insurance companies. The insurance brokers are paid a brokerage fee by the company whose insurance product the insurance brokers finally choose.
Makes the process of policy selection easier
Insurance policies are loaded with complicated legalese, which cannot be understood easily, and the layman finds it hard to comprehend the legal consequences of such terms and conditions of the policy. An insurance broker is a trained and licensed professional who can help his clients properly understand the possible legal implications of a policy and help the client make an informed decision with respect to a particular insurance product.
Negotiates better terms on behalf of the insurer
An insurance broker being representative of his client and not of the insurance company helps to negotiate better terms on behalf of his client and secure the best possible deal for him. Being licensed and trained in the insurance sector, they have a thorough understanding of the insurance market and thus help their clients in securing the best possible deal on their behalf.
Advisory on unexpected situations
An insurance broker better understands the loopholes and the possible pitfalls in an insurance policy and is therefore in a better position to make his client aware of the possible risks that can accrue to his organization or to himself because of such terms in the insurance policies.
Preparation of customized risk management plan
Insurance brokers are in a better position to prepare a customized insurance and risk management programme depending on the requirements and business needs of their clients. They help their clients in designing policies, negotiating better terms with insurance companies and placing the cover with the insurer.
Assistance in making a claim with the insurer
If the client needs to make a claim with the insurer on its policy, then the Insurance broker helps to make a claim and liaises with the insurer on behalf of his client. Further, brokers extend technical advice to their clients, which can be useful in making a claim.
Provides impartial advice
The fact that insurance brokers are not representatives of any insurance company allows them the leeway to offer insurer-neutral impartial advice to their clients. This, in turn, generates the trust of the client in the insurance broker and the overall insurance industry. Instead of favouring any particular insurer, the insurance broker suggests options to the clients on the basis of the business requirements and needs of the client. Such an environment of trust is very much important for the growth of the insurance industry and the development of the insurance sector as a whole in India.
Consultancy on a needs-based approach
Insurance brokers first make an assessment of the businesses of their clients, their financial position and possible risks that may accrue to their clients’ firms. On the basis of assessment of financial standing and risk capacity, the insurance broker provides a tailor-made programme and thereafter negotiates with the insurer to obtain the best possible deal for their client. Further, having vast experience in dealing with a number of insurance products, an insurance broker stands in a better position compared to their clients in getting favourable terms for their clients.
Discovers new markets for the insurance sector to venture in
Insurance brokers, with their experience in the insurance sector and the information, gathered about placements, premiums, and claims experience, are in a better position to design, innovate and produce insurance products for such fields where the insurance sector has not made any advancements. They have a pivotal role in developing new markets for the insurance sector which did not exist or do not have mature and competitive products. Insurance brokers’ knowledge of the insurance sector and how the market functions, coupled with the constantly expanding domestic and international markets, allows them to attract more direct investment in the insurance sector and related industries.
Catalyze dissemination of information
The fact that insurance brokers are not on the payroll of the insurance companies and do not represent their interests make them impartial, and their advice has weight in the insurance sector. Further, an unbiased approach allows them to educate and disseminate information about insurance products to the probable clients, helps in the proper development of the insurance sector and instills trust of the customer in the insurance sector.
It can be concluded from the above-mentioned information that the role of insurance brokers is quintessential for the development and growth of the insurance sector in India. They can also be considered as an extension of the clients while negotiating terms with the insurers. Their role in client education, dissemination of unbiased information and representation before the insurers makes them highly important for the growth of the insurance sector in India.
Read our Article: A Review on Insurance Broker Compliance under IRDAI