The agent who is a family friend, a corporate agent with whom you may already have dealings... we saw the role they play in your insurance journey.
Enter the insurance broker, a relatively new entity in personal insurance in India.
The difference between an agent (including corporate agent) and a broker is that the former represents the company, but the latter represents the customer. He can represent every insurance company in India, if he wants to, and so, you can have different policies with different insurers, all purchased from and serviced by the same entity.
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Two decades ago, the insurance broker was confined to reinsurance, a business-to-business product for insurance companies to cover their risks and offered by firms in India and abroad.
After the insurance sector reforms in 1999 when the Insurance Regulatory and Development Authority (IRDA, as it was then named) came into being, direct insurance brokers were registered to help customers buy products of multiple insurers.
Their natural clients were large and medium business houses who needed sophisticated and high-value life and non-life insurance covers, tailored to their needs.
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Brokers could get them quotations from various insurance companies and negotiate premium rates and terms. They could also offer them risk management advice and claims consulting.
In recent years, brokers have started selling to individuals as well, offering health and motor policies. Aided by their physical and online presence, this appears a promising business opportunity for them.
As customers, you should know that direct insurance brokers can be registered to sell only life insurance or only non-life insurance or both. Brokers who are registered to sell direct insurance and reinsurance are called composite brokers. Any broking company should carry on an insurance broking business exclusively.
Checking authenticity
All registered brokers should have company names with the words ‘Insurance Broker,’ ‘Insurance Brokers’ or ‘Insurance Broking.’ You can also look up www.irdai.gov.in for a list of registered insurance brokers, numbering over 700 now, to check the authenticity of any entity you may be thinking of dealing with.
Regulations specify financial, qualification and compliance requirements for setting up a broking company, the functions of a broker and code of conduct which help protect the customer.
For example, a direct broker should have a share capital (or contribution if it is a limited liability partnership, LLP) of ₹75 lakh. This capital has to be from own funds of the promoters/ shareholders and the shares/contribution should not be encumbered by way of pledging and the like. The net worth at any point should not fall below ₹50 lakh. He should also maintain a deposit of ₹10 lakh with a scheduled bank that IRDAI has a lien on and should also have a professional indemnity insurance cover. The objective is to ensure the financial health of the intermediary for the benefit of all stakeholders.
An important point is an insurance broker cannot indulge in multi-level marketing. So, do be wary of anyone approaching you with such a proposal.
The direct insurance broker’s functions also include assisting in the negotiation of claims and maintaining proper records of claims. He should also help in opening of e-insurance accounts and in issuing e-insurance policies. Should you have a grievance, he should respond and resolve it within 14 days of receipt. Apart from care, diligence and confidentiality, your broker is also supposed to be insurer-neutral when he advises you, not favouring any particular firm but based on your requirement.
At the time of a claim, the code of conduct specifies the broker should forward information from you to the insurer and advise you on the latter’s decision and ‘give all reasonable assistance to the customer in pursuing a claim.’
Direct insurance brokers can also sell through the Internet (web aggregators), via the telephone (telemarketers) and through distance marketing. The regulations apply to all of them too and there are additional points on the code of conduct that applies to them.
(The writer is a business journalist specialising in insurance & corporate history)