BROKING SYSTEM IN GENERAL INSURANCE

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On above link you can check- 'What is general insurance'

The article given below was written at the time of introduction of the broking system in General Insurance. This post will be amended to update the changes.
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BROKING SYSTEM IN GENERAL INSURANCE

After the opening up of the insurance market to private capital the next most talked about event has been the advent of brokers into the market. Traditionally, insurance has not been the forte of brokers and only agents, who were next-door neighbours, acquaintances or wives of friends, were allowed to operate in the direct insurance business. The role of brokers was limited only to re-insurance. In its pursuit to develop the sphere of the insurance business and to give flexibility to react to changing market environment IRDA introduced new institution of brokers by bringing in place Brokers regulation of October 2002. Direct broking has now gained official recognition with IRDA issuing in licenses to the first batch of brokers in the month of January 2003. The brokerage system is likely to have an interesting growth path in next few years.

Brokers offer a host of value-added services to insurance customers including risk analysis, design of insurance-programmes, analysis of risk-providers, negotiating with insurers and claim assistance. They dominate the developed insurance market. In USA 70% of non-life business is transacted through brokers. Broking activities have kicked-off in Indian market and presence of brokers will equip the market with a more motivated and more focused marketing force that would hasten the business development. Broker model has been introduced to give a ‘feel-good’ to the customers.

Concept of Brokerage System

‘Insurance Broker’ means a person for the time being licensed by IRDA under Regulation 11, who for remuneration arranges insurance contracts with insurance companies and/or reinsurance companies on behalf of his clients. Contrary to agents brokers are supposed to be directly looking to the interest of the customer. The client appoints a broker. He conducts a fact-finding on customer’s need and carries preparatory work to insurance contracts and, where necessary assist in the administration & performance of such contracts, in particular when claim arise. He understands the commercial priorities of a client and develops an appropriate risk management strategy to formulate apt insurance programme at optimum premium. He interacts with insurers and reinsures to conclude a better-rated and best available risk protection cover suitable to the needs of the client.

Where agent deal with standardized risk solutions of personal class, the broker has the strength and sophistication of handling extremely complex risks with contractual certainty supported by fast and accurate business deal. Agent does not have access of whole to the insurance market but broker have cosmic relationships with many insurers. World over insurance brokerage houses are large, sometimes even larger than carriers of the risk.

The primary role of broker is to facilitate the transfer of risk through placement of insurance cover on behalf of an insured. They have to inspire in underwriters the confidence to accept the risk presented. There can be no universal solution that will transform every risk into an attractive proposition to insurers and for some clients this may well be impossible. Each case is considered on its merits and individual problems addressed. There are many areas where broker’s input is of great value.

As Match-Maker:

Brokers play an important role of matchmaker bringing the insurers and the clients together in the spirit of goodwill, mutual trust and long lasting relationship. They make business mutually desirable for both the insurer and the insured. They tailor risk-financing programmes to the matchless uniqueness of client firms using analytical tools and technical expertise to determine what is best for their clients. As substantial amount is invested in technology and professional development they are better placed to negotiate price, terms and conditions or even get clients the products that precisely fit their need. Brokers not only look into pricing factors but also see the bend of safety mechanism that exists and so forth. The concept of broking virtually eliminates the need for consumers to keep track of their insurance programme. It offers complete solution right from risk profiling to claims administration, which makes it easier for clients to concentrate on their core business. As pricing of risk is based on the principle of risk-management, insurers are also encouraged and they appreciate better risk-management procedure practiced by insuring community in guidance of skillful brokers. They are real matchmakers.

As Consultant:

These professionals offer insurance consultancy services, risk-management services and services for uninsured loss recoveries. They provide technical expertise and explain various aspects of risk coverage. They deploy their understanding of the insurance market and the strength of their relationships with insurers to secure cover for their clients at affordable cost. Risk-consultancy to corporate clients is greater need of changing times. The insured is generally a layman and the insurer is a technical expert. Broker nourishes relationship between them by his expertise to satisfy both. In insurance it is practice to fix price before the cost is known. Hence there are good and bad rates and not and not good and bad risks. Broking concept should stop ridiculous rate reduction. As a consultant brokers are expected to balance both the rates and terms so that loss of one when shared by any, all survive and leave none to break. This model will flourish for long if brokers act as ‘ priest of marriage’ and not as ‘advocate of divorce’

As innovator:

The most important concept of broking in insurance is that a broker function not only as intermediary, as the term broker applies, but also as innovator. If the insurance product do not exist that meet the need of the client, then they try to invent it and sell that idea to insurers. In this way instead of simply acting as the buyers’ agent in purchasing the best available product from the insurance market they often develop the most excellent products and try to sell it to insurers. This sort of creativity and promotion is now expected to put further challenges to insurers who have remained under the sheltered environment where the insurance product are simply sold on ‘what is available basis’. Now they will have to take on new marketing strategies to offer products, which clients needs.

Role to lessen ‘gap of expectation’:

General Insurance is an intangible product, contingent to the happening of an event that may or may not happen and tested for its utility or otherwise at a future date. There is ‘informal-gap’ between the providers and the served throughout the contract period. This ‘information-gap’ is converted into ‘gap-of-expectation’. Traditionally, the insured has little to say in drafting of contract, which is often technical. Insurance contracts are unique; two parties of contract do not draft contract. The price & terms depends on insurer. Contradictory expectations, no adherence to commitments, different interpretation of basic agreement results in ‘gap-in-expectation’ between the parties of contract. Genuine conditions apart, in present insurance industry, human greed, system failures, bureaucratic approach etc have made things very erratic. There is no question that ‘it takes two hands to clap’ and inadequacies lay both with insuring public and insurance companies. It is here that brokers can play a key role to lessen this ‘gap-of-expectation’. They can offer badly needed depth to this service industry and perhaps more transparent and well-regulated system than other entities in distribution of insurance products. Brokers also have a role to correct distortion in non-payment of claims. They serve to fill gaps in insurer’s service and ensure seamless and efficient service to clients. They understand insurer’s procedure better and respond as required to emerging demands from clients. The Regulator has stipulated time frames to settle claims. These need to be adhered if not bettered and the broker can ensure that insurers regard these rules in the interest of the clients.

WORKING OF BROKING-MODEL & CURRENT REGULATIONS

The Malhotra Committee in its report submitted on January 7,1994 anticipated the need for brokers in insurance business. The IRDA Bill, 1999, inserted Section 42-D to the Insurance Act, 1938 & introduced brokers through legislation. The Broker Regulations were notified on October 16, 2002 permitting the institution of brokers and regulating their operations. The working of brokers, their remuneration & market access status is decided by I.R.D.A. Professional standards of brokers are subject to both their self-regulatory bodies and requirements of registration with designated authorities. The status of broker is legally and professionally distinct from agents.

To his principal, the agent owes the duties such as:

Ø      The duty of carrying out transaction for which he is employed.

Ø      To obey his instructions and to act strictly in terms of his authority.

Ø      To act with reasonable and proper skill.

Ø      To account to the principal for the money received.

Ø      To deal honestly with the principal.

The broker, in addition, has the duties of:

Ø      Ascertaining the needs of his client by instruction or otherwise.

Ø      Using reasonable skill and care to procure the cover his client has asked for. &

Ø      If he cannot obtain what is required he is expected to report in what respect he has failed, and seek his client’s alternative instructions.

A broker is required to have certain qualification, undergo training and pass an examination to be eligible to apply for a license. In addition they are required to have capital norms, insurance cover for professional liabilities, observe codes of conduct, implement accounting regulations and other compliance norms with regulations as befits a professional body. The authority on being satisfied that applicant fulfills all conditions specified for grant of license issue a license that is valid for 3 years and the broker is supposed to get it renewed before 30 days of its expiry. Regulator has right to inspect brokers premises to ascertain how he is conducting business. Brokers are also required to submit half yearly results before regulator.

The broker-model works as under:

Table: 1

	Broker- Model	Agents- Model
01	Represents the customer/ organisation. Obtains detailed knowledge of clients business and philosophy.	Represent the insurance company. Insurers decide how they should function.
02	Minimum investment before getting license is Rs. 50 lacs. For re-insurance brokers minimum capital requirement is Rs.200 lacs and for composite brokers Rs.250 lacs. No part of capital of an applicant shall be held by a non-Indian interest beyond 26% at any time.	No substantial investment required.
03	Required to take professional indemnity cover of minimum Rs 50 lacs to assure security of the client’s funds.	No professional indemnity cover is required. No implied term to exercise reasonable skill & care.
04	Responsibility to provide services such as insurance consultancy, risk management and uninsured loss recoveries through out the year	No commitment to provide risk management services.
05	Assistance in payment of premium, lodging, negotiating and settlement of the claims	This is the discretion of agent to help at the time of distress.
06	Maintain data bank for the client and chart out risk management programme on scientific basis. Also maintains detailed knowledge of available market.	Maintains his own personal renewal data chart of various clients.
07	Carry the insurance business in such a manner that not more than 50% business in first year of business, 40% in 2nd year and 30% from 3rd year onwards shall emanate from one client.	No restriction for agents. However no corporate agent can have a portfolio of insurance from one person/ one organisation under which the premium is in excess of 50% of total premium procured in any year.
08	Keep a deposit for a sum equivalent to 20% of initial capital in fixed deposit with any scheduled bank, which shall not be released without prior permission of regulator.	No deposits are required.
09	He should not suffer any of disqualifications specified under s/s(5) of Section 42 D of Act. He must have necessary infrastructure such as office space, equipments and trained manpower. Two persons in his employment must have requisite qualification as stated in the Act. His Principal officer must receive at least 100 hour training from recognised institute and must have passed an examination conducted by National Insurance Academy, Pune.	No strict stipulations except 100 hours training and to pass an examination conducted by Insurance Institute of India, Mumbai

Brokers Regulations 2002 specifies three categories of brokers:

1.      Direct Broker

2.      Re-insurance Broker

3.      Composite Broker

Apart from an individual, a company, firm or co-operative society can apply for a broker license.

Direct Broker:

Direct Broker means an insurance broker who for the time being licensed by the Authority to act as such, for remuneration carries out the functions specified under Regulation 3 of IRDA Brokers Regulation, 2002 either in the field of Life Insurance or General Insurance or both. He carries out the following functions:

  Obtains detailed information of the clients’ business and risk-management philosophy.

  Familiarise himself with the client’s business and underwriting information.

  Renders advice on appropriate insurance cover and terms.

  Identifies adequate levels of limits.

  Maintains detailed knowledge of available insurance markets.

  Negotiates competitive terms and reasonable rates.

  Submits quotation received from insurers for consideration of client.

  Provides requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover.

  Acts promptly on instructions from a client and providing him written acknowledgements and progress reports.

  Assists clients in paying premium under section 64-VB of Insurance Act.

  Provides services related to insurance consultancy and risk-management.

  Eliminates under-insurance and incomplete coverage of perils in insurance contracts.

  Provides reliable report on surveys and valuation and assisting in the negotiation of the claims.

  Maintains proper records of claims and ensuring prompt recoveries from insurers within the time frame set by the regulator.

Re-Insurance Broker:

Reinsurance broker is an insurance broker that arranges re-insurance for direct insurers with insurance and re-insurance companies. He deals with national and international professional underwriters. Re-insurance by treaty method is for future risks and is based on blind faith of one specialist into another experts underwriting. Broker’s role is to strengthen this belief for a long-term relationship. He carries following functions:

  Familiarise himself with the client’s business and risk retention philosophy.

  Designing re-insurance programme.

  Maintains clear records of the insurer’s business to assist the reinsurers’.

  Renders advice based on technical data on the re-insurance covers available in the international insurance and the reinsurance markets.

  Maintains a database of available reinsurance markets, including solvency ratings of individual reinsurers.

  Renders consultancy and risk management services for reinsurance.

  Selects and recommends a reinsurer a group of reinsurers.

  Negotiates with a reinsurer on the client’s behalf & completing placement of orders well within time limits.

  Assists in case of commutation of reinsurance contracts placed with them.

  Acts promptly on instructions from a client and providing it written acknowledgements and progress reports.

  Collects and remits premiums and claims within such time as agreed upon.

  Assist in negotiation as well as settlement of claims.

  Maintains proper records of claims.

  Exercise due care and diligence at the time of selection of reinsurers and international insurance brokers having regard to their respective security rating and establishing respective responsibilities at the time of engaging their services.

Composite Broker:

A composite broker represents the insured as a direct broker, and at the same time represents the insurer as its reinsurance broker. He can be a producing-broker as well as placing-broker. He gets paid twice for his service and advices to two risk carriers on the same risk. He carries out any one or more of functions mentioned in Regulation 3 & 4 for direct brokers and reinsurance brokers respectively. It is not unusual for composite brokers to deal with customers as direct brokers and gather underwriting information and present it straight to reinsurers, circumventing or marginalizing the direct insurer. Composite broking is an area of hypersensitivity but regulation now recognises it. It has the inherent disability of conflict of loyalty and interests as the broker simultaneously represents the risk producer and the risk carrier. Such an arrangement could in addition lead to explosion of fronting arrangements. Composite broker could tie up reinsurance arrangements at lower rates and bring pressure on primary insurer to front for business. Further the duties; responsibilities and functions of two roles are in disagreement to each other. Preferably there should be no licence for composite broking; because of their enormous reinsurance clout, they will render the direct brokers redundant. Moreover, there is also a danger of insurance companies surrendering their basic underwriting functions to the composite brokers who will arrange everything from cradle to grave. This could even lead to extravagant cessions to foreign reinsurance at the cost of Indian market. This issue also came before the A.C. Mukherjee committee and the committee has recommended that the licencing of composite broking should be discontinued immediately.

Positioning Brokers in Regulated Environment & Role of Regulator

The precise scope of new regime of intermediation of insurance products has already been set in stone. Insurer’s primary front line channel of distribution is increasingly expensive and not providing them the return needed. Insurers need efficient and effective ways to earn premium and develop customers while at the same time they want to drive cost out of their balance sheets. The current situation, which is in transition, has become complex and extraordinary, as brokers have emerged not as facilitator but as competitor to risk carriers. Brokers need to manage distribution as their core business and to make business-partnering their core skill, but not in competition with risk carriers. This issue is difficult to address but the constructive role of regulator can position brokers at right place in delivery business. The following issues confronting the broking-model assume formidable proposition.

Regulated Rates and Products:

The insurance sector that is liberated is yet under substantial price control. In competitive business model presence of tariff, which governs the product feature and pricing in significant number of portfolios, inhibits the customer and provider to exercise their full choice. In such a restrictive state brokers find no innovative and competitive edge to promote the interest of consumers. Brokers perform their best in a market where there is no price or product feature control. The present partial liberalisation has enabled the creation of a competitive environment but controlled features it is difficult for brokers to provide value-addition in their services. This state of market encourages unhealthy practices to flourish. This is the reason that the brokers were put on the firing line in the very first year of their appearance in the market. Public-sector insurers complained that brokerage-model impose the increased cost without any corresponding benefit. In regulated market brokers are not in a position either to improve the features of coverage or reduce it’s pricing. They also complained about the engagement of brokers in unethical practices like premium rebating and other allurements to tap the market especially the creamy layer of insurance business. Unfortunately, even before picking up the pace they got embroiled in controversies over alleged rebating. The regulator reduced the margin of difference between agency commission and brokerage but this constraint will keep confronting the brokers till the price and product features are brought out of tariff.

Regulator has a major role to look into this aspect because, unlike India, non-life insurance in most developed countries is not bound by tariff regime and premium is negotiable for all contracts. To dismantle the tariff system is, as such, the foremost demand of the brokers. Moving away from tariff not later than April 2006, as indicated, to fully market responsive system will definitely increase the scope of broker-model in this sector.

5% Special Discount:

The practice of doing business directly with PSU’s and Government bodies without any intermediation cost was introduced in August 1969 and this practice continues till today. The 5% special-discount for corporate-sector was good with a view to discourage benami-agency-system that continued to operate even after the nationalization of the sector. This feature of 5% discount is peculiar to Indian market and not encountered in other markets.

Government organisations and PSU’s also have the directives from CVC to discourage usage of middlemen. With tariff regulations no value-addition is possible through intermediaries. It only adds cost of insurance to these organisations. The quality of professional advice offered alone cannot be justified to increase the 5% cost of the insurance.

The share of private-sector corporate bodies entitled to 5% special discount for fire and engineering business is estimated about 15% of Rs.14000 crore General Insurance business. May be because of this huge worth, in the very first year of their operations this segment was targeted by brokers, as there are reports, by offering kickbacks and rebates as the differential (between 12.5% brokerage and 5% special discount) was as large as 7.5% to allure this sector where profits or reduction in cost is a key objective of business. Luring clients with overriding commissions became rampant and various kinds of practices were followed to grab business. The regulator was forced to examine this issue. The special discount has been allowed to continue and the margins in brokerage and standard discount have been reduced substantially. Now to acquire the business of big clients, having paid up capital more than Rs.25 crore, the brokers will get only 6.25% brokerage for tariff products. The brokerage admissible is 7.5% for corporate having paid up capital between Rs 3crores to Rs. 25 crore. Brokers should not use his ‘countervailing power’ to squeeze deals that are patently unfair to the insurers, lest he should lose the goodwill of insurer community.

Legal Complications:

It is trite law that a broker is the agent of the insured and therefore owes duties to the insured rather than insurer. In practice, this commercial reality may complicate matters. He may be held liable for breach of an express term of contract or implied term to exercise reasonable skill and care. He will be liable to insured for defaults of not placing right insurance or may be blamed for not checking the policy wording, particularly an exclusion clause in accordance with clients’ instructions. In developed market there are ample of examples for such litigations. Though the regulation provides compulsory professional indemnity cover as a pre-requisite to practice as broker but still the threat of legal complications may turn the thing very unpredictable. Further non-availability of cover according to regulatory norms may also retard engagement of brokers.

The brokers are not only responsible to their customers but it is also expected out of them to act properly on technical issues as well as on matters relating to due diligence and truthful conduct of business towards insurers. Recently regulator has exercised its penal power to suspend a composite broker for improper conduct in relation to placement of reinsurance liability risk of Ranbaxy Laboratories Limited. Regulation has begun to bite in insurance sector and the broker community must carefully observe diligence and reasonable skill and care in broking deals, else the results may be shocking.

NEED OF BROKING SYSTEM IN INDIA

The insurance industry is currently run at unacceptable cost. Brokers can reduce pre-sale and post-sale cost of insurers and in such a situation insurers can concentrate on their core business i.e. underwriting and leave the distribution to brokers. Private insurers that have limited capital and resources have practically no other viable option but to use this most vibrant & useful middlemen to handle their line of products. Traditionally, the Public-sector insurers relied on officers and development officers to widen and create insurance markets. They were not able to fulfill their expectation. The present insurance market is mainly lenders-driven market or else where the requirement to have an insurance cover is because of some statutory compulsion. The PSU’s have realized this hard reality even before the start of the game that their own marketing force cannot be the movers and shakers of future market. This seems the reason of offering VRS to slim their fat size. As the direct marketing force has been reduced substantially in PSU’s, the brokers now have an equal chance to develop themselves as their distribution partner.

Broker-model has a distinctive feature that ensures the patronage of particular consumer segment that values the choice presented by brokers. Inherent limitations of the individual agent have contributed to leave huge gaps in the spread of insurance, which are potential area for brokers. They can aim to combine high-end sales with mass marketing approach by segregating insurance business in terms of corporate and retail customers.

Retail-Segment:

The effective way to reach to masses is to grab the retail segment. This segment includes motor, health, personal accident and package policies like householders and shopkeepers’ covers. Motor is key segment of business. Excluding motor the retail segment constitutes only 15% of General Insurance business. This poor performance is largely due to lack of adequate distribution channel rather than lack of products. In fact, the insurance industry has developed a wide array of products over last few decades. However, it is anybody’s knowledge that not more than 40% of these products are in regular use. This means either the products does not meet the requirements of the target group or the traditional marketing force is not fully aware of the availability of these products. By tapping such under-served niches, brokers can expand the retail market substantially. The individual is not the whole very insurance conscious. He is aware of a few of common forms of insurance but will probably have no conception of the enormous variety of covers, which the insurance market provides. He may also be prepared to concede that the idea of insurance is a good one, but he still tends to be reluctant purchaser. His reluctance is mainly because of payout in return of which he receives no immediate tangible benefit and to some extent because of his perception that it is very difficult to get a claim from insurers. The brokers’ prospect may be bright if they take the lead to improve the situation from this place. They can play the role of educator to develop in this line. Brokers need to do more than what insurers and traditional intermediaries have done so far. Clients need far more than simple introduction to available covers. Broker’s task will largely be to select most appropriate cover from a range of standardized policies and wherever required he can negotiate additional endorsement on standard packages or can work on tailor made covers in consultation with insurers to suit particular group or inhabitants of particular zone.

It is the influence of brokers that one can find floater in family package health cover, critical illness cover as supplement to medi-claim policy and inclusion of pre-existing disease after four claim free years in succession. Personal line of business is mostly non-regulated business and brokers have huge scope to negotiate both pricing and product features. To put their finger on right pulse brokers must assure post-sales service and doing so they can be seen far ahead on road leaving their competitors miles to the rear.

Motor business is the major portfolio for insurers. It constitutes 40% of general insurance market. To maintain growth in profitable private car insurance segment insurers have signed a series of MOU’s with lead manufacturers, distributors and financers. Insurers have preferred Corporate-Agency-Model to distribute this major product. It is difficult for brokers to grab this portfolio without any value-addition. They have to develop business relationships and post-sale service is the key area that can give some mileage to them, as the traditional agency force has remained deficient in this area and the dissonance is common experience of customers once they meet an accident. Brokers can help their clients by completing formalities of making claim upon his insurers, and possibly for assistance in making an uninsured loss claim against the other motorist.

Health insurance is another area in retail-segment that has huge potential to grow as standalone business. Health needs of the people are increasing day-by-day and more so the cost of treatment is also escalating with parallel pace. Current health care expenditure in India is Rs. 1,03,000 crore, which includes Rs. 86,000 crore, spent on health care delivery and Rs. 17,000 crore on pharmaceuticals representing 5.2% of GDP. This is comparable to the expenditure most developing countries incur on health. However, the coverage of population under private, social and other types of health insurance is limited to the extent of 15%.

Following table shows the form of healthcare coverage in India.

Table: 2

S.No	Type of healthcare coverage	Number of lives
01	Private Medi-Claim cover	80 lacs
02	E S I beneficiaries	3.4 crore
03	Central Government Health Scheme	40 lacs
04	Railway health scheme	12 lacs

Insurance awareness is very poor in our country. This presents an opportunity to brokers to take lead to educate people and to develop and negotiate need based insurance covers in health sector where only one cover ‘medi-claim’ is largely marketed. This policy currently covers only 5% of the population.

One in every 333 Indians suffer from a heart-stroke. Four million stroke victims continue to survive. 20% of the population can develop cancer. Today, the average age of a person who can experience a heart attack has come down from 40 years to 35 years on account of changing lifestyle. All this means additional medical expenditure that may not be adequately covered under general medi-claim policy. Expenses could be incurred even after discharge from hospital. Add to this fact one may even loose his job as a result of falling prey to any illness. Even after taking a cover customers are unsure about whether they can fall back on their medi-claim policy should they be affected with ill health. At the heart of most disputes is the issue of pre-existing ailment.

Floodgates of competition have thrown a challenge to the brokers to develop more innovative covers to deal with the health care issue at large and to make an impressive hold on the market. This is an area where there is ample of scope to redesign the cover and negotiate the rates. Moreover, this will earn them 17.5% brokerage. Health insurance products are Giffen Good- a term used by economist for products where sales rise despite an increase in prices.

Corporate-Segment:

India is shining and showing strong growth in both life and general business. It is expected that insurance business, which is pegged at $ 6.6 billion, would increase to $ 40 billion within next 4-5 years. Insurance premium accounts for a mere 2% of GDP compared to the world average of 7.8% and G-7 average of 9.2%. With increasing sign from manufacturing activities and increasing signs of consumption recovery there are all chances that ‘feel-good’ factor in newly born broker intermediation will turn into ‘feel-better’ as there is vast scope in corporate sector. The share of gross fire insurance business in Rs.14000 crore general insurance market is 20%. The engineering business is 6% and marine constitutes 8%. Latest market reports shows that while the private players are growing at the pace of 90% the growth rate of PSU’s is 5%.

Indian corporate has become more risk aware with development of economy. Due to fall out of September 11 compelled corporate look for better, newer and wider covers besides the traditional operational covers. Corporate-sector requires unique tailor made covers and risk-consultancy services. Risk profile of marine hull, aviation, energy, oil, power, food and beverage, entertainment, broadcasting and other jumbo projects are different not only from industry to industry basis but also from industrialist to industrialist basis. Brokers subdivide a market by introducing more characteristics. They believe to move into niches beyond segments to make their presence felt by the market. Brokers, world over have designed, negotiated and finalized many innovative covers. The first tailor made cover for a Hollywood film covering the risk of death or injury to stars or damage to negatives or tapes causing costly re-shoots and risks from pre-production until release of the film was broker-driven and it was altogether different from standard accidental damage and fire cover. Big corporate will welcome the intermediation of capable and accomplished experts who will make the deals possible on tailor made products best suitable to their organisation. They are not happy even with ‘one-industry-one-rate’ they want specific rates for their organisation.

Mass-Marketing:

India is fast catching up with direct broking. Intermediation through brokers has already changed the way of insurance marketing with mass. Brokers are better placed to sell group insurance covers to a set of people who share a similar need. They could transform urban and semi urban markets in the non-tariff business. Indian consumers have also started looking for real value for their money. Brokers with competitive insurers are already hitting upon innovative and novel ways to reach both the uninsured and underinsured. Some are packaging the goodies of the traders with insurance facility as extra incentive for wooing the cost conscious consumer; some are targeting the same with low served health and accident segment. Market report confirms that new companies are almost targeting 50% of premium income from these nation wide alternate channels.

CONCLUSION

Brokers have vast scope and prospects in the distribution of insurance products. With market-oriented thinking they can generate risk awareness, expand shopper-pattern and develop insurance market. Broking-model is new to the Indian scene as such there are many apprehensions on all sides. Neither the brokers nor the insurers nor have the clients tested each other enough to build mutual goodwill as necessary to become supporters of each other rather than as adversaries who are bent upon to outsmarting each other.

Broking in insurance will increase range, mobility, integration and above all utmost good faith among parties in insurance contract. The market will witness the onslaught of multiple distribution channels that will revolutionise the geometry of insurance products. In the end, the intermediaries that best satisfy their customers will be the winners. The job of brokers is to “think customer” and to guide insurers to develop products that are meaningful and attractive to the target customers. The future promises to hold out a highly competitive environment where only the fittest will survive.

VINAY VERMA, 

M.COM; F.I.I.I.; F.I.C.W.A.; A.C.S.; P.G.D.I.M.; P.G.D.M.M.