Insurance Broker: Everything You Must Know Before You Hire One
An insurance broker fills up the gap between a consumer and an insurance company. A broker makes money through commissions gained by selling various insurance policies to the clients. Insurance brokerage is one of the fastest-growing markets in today’s time.
The best way to ensure the safety of precious objects, property, business, or even human beings is to get insurance. It guarantees a specific amount of money to the person in case of adverse events on the insured object. One has to invest some amount of money yearly/quarterly/monthly to acquire the amount at the end of the maturity period or any adverse conditions. The terms and conditions for all insurances vary according to the company. Furthermore, some people deal with insurance brokerages for clients and they are known as insurance brokers.
Who is an Insurance Broker?
An insurance broker is a professional person who plays the role of a bridge between an insurance company and a consumer. He/she helps clients find a suitable policy for their needs and complete insurance sales. Further, insurance brokers represent customers and not the insurance companies; hence, they cannot bind any coverage on behalf of the consumer. Apart from this, insurance brokers make money through commissions they get from selling insurances to businesses or consumers. Commissions vary between 2% to 8% of premiums, solely depending on the state rules. Moreover, brokers sell insurance policies such as homeowner, health, accident, annuities, and life.
Money Making Process of Insurance Brokers
An insurance broker makes money via fees and commissions on the insurance policies sold. The commissions are a small percentage of money which is based on the amount of the premium policy sold yearly. An insurance premium is the quantity of money a business or consumer pays for a policy. Premiums cover insurance on the home, life, health, and much more.
Premium acts as a source of income for the insurance companies and functions as a liability for the insurer as he/she must give coverage for the claims made against policies. Liabilities are covered by the insurers through premiums and related policies. Also, premiums can be further invested to create maximum returns and balance costs of the insurance coverage, therefore aiding the insurer to keep their charges competitive. Apart from this, a consumer invests premiums in assets with fluctuating returns and liquidity. Brokers earn a lump sum percentage against a 5-year policy that is sold by the broker for a residual income over the policy’s period.
Insurance Broker vs. Insurance Agent
Brokers and agents are confused with each other all the time. From the outside, both of them look the same as they both sell insurance. The primary difference is that an agent is a representative of an insurance company and sells that specific company’s policies to the customers. Whereas, brokers don’t work for the insurance companies but work for clients and find the right insurance that suits the consumer.
Sometimes it may seem that brokers are an exceptional way to buy insurance policies, but some people favor dealing with the insurance agent directly. The perks of dealing with an insurance agent are that policies are bought swiftly and the agent can acquire new policies within minutes. On the other hand, brokers have to apply with the insurer via fax or email and await approval from the insurance companies. Apart from this, there is a third method to buy insurance policies – online shopping. Some companies such as Square One offer online purchase of policies and eliminate agents or brokers from the picture.
Top 15 Insurance Brokerages Globally Recognized
The large insurance brokerages worldwide offer extra services other than providing insurance policies. The top 15 are listed as follows:
- Aon P.L.C.
- Marsh & McLennan Cos. Inc.
- Willis Towers Watson P.L.C.
- HUB International
- Arthur J. Gallagher
- Brown & Brown, Inc.
- Lockton Inc.
- Truist Insurance Holdings Inc.
- Alliant Insurance Services, Inc.
- USI Insurance Services L.L.C
- NFP Corp.
- AmWINS Group Inc.
- Assured Partners Inc.
- CBIZ Inc.
Covid-19 Impact & Future Scope of the Insurance Brokerage Market
As per a new report offered by Research Dive, the global insurance brokerage market is predicted to register a revenue of $515.3 billion by 2028. The insurance brokerage market is witnessing a negative impact during the coronavirus pandemic due to a reduction in the demand for insurance policies. Also, the shutdown of brokerage companies in developing countries is expected to hinder the market during the pandemic phase. However, initiatives taken by government bodies like risk coverage and expansion of services for customers are predicted to boost growth the insurance brokerages in the future years.
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