Q: Are brokers and agents practically doing the same job?
A: No. Insurance brokers are working in client’s interest and are independent from insurers, with whom they cooperate on placing risk for their clients. Brokers also have consultancy role and the level of knowledge they must have is higher than agents’ (as the NBS license for brokers require higher formal education and more complex questions at the exam).
Insurance agents are representing insurance company and selling their standardized products).
Q: Why insurance brokers must arrange errors and omissions insurance and agents must not?
A: Because insurance brokers work independently from insurer and have responsibility for financial loss that client may sustain due to their own errors and omissions, in terms of providing advices, defining insurance needs, etc. As insurance agents represent insurers, responsible for errors and omissions of agents are insurers who are relying on agents.
Q: It does not seem logical that insurance brokers work for client and are remunerated through commissions agreed with insurer. Is this a principle in other countries as well?
A: Insurance broker’s commission is included in gross insurance premium - in its part which is related to administration costs that insurer has anyway (i.e. not in technical premium which is used for claims’ payment funds). As insurance broker takes over a part of insurer’s job (collection of data, defining of coverage / limits), it is entitled to commission correlating to performed work. Of course, insurance broker can be paid by the client as well, in which case it cannot take commission from insurer.
Unlike some other insurance brokers, ACB always emphasizes to its clients that our service only seems free of charge to them, due to the fact that every insurance brokers is remunerated from the premium that is paid to insurer by its client.
In most of the countries, first remuneration method is in force.
Q: How can we be sure that the insurance premium presented by insurance broker is competitive, i.e. lower than the offer from insurance company?
A: Standard clause that every professional insurance broker (as the „big buyer“) concludes with insurance company is saying that insurance premium which is offered to broker for its client cannot be higher than the direct offer given by insurer.
Although you may hear some insurers saying completely the opposite in practice, you can rest assured that such statements are contrary to contracts and could be a matter of legal actions from insurance brokers.
Q: Is insurance broker involved in claims?
A: Yes, legal obligation of insurance broker is to assist client in claims procedures.This is usually performed in terms of advisory and other technical support issues, but not in terms of claims’ administration.