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Finally the long wait is over. The Insurance (Amendment) Bill 2001 has been passed by both the Houses which means the insurance sector has been thrown open for intermediaries such as brokers and corporate agents. So in addition to insurance agents, brokers will also play a major role now in selling risk products. But how different is a broker from an insurance agent and what are the services he will offer?
Role of an Insurance Broker:
An insurance broker will act as an intermediary between the customer and the insurer and his scope of activities will be far wider than that of the agent. Unlike an agent who represents a single insurance company, a broker will represent a minimum of three insurance companies. A broker, as per the clients requirements, will obtain quotes from various insurers. And as per the requirements of the customer he will advise him on just the right policy that he could go for from a whole range of products available in the market from various insurers.
More professional, code of conduct to follow:
Insurance brokers will be given the required training by the insurance company and will have a code of conduct to follow. They will be more professional and will have minimum capital norms and stringent regulations to be followed as laid down by the insurance regulator. The regulations proposed the minimum capital for a direct broker at Rs 25 lakh while for a reinsurance broker it is Rs 1 crore.
Range of products:
Insurance brokers will be well versed with every product information to offer advise on the risk products they sell and hence will be in a position to offer a whole basket of risk products of various companies with several options to meet the customers growing insurance requirements. As for the customer, there will be no difference in the price of the product.
Brokers will also play a major role now in facilitating policy servicing henceforth. But in contrast to agents, who are appointed by a single insurer, brokers will be answerable to several of them and the commission structure will also vary.
Brokers fees:
Brokerage fee will perhaps be capped at 17.5 percent. But views on it vary. For in certain countries abroad the average brokerage commission is about 18 to 20 percent while in some cases it has gone up to even 30 to 35 percent. The insurance regulator plans to come out with the necessary regulations soon in this regard.