A direct broker can offer you a host of insurance and financial products and services to consider. Insurance brokers assume higher responsibilities to help you choose the best insurance and financial product that fits your needs.
Knowing the difference between an insurance broker and an insurance agent is the key to understanding how you can make the best use of services offered by them for your insurance and financial requirements.
The type and quality of the insurer, cost of insurance policy, and most importantly, the assistance to make an informed decision, depends on the intermediary from whom you are making a purchase.
It is critical to understand what exactly insurance brokers and agents do, so that you can make an informed decision while buying an insurance plan.
Who is an insurance agent?
An independent insurance sales agent typically sells you a variety of financial products such as life insurance, health insurance, property insurance, and so on. An insurance agent is a person who is an intermediary between the insurer and the person availing the insurance. Insurance agents offer you products available with the insurance company with whom they are associated. They are generally responsible for helping you in filling the proposal forms, paperwork, and paying insurance premiums. An insurance agent can represent up to one life insurance, one general insurance, and one health insurance company and can give you in-depth information about the same.
Who is an insurance broker?
An insurance broker sells, negotiates, and solicits insurance for compensation. An insurance broker works independently. A direct broker can offer you a host of insurance and financial products and services to consider from. Insurance brokers assume higher responsibilities to help you choose the best insurance and financial product that fits your needs. Insurance brokers help you choose the most suitable insurance company among several insurance service providers and products. They give you information about the range of insurance companies and help you compare their products and services.
IRDAI has permitted three types of insurance brokers to operate in India.
1. Direct broker (Between the end-users and primary insurers only)
2. Re-insurance broker (Between primary insurers and re-insurers only)
3. Composite broker (Combination of both)
As we speak about a direct insurance broker, they are in a strategically advantageous position of offering insurance plans to the end customers. Direct brokers represent the clients and not the insurer.
A direct insurance broker acts on behalf of their clients and advises in the interest of their client.
Agent commission in insurance
Agent commission in the insurance sector is based entirely on business produced (policies sold and renewed). The agent commission in insurance is based on the type of insurance policy sold.
In 2017, IRDAI had revised the structure of agent commission in the insurance sector. In the insurance sector, there are many categories of products: life insurance (single, limited and regular premium), health insurance, vehicle insurance, and many more. The structure of agent commission in insurance is different for all types of products.
How does agent commission in insurance affect your investment?
Buying insurance policy through an insurance agent involves commission and some other intermediate costs. This makes insurance plans more costly.
Which is better? Direct broker or insurance agent?
An insurance broker is an independent entity who partners with multiple insurance companies to sell their products. This means the broker has access to a wide range of products, coverage, and prices. Hence, they are not only able to find the best insurance solution, but they will also shop around and help you compare your options to get the best deal for each buck spent. A licensed insurance broker can provide you with guidance on all of your insurance needs. And the best part is, they won’t charge any fees for their expertise and services.
Buying insurance from a broker, especially an online broker, would help you to interact with the insurance company immediately. You get first-hand information about the insurance product and the company. You can compare policy quotes, features, and check policy reviews online in just a matter of a few clicks.
Why choose an insurance broker?
Insurance brokers have access to a vast number of insurance products, and as they deal with several insurance companies directly, they have access to products that are not available with insurance agents.
Some insurance policies can be complicated, and an insurance broker can help you understand them thoroughly. The broker can also help you identify what level of cover you need to make sure you are adequately protected.
An insurance broker can help you find a great deal as they have in-depth understanding of the insurance market while also negotiating premiums on your behalf. Moreover, a broker will explain the insurance product to you and guide you if there is any special situation you need to know about.
In the case of a policy claim, your broker will assist you through the procedure and may also communicate with the insurer on your behalf, if required.
The significant difference between an insurance agent and broker is that an agent only represents one insurance company. This can be a drawback for you as a customer. The insurance agent may not have the best suitable product for you to meet your insurance needs. Moreover, you won’t be having a wide range of insurance products to choose from as against a broker does. This limits your coverage options and cost points.
Trust and reliability are two crucial factors for you to consider when deciding which insurance plan you should choose. The very first step in trust is knowledge. Knowing the difference between an insurance broker and insurance agent can help you make the right choice. And since you will be ensuring your life, health or some pretty valuable asset are in safe hands, learning as much as possible before you make a choice is always your best bet.