Insurance brokers definition
Insurance brokers have access to many different insurance policies and, because they deal with a range of insurance companies directly, sometimes brokers have access to policies that are not available to most consumers. Because the general insurance industry in Australia offers so many options, it can be quite difficult to choose the right policy.
Some insurance policies can be complicated, and an insurance broker can help you understand the details of a policy and also work out what level of cover you need, so that you can make sure you are properly protected. Depending on the type of advice a broker may provide, they may be required to provide that advice, in addition to other information, in a document called a Statement of Advice SoA.
Brokers can often find you a good deal on insurance because they have a thorough understanding of the insurance market and can negotiate premiums on your behalf. A broker will explain your policy to you and advise you if there are any special situations you need to know about.
Brokers can prepare a customised insurance and risk management program for you or your business, where they design the policies, negotiate the terms with insurance companies and place the cover with the insurer. By including a risk management program, which puts some of the responsibility for risk prevention and loss minimisation on you or your business, you can reduce premium costs.
If you need to make a claim on your policy, your broker will assist you through the process and will liaise with the insurer on your behalf. Insurance brokers might charge you a fee for their services, or they might receive a commission from the insurance company. They are required to advise you of the fees that they charge or the commission they receive. This may be set out in the Financial Services Guide, Product Disclosure Statement or where a broker has provided you with personal financial advice, the fees and costs associated with their advice will be set out in your Statement of Advice.
Just as you would spend some time trying to make sure that the insurance policy you choose is the right one for you, if you decide to use an insurance broker you should make sure that the person you appoint is going to help you in your particular situation.
To find a broker visit www. There are general conduct obligations that apply to all financial services licensees and authorised representatives and specific conduct obligations that apply to an adviser who provides personal financial product advice. Where a broker provides you with personal financial advice then in accordance with the Corporations Act they must:.
Brokers are required to be members of an authorised external dispute resolution scheme as a condition of their AFS licence. Brokers are bound by the decisions of FOS. If you do have a complaint about the services being provided by your insurance broker, in the first instance you should raise it with them.
All insurance brokers should have an internal complaints and disputes handling process designed to help resolve any complaint. If it is not possible to resolve the complaint to your satisfaction through this process, you can refer the unresolved complaint called a dispute to the free and independent external dispute resolution process administered by the Financial Ombudsman Service FOS.
FOS will examine your dispute and if it is within its jurisdiction, seek to resolve it by liaising with you and the insurance broker. If the dispute cannot be resolved, FOS can make a determination imposing binding sanctions on an insurance broker after considering the available evidence. While the above process is designed to make things easier for you, you still have your normal legal rights regarding any dispute. Reassuringly, there are very few disputes involving insurance brokers each year.
In the financial year, disputes against brokers made up only 2. If you have a complaint about the products or services being provided by your insurance company, please refer to the section resolving disputes.
Insurance brokers work with their clients to understand their risks, and to discuss how to use insurance to protect their assets and businesses. Brokers offer expert advice on the management and reduction of risk, and on the range of insurance products that are available. The same skills and networks are also used to help their clients resolve claims when they arise. An insurance broker can save you time, money and worry. A broker can help you understand the cover you need, and can purchase that cover for you from the insurance market.
The advice is tailored to your needs. The most common types of insurance brokers arrange are business packages, commercial motor and professional indemnity. In one case, Near North Entertainment Insurance Services provided alternative rock band Third Eye Blind with a commercial general liability CGL insurance policy that excluded coverage for the "entertainment business. In , Eliot Spitzer found apparent cases of bid-rigging by the major brokers, where the brokers arranged with insurers to provide "fake" quotes in exchange for providing favorable risks amidst contingent commission arrangements.
In most states there is no requirement to disclose the commission of the broker to the customer, but in New York, a regulation "Regulation " was adopted in which required disclosure.
In most states, agents cannot charge a fee in addition to their commission, although Texas is one of the exceptions. Though not an absolute separation; an insurance agent is an insurance company's representative by way of agent-principal  legal custom. The agent's primary alliance is with the insurance carrier, not the insurance buyer. In contrast, an insurance broker represents the insured, generally has no contractual agreements with insurance carriers, and relies on common or direct methods of perfecting business transactions with insurance carriers.
This can have a significant beneficial impact on insurance negotiations obtained through a broker vs. Any person acting as an insurance agent or broker must be licensed to do so by the state or jurisdiction that the person is operating in. Whereas states previously would issue separate licenses for agents and brokers, most states now issue a single producer license regardless if the person is acting on behalf of the insured or insurer.
The term insurance producers is used to reference both insurance agents and brokers. Within Australia there are also a number of industry bodies that issue professional accreditations to members that comply with best standards of professional practice and integrity and maintain up to date skills and knowledge.
Dealing with an insurance broker as opposed to directly with an insurer is something many customers particularly businesses choose to do in Australia for reasons including: As in many industries, there is a trend towards disintermediation where consumers buy direct from the insurer without an intermediary. From Wikipedia, the free encyclopedia. This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources.
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