Insurance Brokerage Firms

By: Eric Morris

Insurance brokerage firms play a key role in business development of both life insurance and general insurance companies. On one hand, they act as intermediary between insurer and client, helping to assess the client's business and risk profile, and accordingly suggesting appropriate coverage. On the other hand, they also act to convince the insurer to assume the risk involved in underwriting particular policies. Although insurance brokerage firms draw their salaries from insurers, a firm's top priority is to see to the client's interests. Moreover, firms do not charge any commission for services provided to clients. When a client makes damage claims, the firm interacts on behalf of the client with surveyors, photographers and structural engineers appointed by the insurer.

The insurance broker also relays data relating to the potential client's business and risk profile to the technical division of the insurance company. The broker's role may vary according to the size of the insurance company it serves. For big insurance companies, brokerage firms may operate in specialized areas, while elsewhere they may be required to look after the entire range of policies that an insurance company may have to offer.

Insurance brokerage firms are also supposed to manage knowledge and information flow relating to their clients and the markets in which they operate. Accordingly, they have to maintain detailed records. Not only that, but they also collate data from other sources and then analyze them to see the big picture. In addition, they identify new industry trends and developments on the basis of collated data and evaluate various insurance products on the market.

In many countries, in fact, insurers are already selling their products mainly through brokerage firms. In other words, brokers have emerged as the sole distributor of policies for the insurance companies in those countries. Nevertheless, this trend is yet to evolve into a global practice.

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