25 July :A K Bery, New Delhi:The Government of India nationalized Life insurance in 1956 to form LIC & the 107 non-life insurers in 1972 to form GIC and four subsidiaries.
To prepare for integration with global economy IRDA was established and In Oct 2002 license were granted to the private insurers to permit operation. The competition resulted in introduction of new covers, Third Party Administrators, Garage tie up, Bank Assurance, Corporate Agents and Brokers resulting in speedy and efficient servicing.
In international market 80-90% of corporate/ commercial insurance business is transacted between insurer & client through Insurance Broker because of his value addition and professional competency. In the last century the broking community has matured to value added services like risk management including alternate risk transfer and business continuity planning.
1. Broker is different from agent /corporate agent who can represent only one insurer whereas a broker represents the interest of the client and can place business with any suitable insurer operating in the market
2. Broker has the necessary qualification, expertise, and knowledge of market, negotiating skill to act on behalf of the client.
3. Broker are technically competent to study the requirement of the client, design a suitable insurance program & compare the terms, conditions, excess and premium quoted by various insurers
4. Broker is aware on the underwriting philosophy, technical competence, servicing arrangements and financial strength of each insurer in the market
5. Broker can design tailor made policies, special covers and arrange servicing arrangements to suit the peculiar needs of client.
6. Broker is a professional outsource for management of insurance portfolio of the client
7. Currently broker can differentiate in premium rate only as the policy wording is still governed by Tariff.
8. Globally Package /Umbrella Policy are used to protect the balance sheet and not separate policy for each location & perils. The role of insurance is to protect the assets, income and from liability
9. The broker assists in risk management, policy audit, fixing correct sum insured, limit of liability & excess as also risk retention or captive.
10. The broker is ruminated by the insurer in a transparent way to the extent of services provided.
11. The fee based consultancy is the alternate to broking and has a very important role in India because of the following reasons:
a. Broking is a very new concept in INDIA
b. Since the insurance was a monopoly of the public sector and under Tariff regime there was limited scope of differentiation and innovation
c. The recognition to insurance as a qualification and profession is a recent phenomenon
d. The awareness to principals & practice of insurance is limited. Even the industry, intermediaries & financial institutes have little exposure to reinsurance, it’s functioning and the international best practices.
e. The domain knowledge helps the brokers /consultants to correctly present the claims, study the survey reports and discuss and debate correct interpretation and point out lapses if any
f. A broker/ consultant can assist in fair and speedy settlement of the claims
g. The broker/ consultant can educate the client to insurance principals opt for suitable policy limits & excess and help the management take informed decision
h. The importance of maintaining premium claim data has not been understood in discounting market but would become important after complete abolition of Tariff
i. The insurance environment is changing at a very fast pace & rules of the game being re written to be at par with global practices and the need for professional advice cannot be ignored
The important issue to be addressed is:
1. Is your insurance Adequate?
2. Have you fixed Sum Insured after due deliberation?
3. Have you done cost benefit analysis for perils/add on covers opted/not opted for?
4. Are you aware of the requirements at the time of a claim?
If the answer to all the above is yes then you need not look for the services of a professional broker/ consultant for individual covers/ your business
A K Bery
Author is a qualified insurance professional with 32 years of hands on experience
Head Non Life – Zuari Chambal Insurance Solutions
Resident North- Bhatawadekar & Company Surveyors & Valuers
DGM Insurance – Flex Group
Divisional manger The New India Assurance Company Ltd