Agent Or Broker? Tick The Right Option

In most cases, insurance policies are sold either by an insurance agent (adviser) or an insurance broker. Insurance agents represent a particular insurance company and their objective is to sell a product offered by the company they represent. Hence, the normal tendency of an insurance agent is to sell you a product that is available in the company’s product offerings. Contrary to this, an insurance broker has tie-ups with several insurance companies and hence all the offerings of these various companies are sold by the insurance broker. Hence, by approaching an insurance broker, you as a client can get options from different companies and according to your need, can buy a suitable product.
Insurance brokers can be of three types — reinsurance brokers, direct brokers, and composite brokers. A reinsurance broker is engaged solely in the reinsurance business. A direct broker on the other hand offers products of both life and non-life insurance companies. Composite brokers provide both kinds of services — direct as well as reinsurance business. On similar lines, an insurance agent can either be a simple life insurance agent, non-life insurance agent or a composite insurance agent. A life insurance agent can sell products offered by a life insurance company. A non-life insurance agent sells products of a general insurance company.
A composite agent, however, can sell insurance products of both —life insurance and non-life insurance. Hence, by choosing a composite agent you can avoid the hassle of dealing with two different agents for life and non-life insurance. But even then a composite agent can offer products of only two companies — one life and one non-life insurance company. As opposed to this, an insurance broker can offer you a variety of products from several companies from both the life and non-life space.
Service is another criterion when it comes to buying insurance. An agent is a one-man show. The same agent sells and then services the client. Things are however much more organised in case of an insurance broker. Generally, there are specialised groups of people for giving different sorts of services. For instance, one area where clients face the biggest problem is in the settlement of claims. Due to the large size, a broker is better equipped for a faster claim settlement.
However, it can be a cumbersome job to shortlist a broker as there are a number of insurance brokers offering similar services. When choosing an insurance broker, one of the key points to consider is the value addition the broker brings to the table. Additionally, he should have contacts with the maximum number of insurance companies, research capability, and the network and logistics to find out a product that best suits the client’s need. Three important areas that merit consideration when it comes to firming up a broker are: [PAGE BREAK]

a) Dependability And Longetivity: Insurance (especially life) is a long-term product and may be for a period of as long as 50 years. Hence it is important to be sure that your broker is going to be around for long. Every new business has a risk associated with it,  the quantum of risk being much higher in the first three years. Hence, one should avoid an insurance broker having less than three years of business track record as one may face some difficulties in case the company does not survive.

b) What Type Of A Client Are You? The focus area of the company should be aligned with your objective. So, if you are an individual and your insurance broker is more focused towards corporate clients, service levels may be inadequate and you might get a raw deal.

c) How Big Is Your Broker? A broker with a larger business turnover will have more bargaining power with insurance companies. This is especially useful during claim settlement. A small insurance broker on the other hand may not enjoy similar attention from insurance companies. This is however not always true because a small agent may offer you better service as you could be his key client.