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Insurance brokers are agents of the clients and provide independent insurance professional advice. We represent our clients’ best interest and obtain the deal, which offers them the best value. In many cases, the best deal may not necessarily be the cheapest offer but that which offers the widest coverage at competitive premiums. Acting as intermediaries, we pursue insurance mediation duties on behalf of our client . We are full- time insurance professionals who have a duty to exercise reasonable care in dealing with our clients. As professionals, we can be sued if we are guilty of professional negligence, e.g., in giving faulty advice.
The seminal case which defined the broker’s duties of a ‘professional’ was Hedley Byrne v Heller , where it was held that care has to be exercised when advice is given, even where there is no formal contract in place.
The insurance broker’s services to the client are free since we earn percentage commission on businesses placed. The insurer pays the broker’s fees though this does not affect premiums charged. The premiums charged have business acquisition costs embedded.
Insurance brokers also play the role of a distribution channel for insurers. In executing this role, they build relationship with underwriters in order to ensure the right terms for their clients, understand the insurer’s risk appetite and present risks in an efficient manner to aid the insurer in understanding the risk better.
We usually handle complex commercial transactions and place large volumes of businesses with various insurers. We acquire very useful knowledge of insurers both local and international and their product offerings. This becomes necessary when a global risk placement is required. In our market, brokers sometimes form a syndicate of insurers to participate on a large risk on co-insurance basis. Spreading the risk through this arrangement, insurers are apportioned percentages or subscriptions of the risk with the leader carrying the highest percentage.
The objective of the insurance broker in this role is to build up security for the placement to a 100%. We ensure the market we place the risk is secure and only insurers capable of underwriting the risk and honouring their claims are contacted.
With complex risks, the broker may revert to their client at different times to answer all the underwriter’s questions. We would then present the risk in an efficient form and seek premium quotations from qualified insurers.
We negotiate from a stronger position because of the influence we wield. We have access to a variety of insurance products and provide quality information to underwriters. As required by the principal-agent relationship, we act professionally in the best interest of the client in negotiating the best of terms and conditions with the underwriters.
Insurance brokers also conduct risk management surveys to provide client with expert assessment of inherent risks together with practical recommendations for controlling and eliminating those risks. We also conduct business interruption analysis by assisting in identifying risks to the business and quantifying the right sum insured whether it be gross profit, revenue or loss limit and indemnity periods. Follow us in subsequent newsletters on how Business Interruption can help you bounce back after a major loss.
The insurance broker will handle all administrative processes and all other paper works. The broker liaises with insurers, notifies the leader of the claim, and assist with negotiations on quantum of claim until settlement. They may sometimes appoint loss adjusters, lawyers, surveyors, structural engineers to provide independent opinions to what the underwriters may proffer. Where there are uninsured losses, the broker would pursue recoveries on behalf of the client where appropriate.