Insurance Agents vs. Insurance Brokers

Insurance in itself tends to be a complex financial tool. It reaches to a new level of complication when you have to decide whom to contact for buying the policy: agent or a broker.

Agents and brokers both act as intermediaries between the insurance company and the customer. They approach the customer, pitch for the sale of the product and ultimately make the sale. They both appear for exams conducted by IRDA and acquire license to sell for a particular period of time.

While they may both appear to have the same role, yet there is a major difference between the two.

Agents may be individuals or a group of people coming together to form an agency. They are allowed, by law, to sell insurance for one particular insurance company only. These individuals are not on the insurance company’s payroll. They work on commission basis. They are responsible for selling the insurance plans. They also ensure timely and accurate processing of proposal forms, collection of premium amounts and the paperwork that follows.

Brokers also might be individuals or a group of people who form broking firm. They acquire broking license and hence are allowed to sell product for various companies. They are not accountable to any particular company. Ideally, in the sales process, they represent a customer. But brokers also work on commission basis.

Most of the sales for an insurance company come through the agents and the brokers. And it is quite possible that the customer has been sold a wrong product, has been promised unrealistic returns or has been misrepresented. Since agents and brokers don’t have the ownership for the sale of the product, the customer suffers the loss and the company’s image gets tarnished.

Nowadays, companies have also started focussing on direct sales channel where the company employees act as the intermediary between the customer and the company. They help the customer purchase the most suited product. Companies are more focussed towards direct channel as it eliminates partiality towards more commission based products as these people are on fixed payroll.

 

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