This is the most common question asked by anyone who has chosen (or is considering choosing) to employ the services of an insurance broker. After all, if an entire market institution – insurance brokers – exists, then there must be a clear need for their services. If you approach the insurer (a representative of the insurance company) about this, he will most likely tell you that the broker is an extra link, that he is only a middleman who is not liable for anything, and that it is preferable to insure directly. We wonder why?
We will try to answer briefly and to the point.
Firstly, insurance is one of the most complicated financial services, with a significant number of conditions, clauses, and exceptions that are confusing on your own.
Secondly, when you get insurance coverage, you’re only getting started. After all, purchasing a policy isn’t the goal; the goal is to collect insurance coverage in the case of a loss, which is far more difficult.
Any insurance company will be happy to ensure you and collect the premiums due to it but will be hesitant to part with the money when it comes to providing compensation. These are the industry’s features!
We lead you to the idea that you require a personal assistant and insurance consultant to handle all of your concerns about competent insurance preparation, selecting the best insurance coverage and a dependable insurance company, and assisting you in resolving disputes with the insurance company in the event of an insured event.
An insurance broker is such a helper, your insurance market representative!
Why wouldn’t an insurance agent be a good fit for this position?
Because he is a representative of a certain insurance company by virtue of his legal standing, he cannot represent your interests. That’s not to mention the insurance company. Perhaps this is why insurers are scared of dealing with insurance brokers being well in all parts of the industry and can debate on an equal footing! Isn’t it simpler to “deal” with a client who hasn’t had much experience?
However, based on our logic, one may conclude that all insurance firms and their representatives are out to deceive a gullible customer and that all brokers are “robin hoods” looking out for his best interests. Not at all!
First, the problem is not that some people are good and others are bad. The idea is that an insurance broker’s legal standing is to safeguard the insured’s interests in the insurance market.
Secondly, there are several forms of insurance that don’t require the use of a broker. Typically, they are large, standardized insurance policies that are simple to understand and are marketed by insurance brokers or directly through insurance company offices.
The next question, which logically arises: “How much does a broker’s service cost?”
It is customary to answer this question: “The service of an insurance broker is free for the client!”
In truth, there isn’t any catch. The insurance rate of any insurance company includes the remuneration of an insurance agent or broker. It is this remuneration that is the cost of the broker’s services, i.e., by his commission.
As a result, another key conclusion emerges: the cost of insurance for a customer is unaffected by whether or not an insurance broker is present in the “insurer-policy holder” relationship scheme.