A valuable middleman between individuals in search of insurance and businesses offering policies is the insurance broker. There have been several advantages and disadvantages of using insurance brokers. The advantages include cost-effectiveness, expertise, and their ability to offer an extensive range of policy options, thus saving consumers looking for coverage time and effort. Similarly, disadvantages include less professionalism and sometimes high broker fees. But this is not an issue because each and everything has its own benefits as well as drawbacks. To go deep into the advantages and disadvantages of using insurance brokers, you have to read this blog till the end.
What is Insurance?
Insurances are a contract that depends upon the future event. Basically insurance is applicable to the happening or non-happening of future events which are uncertain or which have no certainty. These are the types of contingent contracts. While getting insurance, you can get assistance from insurance brokers. There are various advantages and disadvantages of using insurance brokers. Hence, they must be used carefully. There are a total of three parties in insurance. These are mentioned below:
- The individual or company who is taking the insurance is known as the insured.
- One who is providing the insurance policy to the insured is known as the insurer.
- The third and last part is a nominee who is indirectly part of the contract.
Who is an Insurance Broker?
An intermediary between the person who wants to take the insurance policy and the one who wants to sell the policy is known as an insurance broker. In technical language, one who connects the insured and insurer is called an insurance broker. Sometimes, in a local language, people call them the agents of the company. As everything has its good and bad, positive and negative, there are advantages and disadvantages of using insurance brokers as well. They help individuals who want to take insurance policies in the following ways:
- Gives complete knowledge regarding the insurance policy
- Offers them options
- It can help them to choose the best policy
- Connects with the best insurers
Key Advantages and Disadvantages of Using Insurance Brokers
Some of the crucial advantages and disadvantages of using insurance brokers in the insurance industry are:
Advantages of Insurance Broker
- As insurance brokers are paid a commission by the company, one do not need to pay them a very high amount for their services
- They are less costly
- Their expertise can help you get the best policy for yourself
- They are working with multiple companies and hence provide you with the best one that is suitable for you
- Offers you multiple policies that give you an option to choose the best one for yourself
- Helps in making the claim
- Helps while completing the formalities related to policy
- Saves time and energy for the one who wants to take the policy
- Provides accurate information
Disadvantages of Insurance Broker
- Due to non-payment of the amount or less payment, sometimes one can face unprofessionalism.
- Sometimes, you may get an inexperienced insurance broker who may have less knowledge regarding the insurance market.
- All brokers are not working or associated with all the companies. Hence, they can provide you with the knowledge or information related to those insurance policies where they are associated.
- As insurance brokers are not associated with every insurance company, there are chances that you may miss good policies sometimes.
- Sometimes, they may charge brokers fees, which will be additional to your insurance policy.
- Their main aim is to do sales, and sometimes they may compromise with the quality of services.
Insurance Broker Versus Insurance Agent
Mostly, these two words, insurance brokers and insurance agents, are used interchangeably by individuals. But they have slight differences, which are given below in the table:
| Insurance Broker | Insurance Agent |
| He or she is self-employed | Working for an organisation |
| Associated with multiple companies or organisations | Associated with a single company or organisation |
| They don’t have commitments towards one particular company | They are committed to one particular company |
| The works for the betterment of the person who wants to take policy | They work for the betterment of the company they are working with |
| They are not trained by the companies | They are well-trained individuals in the company |
| They are less professional | They are comparatively more professional |
| They are not answerable to the insurance companies | As they are associated with the insurance companies, they are answerable there |
| The company gives them a commission | The company gives them a salary |
| They are not the employees of the company as they are working individually, there is no employer-employee relationship between the company and the broker | They are the employees of the company as they are working for the company, and there is an employer-employee relationship between the company and the agent. |
| Sometimes, they see their personal interest | They can not work for their personal interest |
| The organisation is not accountable for a broker’s activities. | For the actions of agents, the company is liable. |
Insurance Broker and an Insurance Web Aggregator Key Differences
There are multiple differences between an Insurance Broker and an Insurance Web aggregator. While discussing the advantages and disadvantages of using insurance brokers it is also important to discuss insurance brokers and IWAs. They are two different things working with the same object. Some of the key differences between them are mentioned below:
- The concept of an insurance broker is very old, whereas insurance web aggregators came into the market after insurance brokers
- Insurance brokers are not that technology-friendly, while IWAs are working fully through technology
- Websites are mandatory for the business of IWAs, but it isn’t the same for the brokers. They can work even without websites.
- IWAs are more transparent in comparison to insurance brokers
- The work of IWAs is more professional than brokers
- For Insurance Web Aggregator companies, there is a need for an Insurance Web Aggregator Licence whereas there is no such need for the insurance brokers
Conclusion
The insurance market and the awareness regarding the same is at its peak today. Insurance is very common these days as insurance brokers. There was a time when people didn’t have much awareness regarding insurance, but time has changed now. Everybody wants to secure their future, and insurance plays a crucial role over there. However, due to the overflow of insurance policies in the market, people become confused sometimes and choose the wrong policy for themselves. This is where insurance brokers came into the picture. There are a number of advantages and disadvantages of using insurance brokers. They help individuals or organisations choose the correct policies for them as per their requirements. This is one of the best advantages and disadvantages of using insurance brokers.
