THE VITALITY OF A BROKER IN THE INSURANCE CYCLE
Insurance Brokerage has become of age. Regardless of the challenges insurance brokers face, they are now part and parcel of the insurance cycle. But this has not stopped misconceptions regarding who an insurance broker is and what their role is, to continue playing out. As it has been proven umpteen times, circumventing insurance brokers often leads to a gap in the insurance cycle. Unfortunately, this is to the detriment of not just the clients but the insurers too! It is upon this backdrop that I wish to demystify insurance brokerage.
For chronology purposes, let’s start by understanding who an Insurance Broker is. An Insurance broker is a professional that works directly for a client by specializing in insurance and risk management. In a nutshell, an insurance broker acts as an intermediary between a consumer and an insurance company, helping the consumer to find a policy that best suits their needs.
You may find it interesting to learn that, by law, Insurance brokers do not charge their clients for the services provided. This is because they earn brokerage commission incomes from insurance companies as clearly spelt in the Insurance Act 6, 2017.
Having unpacked who an insurance broker is, it is only right that we delve into their roles. These are quite expansive but fortunately, they bring to the fore, the insurance broker’s relevance in the insurance terrain.
Choosing an Insurer: An insurance broker offers advisory services on the most suited insurance company to underwrite a client’s risk. The criteria for this is often based on the underwriting capacity and the appetite for the risk in question. A broker is therefore part and parcel of procuring insurance quotations from different insurers. They also partake in analyzing such quotations to ensure that the client makes favorable decisions in choosing an insurer.
Negotiating with the Insurer: An insurance broker negotiates for comprehensive policies in the best interests of the client. He/she seeks to secure those with wide coverage and extensions whilst also paying mind to the insurance rates/premiums.
Selecting the cover: Brokers also help the client to select the best-suited insurance policy. This is made possible by their extensive knowledge of the insurance industry and the products therein.
Preparing claims: In case of occurrence of a loss or damage, a broker is meant to guide the client through the insurance claims requirements and procedures to ensure that the claim is promptly & satisfactorily settled.
Risk advisory: When it comes to risks of huge magnitudes, an insurance broker helps to spread these among many insurance companies. This is because of the dangers of concentrating a huge risk with one insurance company. Spreading it to different insurers is crucial for sufficient risk mitigation.
As the Insurance Brokers Association of Uganda (IBAU), it is incumbent upon us to solicit for a conducive working environment for the brokers while at the same time playing a major role in growing the general uptake of insurance in the country.
While major challenges still continue to affect the operation of insurance brokers, we continue to take strides to improve their operation environment. This is by engaging the relevant regulators to this effect. Through critical awareness programs like the “Beat the risk” campaign, we are hopeful that public is warming up more to the essentiality of insurance.