Are insurance brokers and insurance agents the same? No, insurance brokers are different and have distinct roles and responsibilities from that of insurance agents.
Moreover, each profile has its perks and drawbacks. As a layman, you might be wondering how these two roles differ. Insurance, insurance broker, and insurance agent are common terms discussed in everyday life. But when you get to a deeper understanding of these terms, their working becomes much more clear to you.
So in this article, we will mainly focus on insurance brokers and the disadvantages of insurance brokers. Stay with us till the end to find out the cons of an insurance broker’s role:
Who is an insurance broker?
An insurance broker is one who works on behalf of the client and not on behalf of the companies. Their role is not limited to working for a single company, rather they are well-versed with the plans and policies of various insurance companies. By investigating what their client is looking for and analysing their situation, they suggest insurance policies that suit their client’s affairs.
Insurance brokers are said to be less biased, and favouring a particular insurance company is a rarity on their part as they work independently.
Upon the number of insurance policies sold, the insurance broker gets a commission based on the premium amount. Some companies also give bonuses to the broker due to the increased sales in their policies.
Alongside, a broker will also charge a fee for his services to the clients, known as the consultation fee. In some cases, brokers also provide support to their clients even after the purchase of the insurance policy.
Insurance Broker vs Insurance Agent:
How do insurance brokers and insurance agents differ? Let’s discuss:
|They are independent salesmen, selling the insurance policies of multiple companies.
|They work and sell the insurance policies of a particular company only.
|They represent the client.
|They represent the insurance company.
|Varies based on sales.
|Fixed commission from the company.
|Charge a fee.
The above table represents the basic difference between an insurance broker and an insurance agent.
Disadvantages of Insurance Brokers:
Apart from all the functions that an insurance broker performs, his/her role also has several drawbacks:
1. Limited Knowledge:
Though an insurance broker is well-versed with the policies and schemes of numerous insurance companies, he may have limited access to the short-term offers or deals of the company. This may limit his scope of knowledge and provide a more generalised view of the insurance policies and schemes.
2. Lack of Experience:
Insurance brokers are independent salespersons. As they are not trained by any particular insurance company, they may not know about the ongoing packages. Also, when a broker isn’t experienced enough, his ability to analyse and suggest appropriate insurance policies is at stake. He may also fail to offer effective services to his clients.
3. Risk of Scams/Frauds:
There may be insurance brokers in the market just for namesake. They operate without any valid license and exhibit fake profiles. Such fraudsters disguise themselves as brokers to collect fees and consultation charges from the clients, and later on ditch them. Such scams have risen in recent days, especially after the implementation of online consultation services.
Insurance brokers may prove to be costly as they ask for additional fees apart from getting a part of the premium. The clients usually have to pay a certain amount as a consultation fee or broker’s fee when they want to avail the services of the insurance broker. This may therefore lead to an extra cost burden on the customers.
There are chances that a broker might favour a specific insurance company because of the bonuses that the company provides to the broker. Hence, based on the incentives the broker receives from a particular insurance company, he may try to provoke his clients to buy the policies of only that company. This makes him sales-driven, wherein he doesn’t work on behalf of his customers.
Thus, these disadvantages of insurance brokers tend to lessen their scope.
Frequently Asked Questions
- Why do people quit as insurance agents/brokers?
People quit as insurance agents/brokers because of less pay. The minimum payment by the insurance companies and the heavy workload is what makes the insurance agents/brokers quit their jobs.
- What is the difference between banks and insurance companies?
Banks are places where people deposit and withdraw funds, and this includes short-term as well as long-term funds. Whereas, insurance companies collect funds from their customers for long-term purposes to meet the financial demands of events that are uncertain.
- What are the disadvantages of insurance?
Insurance, which people have created hype about has several disadvantages. First of all, it guarantees money at the time of loss, accidents, etc. which may or may not arise. And this money is deposited by you eventually over the years. Moreover, you have to abide by various terms and conditions, pay additional charges, pay high premium amounts, and also has long procedures.
- Who is known as the father of insurance?
Solomon Huebner is known as the father of insurance education. He was the one who established the insurance department at Wharton in the year 1913.
- What is risk in insurance?
Risk in insurance is the happening of an uncertain event. It includes any unexpected loss, injury, theft, or damage to a property or belongings.
With a clear discussion of the disadvantages of insurance brokers, you now know what limits their scope and makes them less-known job holders. Lack of professionalism in their job might make them suspicious. Thus, be it any job, what makes it complete is the display of self-confidence, the right knowledge, and loyalty towards the customers as well as the company.