Insurance Brokers are people who advise prospective policyholders on their insurance needs. They also negotiate insurance contracts on their behalf with insurers in return for a fee or commission. They usually act as middlemen between corporate entities that want to insure their property or other interests. And as well as the insurance companies that underwrite these risks. He works for the policyholders by distributing the products of different insurance companies and he is independent.
Similarly, they equally act as intermediaries who solicit, negotiate or sell insurance policies on behalf of Clients for commission/compensation.
They are persons who are licensed to sell Insurance Policies to people. And work with many insurance companies with various insurance products to sell to policyholders. As opposed to an insurance agent, who offers the products of only one company, an insurance broker is able to compare numerous products of the companies he works with.
Some insurance companies work with insurance agents only; in other words, their products are not available through the brokers.
Furthermore, a broker can also go a step further to ascertain which insurance company is best for you if you have any specific health issues, by talking with the various insurers.
Insurance broker can often get better rates on insurance premiums. For example, life insurance policies are often technical and little-known aspects. Life insurance broker can navigate through them and often get lower rate than you would get on your own. This is unlike Home insurance and auto insurance policies which you can often get directly from the insurer.
When working with an insurance broker, it is important to understand how many different providers a broker works with as well as the insurance products he/she can offer
Types of insurance brokers
They are two types of insurance brokers and they are
- Retail insurance brokers and 2. Commercial insurance brokers.
Retail insurance brokers act on behalf of companies and individuals that sell home, auto, health, and travel insurance coverage while commercial insurance brokers deal directly with industries like oil and gas and sell more complicated policies like equipment damage or failure.
What is the difference between agents and brokers?
While both agents and brokers act as intermediaries between insurance buyers and the insurance market, the major difference between the two is that Agents represent insurers, that is each of the different insurance companies they work with, while brokers represents their Clients , that is, the insurance buyer. They are professionals who act as intermediaries between the insurance company and the prospective policyholder by helping him to find the best insurance policy that suits his needs. Their job is to represent the policyholder and not the insurer.
However, agents can either be a captive agent or an independent agent. While captive agents represents a single insurance company, independent agents represents many insurance companies
Advantages of an insurance brokers
- Insurance brokers specialize in insurance intermediary. And it is their role to understand your needs, identify any potential insurance risks and find the best available cover for you. Remember your broker works for you and not the insurance company.
- Professional advice on products and services available to you. This is because, insurance brokers are not under any obligation to sell one insurance product, as a result of this, they will provide you with numerous options to choose from and thereby finding the most favorable and cost effective option for you.
- Advice on historical data for your industry.
- Access to a range of different policies. The insurance broker knows about the rates and terms offered by several insurance companies.
- Assistance when making a claim. Making claims are easier with insurance brokers as they assist the policyholder in making the claim from the insurance provider
- An insurance broker can save you time, money and worry.
- The insurance brokers act in the client’s best interest, this is because, the broker represents the policyholder and not the insurance company. They equally provide you with full disclosure of their commissions before hand
Disadvantages of an insurance brokers
- Dealing directly with insurance companies may save you money. However without entirely understanding the terms and conditions of your insurance policy, you may not know if you have the right cover.
- Dealing with brokers may well turn out to be an extremely expensive exercise. This is because, brokers are generally paid by commission, so this may affect the policies they recommend to you. They may recommend a policy with higher premiums so as to get higher commissions
- Lack of understanding of terms, conditions and policy exclusions. Sometimes, the brokers may not fully understand the terms of policies they offer and there is often a disappointment when a claim arises and the insurance company doesn’t respond in the way customers believed it should.
- Similarly, the quality of services varies per broker, not every broker offers the same quality of services. This may force you to shop around looking for the best broker in town making you spend money unnecessarily
