B Com Exam  >  B Com Notes  >  Principles of Insurance  >  Operations of Intermediaries - Insurance Business And Market, Principles of Insurance, B com

Operations of Intermediaries - Insurance Business And Market, Principles of Insurance, B com | Principles of Insurance PDF Download

Insurance intermediaries facilitate the placement and purchase of insurance, and provide services to insurance companies and consumers that complement the insurance placement process. 

Traditionally, insurance intermediaries have been categorized as either insurance agents or insurance brokers. The distinction between the two relates to the manner in which they function in the marketplace. 

 

Insurance agents

Insurance agents are, in general, licensed to conduct business on behalf of insurance companies.  Agents represent the insurer in the insurance process and usually operate under the terms of an agency agreement with the insurer.  The insurer-agent relationship can take a number of different forms. 

In some markets, agents are “independent” and work with more than one insurance company (usually a small number of companies); in others, agents operate exclusively – either representing a single insurance company in one geographic area or selling a single line of business for each of several companies.  Agents can operate in many different forms – independent, exclusive, insurer-employed and self-employed. 

 

Insurance brokers

Insurance brokers typically work for the policyholder in the insurance process and act independently in relation to insurers.  Brokers assist clients in the choice of their insurance by presenting them with alternatives in terms of insurers and products.  Acting as “agent” for the buyer, brokers usually work with multiple companies to place coverage for their clients.  Brokers obtain quotes from various insurers and guide clients in determining the adequate policy from a range of products. 

In some markets, there are distinctions among brokers depending upon the types of insurance they are authorized (licensed) to intermediate – all lines of insurance, property and casualty or life/health coverage.  While most, if not all, brokers are active in commercial lines, some also intermediate personal lines policies.  There are also distinctions between “retail brokers,” who negotiate insurance contracts directly with consumers, and “wholesale brokers,” who negotiate insurance contracts with retail brokers and agents, but not directly with consumers. 

Reinsurance brokers solicit, negotiate and sell reinsurance cessions and retrocessions on behalf of ceding insurers seeking coverage with reinsurers.  Reinsurance brokers can also be involved in a reinsurer’s retrocession of parts of its risk. 

As a technical matter, a broker’s role may change during an insurance transaction and over the course of an on-going relationship with a client.  Many brokers sometimes act as an “agent” of the insurer and other times as a “broker” of the client when assisting a client with insuring its risk exposures through an insurance contract with a traditional carrier.

For example, the broker acts on behalf of the client when negotiating the contract of insurance and placing the policy.  When the broker provides services that would otherwise be handled directly by the insurance company, such as premium payments and claims handling, the broker is essentially acting as agent for the company.  This unique concept makes the insurance process more efficient for both the policyholder and the insurer. 

As a practical matter, regardless of the legal role in which a broker is acting, the manner in which the broker approaches all such placements for his clients is as an intermediary – working on behalf of his clients to facilitate the consummation of insurance contracts with carriers who have the ability and capacity to properly insure his risks.

Having said that, determining whether an intermediary is legally an agent or broker is not always clear-cut.  An intermediary’s status is determined by the totality of the facts regarding the specific transaction at issue.  An intermediary might be called a “broker,” but actually represents the insurance company in a particular transaction.  In such situations, the broker is actually – and legally – considered the company’s agent, not that of the customer.  Although, such an activity-based approach is increasingly used around the world, the legal status of insurance intermediaries varies throughout the international insurance market. For purposes of this memorandum, included within the term “intermediary” are insurance agents, brokers, producers, advisors and consultants.  

The document Operations of Intermediaries - Insurance Business And Market, Principles of Insurance, B com | Principles of Insurance is a part of the B Com Course Principles of Insurance.
All you need of B Com at this link: B Com
49 videos|51 docs|14 tests

FAQs on Operations of Intermediaries - Insurance Business And Market, Principles of Insurance, B com - Principles of Insurance

1. What are the main operations of intermediaries in the insurance business and market?
Ans. Intermediaries in the insurance business and market perform various operations, including: - Distribution of insurance products: Intermediaries help insurers in selling their insurance policies to customers by acting as a link between the two parties. They assist customers in understanding the available insurance products and facilitate the purchase process. - Risk assessment and underwriting: Intermediaries play a crucial role in evaluating the risks associated with potential policyholders. They collect and analyze information about the applicants' risk profile, financial stability, and other relevant factors to determine the insurability and premium rates. - Policy servicing: Intermediaries assist policyholders throughout the policy term by providing information, handling policy changes, and addressing any concerns or queries. They act as a point of contact between the insured and the insurer. - Claims management: Intermediaries help policyholders in filing insurance claims and guide them through the claims settlement process. They ensure that the necessary documentation is submitted and liaise with the insurer to expedite the claim settlement. - Risk management advice: Intermediaries provide valuable risk management advice to clients, helping them identify potential risks and suggesting appropriate insurance coverage. They assess clients' needs, recommend suitable policies, and ensure that the coverage adequately protects against potential risks.
2. How do intermediaries contribute to the growth of the insurance market?
Ans. Intermediaries play a significant role in the growth of the insurance market through the following contributions: - Market expansion: Intermediaries help insurers reach a broader customer base by acting as a distribution channel. They have an extensive network and established relationships with potential policyholders, enabling insurers to expand their market presence. - Increased customer awareness: Intermediaries educate customers about insurance products, their benefits, and the importance of insurance coverage. By raising awareness, they create a demand for insurance and contribute to the growth of the market. - Customized insurance solutions: Intermediaries assess clients' risk profiles and provide personalized insurance solutions tailored to their specific needs. This customization enhances customer satisfaction and encourages more individuals and businesses to seek insurance coverage. - Improved customer experience: Intermediaries act as intermediaries between policyholders and insurers, ensuring a smooth and seamless experience for customers. They provide assistance during the policy purchase, policy servicing, and claims settlement processes, thereby enhancing overall customer satisfaction. - Feedback and market intelligence: Intermediaries gather feedback from customers, providing insurers with valuable insights into market trends, customer preferences, and areas for improvement. This information helps insurers refine their products and strategies, leading to market growth.
3. What role do intermediaries play in the underwriting process of insurance policies?
Ans. Intermediaries play a crucial role in the underwriting process of insurance policies, including: - Risk assessment: Intermediaries collect and analyze information about the potential policyholders to assess their risk profiles. They evaluate factors such as age, health condition, occupation, lifestyle, and previous insurance history to determine the insurability and premium rates. - Application review: Intermediaries review the insurance applications submitted by individuals or businesses. They ensure that the applications are complete and accurate, verifying the information provided by the applicants. - Documentation and information gathering: Intermediaries gather all necessary documentation and additional information required for underwriting purposes. They may request medical reports, financial statements, or other relevant documents to assess the risk accurately. - Liaison with insurers: Intermediaries communicate with the insurer's underwriting department on behalf of the applicant. They provide the collected information, answer any queries, and negotiate terms and conditions, if required. - Policy placement: After the underwriting process is complete, intermediaries help in placing the policy with the insurer. They facilitate the policy issuance and ensure that the policyholder receives the necessary documentation.
4. How do intermediaries assist policyholders in the claims settlement process?
Ans. Intermediaries provide valuable assistance to policyholders in the claims settlement process in the following ways: - Claims filing: Intermediaries guide policyholders in filing insurance claims correctly. They ensure that all required documentation is submitted, including claim forms, supporting evidence, and any other relevant paperwork. - Documentation review: Intermediaries review the submitted documents to ensure their completeness and accuracy. They help policyholders rectify any errors or provide additional information, if necessary. - Liaison with insurers: Intermediaries act as a liaison between policyholders and insurers during the claims settlement process. They communicate with the insurer on behalf of the policyholder, providing updates, answering queries, and negotiating the settlement. - Expedited settlement: Intermediaries use their expertise and knowledge of the claims process to expedite the settlement. They follow up with the insurer, provide any additional information requested, and ensure that the claim is processed efficiently. - Claim advocacy: If there are any disputes or issues during the claims settlement, intermediaries advocate for the policyholder's rights and interests. They help policyholders understand their policy coverage, negotiate with the insurer, and seek a fair and timely settlement.
5. What are the benefits of intermediaries providing risk management advice to clients?
Ans. Intermediaries offering risk management advice to clients provide several benefits, including: - Enhanced risk identification: Intermediaries have expertise in assessing risks and identifying potential threats faced by individuals or businesses. By providing risk management advice, they help clients gain a better understanding of the risks they face and the potential consequences. - Tailored insurance coverage: Intermediaries analyze clients' risk profiles and recommend insurance coverage that aligns with their specific needs. By understanding the risks and exposures, intermediaries can suggest suitable policies that adequately protect against potential losses. - Cost-effective solutions: Through risk management advice, intermediaries help clients implement risk mitigation strategies that can potentially reduce the overall insurance costs. By identifying areas where risks can be minimized or avoided, clients can optimize their insurance coverage. - Peace of mind: Intermediaries' risk management advice provides clients with peace of mind, knowing that they have taken proactive measures to protect against potential risks. This assurance allows clients to focus on their core activities without constant worry about unforeseen events. - Long-term relationship: Intermediaries offering risk management advice build long-term relationships with clients by consistently providing valuable insights and guidance. This relationship fosters trust and loyalty, leading to continued business and referrals.
49 videos|51 docs|14 tests
Download as PDF
Explore Courses for B Com exam
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Download the FREE EduRev App
Track your progress, build streaks, highlight & save important lessons and more!
Related Searches

mock tests for examination

,

B com | Principles of Insurance

,

Operations of Intermediaries - Insurance Business And Market

,

Exam

,

Principles of Insurance

,

practice quizzes

,

Semester Notes

,

Operations of Intermediaries - Insurance Business And Market

,

Operations of Intermediaries - Insurance Business And Market

,

shortcuts and tricks

,

Objective type Questions

,

pdf

,

MCQs

,

Principles of Insurance

,

Previous Year Questions with Solutions

,

video lectures

,

ppt

,

B com | Principles of Insurance

,

Sample Paper

,

past year papers

,

Free

,

Summary

,

B com | Principles of Insurance

,

Extra Questions

,

Important questions

,

Principles of Insurance

,

Viva Questions

,

study material

;