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Agent or
broker? |
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There is a technical difference between
an agent and a broker. Agents are authorized to sell only the products of the
companies they represent. Brokers represent the insured and works on behalf of
the client (insured). They maintain relationships with several insurance
companies and have an overall view of the entire spectrum of insurance policies
and services.
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How insurance brokers
balance the interests of insurance companies and customers |
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In law the insurance broker is the agent
of the insured, and as such owes the insured careful and prompt attention to
instructions, expert advice and competitive pricing of products. |
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The law also makes brokers
the agent of the insurer for certain duties, like collection of premiums and
the passing on of relevant information obtained from the client.
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| The services an
insurance broker performs |
| A broker’s services
don’t end with the sale of the policy; they start with the sale of a
policy. These services include: |
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| • Pre-sale due
diligence that includes assessing needs, obtaining quotes and making
recommendations on the best coverage. Depending on the property being insured,
this might include performing an insurance valuation, taking photographs or
obtaining an inspection report;
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| • Revising policies at
renewal or mid-term if required;
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| • Ensuring claims are
fairly handled; brokers make a positive difference to the insured’s
payout from the insurer in a substantial number of claims;
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| • Heading off
potential claims or coverage problems by being hands-on with the customer;
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| • Being on the alert
for material changes that will affect the validity of policies, and
recommending appropriate changes;
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| • Providing
administrative follow-up, such as mortgagee changes, certificates of insurance,
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| • Being available to
insureds in the event of loss – especially large, catastrophic loss
– on a 24/7 basis.
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| How insurance brokerages
are paid for their services |
| • Insurance brokerages
get paid a commission by the insurance companies with whom the business is
placed finally. Brokers don’t set their commission levels. Out of that
commission brokers pay for their office expenses and wages for employees.
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| They don’t add more to
the cost of policy than when insurance companies sell direct to consumers.
There is a procurement cost for any business and if insurers don’t pay
broker commissions, they incur it in paying their sales staff and keeping their
infrastructure which will invariably go into the costing of the product
directly advertising to consumers than brokerages typically do.
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| Insurance brokers are
active in their communities |
| Insurance surveys have shown
that nearly all member brokerage principals are involved in community
activities, mainly in business groups and amateur sports. Brokers often play a
leadership role, serving as chair or director.
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| Brokers are among the first
to respond in emergencies. Many brokers, especially in rural communities, keep
fire-fighting equipment, diving equipment and other emergency supplies in their
offices.
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| Brokers are risk management
experts and have a wealth of information available on safety and security at
home, at work and on the road. |
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