Investment in the Insurance sector is of two Types:
- The life insurance sector, which consists of investment on the risk of life, for example, health insurance, pension plans, savings plan.
- Non-life insurance sector which consists of investment over non-living items like property insurance, car insurance, bike insurance, insurance on natural calamity, gold insurance and even insurance of electronic items like a mobile phone.
This multiple kind of investment plans are needed to be brought in the notice of the general public and have to create awareness regarding the benefits of taking up the insurance policies and this is done by the insurance broker. This insurance broker acts as an intermediate between the clients and insurance companies. They gain in-depth knowledge of the insurance market and the risk involving into investment and accordingly, they suggest the clients with best policies. The insurance broker provides expert advice regarding the terms and conditions of the policies and also give interesting information about the discounts on buying those policies.
An insurance broker is a term given under the Insurance Brokers (Registration) Act 1977 which was designed to prevent the brokerage practices of firms. Insurance brokerage is largely associated with general insurance (car, house, etc.) rather than life insurance, although some brokers continued to provide investment and life insurance brokerage until the onset of more onerous regulation in 2001. This further resulted in splitting into two groups:
- General insurance intermediaries/brokers
- Independent financial advisers (IFAs) for life insurance, investments, and pensions.
- Retail insurance broker arranges policies for individuals and companies and deals directly with them. Policies for an individual includes travel, motor, pet cover, house. Policies for companies cover damage to property and business disruption. They also deal with employer’s liability and products liability insurance.
- Commercial insurance brokers usually deal with complex and high-value insurance coverage like marine, aviation, oil, and gas.
How are insurance brokers different from Agents:
There is no defined differentiation between the two words but an insurance agent is an insurance company’s representative by way of agent-principal legal custom. The agents primarily associate with the insurance carrier, not the insurance buyer. An insurance broker generally has no educational qualification or training’s on insurance carriers and works on general practices in perfecting business transactions with insurance carriers. This can have a significant beneficial impact on insurance negotiations obtained through a broker (vs. those obtained from an agent). Whereas the insurance broker is a dignified insurance specialist, who uses all his knowledge to understand the market risk factors and all the policies to advises customers which are best suitable.
The term insurance producer generally encompasses both an insurance agent and an insurance broker.
Insurance Brokers job Activity:
An insurance broker’s job tasks are to
- Acquire information on the needs of clients.
- Creating and maintaining a healthy relationship with all clients.
- Notifying clients about the renewal dates of policies.
- To ensure clients understand the terms and the extent of the cover provided in line with industry regulations.
- Administrative tasks such as paperwork and maintaining detailed records.
- Marketing of existing policies and acquiring new clients
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