Explain Different types of Insurance Brokers and their functions.
The three main type of Insurance Brokers are:
- The Direct Broker (between end-users and primary insurers only).
- insurance Brokers (between primary insurers and insurers only).
- Composite Brokers (both the above).
A direct broker is an insurance broker who for the time being licensed by the Authority to act for remuneration, arranges re insurance for his clients.
Functions of Direct Insurance Broker.
- To obtain the detailed information of the client’s business and risk management philosophy.
- To familiarize himself with the client’s business and underwriting information so that this can be explained to an insurer and others.
- To render the advice on appropriate insurance cover and terms.
- To maintain the detailed knowledge of available insurance markets, as may be applicable.
- To submit the quotation received from insurer for consideration of a client.
- To provide the requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover.
- To act promptly on instructions from a client and providing him written acknowledgements and progress reports.
- To assist clients in paying premium under Section 64VB of Insurance Act, 1938 (4 of 1938).
- To provide services related to insurance consultancy and risk management.
- To assist in the negotiation of the claims.
- To maintain proper records of claims.
A reinsurance broker means an insurance broker who for the time being licensed by the authority to act as such for the remuneration, arranges insurance for his clients.
Functions of Reinsurance Broker.
- Familiarize himself with the client’s business and risk retention philosophy.
- Maintain clear records of the insurer’s business to assist the insurer or others.
- Render advice based on technical data on the reinsurance covers available in the international insurance and the reinsurance markets.
- Maintain a database of available reinsurance markets, including solvency-ratings of individual insurers.
- Render consultancy and risk management services for reinsurance.
- Select and recommending a insurer or a group of insurers.
- Negotiate with a insurer on the client’s behalf.
- Assist in case of commutation of reinsurance contracts placed with them.
- Act promptly on instructions from a client and providing it written acknowledgements and progress reports.
- Collect and remit the premiums and claims within such time as agreed upon.
- Assist in the negotiation and settlement of claims.
- Maintain proper records of claims.
- Exercise due care and diligence at the time of selection of insurers and international insurance brokers having regard to their respective security rating and establishing respective responsibilities at the time of engaging their services.
A composite broker is an insurance broker who for the time being license by the authority to act for a remuneration, arranges the insurance for his clients with insurance companies and/or re insurance for his clients.
Functions of Composite Broker.
A composite broker shall carry out any one or more of the functions mentioned in the functions of the direct broker or the reinsurance broker above.
The brokers have to obtain the license from the IRDA. For this they have the meet the certain criteria and the norms as prescribed by the IRDA. They have to maintain a certain code of conduct and also maintain a separate account in respect of the insurance money and his earnings. The insurance broker has to maintain solvency margin as notified by the IRDA in the regulations.