Insurance agents and insurance brokers are intermediaries between the client and the insurance company. Representatives of the insurance company organize pre-sale work for the conclusion of the contract and accompany the insured before signing the insurance agreement. What is the difference between a broker and an agent, let's try to figure it out.
Legislative framework
The legal status of insurance agents and insurance brokers is defined in the Law “On the organization of insurance business in the Russian Federation”. They are participants in the insurance relationship. Agents and brokers are also subjects of the insurance market that are directly involved in the sale of insurance products to interested customers. Given the requirements of the law, insurance companies promote their products by attracting intermediaries: insurance agents and insurance brokers.
In addition to the main document regulating the insurance system, their activities are regulated by the Civil Code, a number of federal laws on joint-stock companies and limited liability companies, the Regulation on maintaining the register of insurance brokers and other by-laws.
Functions of Insurance Intermediaries
The activities of insurance agents and brokers are expressed in the provision of intermediary services to insurance companies and their clients on the following issues:
- attracting customers for insurance policies;
- conclusion of insurance contracts;
- accompaniment of insurance documents during their validity;
- amending existing contracts when changing material conditions;
- settlement of insurance payments from execution of the act to receipt of monetary compensation;
- advising on the conclusion of insurance contracts.
Ban on the activities of insurance intermediaries
Individuals who have an unexpunged criminal record in their biography are not entitled to engage in insurance activities and act as an insurance agent or broker. It is also forbidden to mediate a specialist whose criminal record is not extinguished. The leaders of insurance companies that managed the organization for the past three years before declaring the company bankrupt, also can not engage in intermediary insurance activities. The same restrictions apply to employees of insurance companies who work directly with the organization’s management bodies and its subsidiaries.
An insurance agent, a broker with an insurance company that is not registered in our country, do not have the right to enter into any contractual relationship. The only exception to this prohibition applies to reinsurance contracts.
Responsibility of insurance intermediaries
The agent and broker of the insurance company are responsible for:
- failure or poor performance of their direct functions;
- disclosure of information that constitutes a trade secret of an insurance company;
- transfer of personal data of customers;
- compliance of the information provided for the implementation of mediation.
To work with policyholders, insurance intermediaries have the right to receive data on the financial condition of the insurer, the availability of permits for the implementation of insurance activities.
Insurance agent - individual
Both a citizen and a legal entity can work as an insurance agent. An individual can be an individual entrepreneur, work under an employment contract or civil law agreement.
Monitoring the work of insurance agents is carried out by the insurance organization. Its employees check agent reports on work done for the period specified in the signed contract. As a rule, once every two to five days, the insurance agent is required to report to the insurance company. He provides copies of the realized insurance policies, presents blank forms for verification, submits the contributions received from the insured.
The insurance agent promotes insurance products from the insurance organization to the policyholder. In addition, for the quality of agency activities, he informs potential consumers about the type of insurance, the cost of the policy, the level of insurance protection.
Insurance agent - legal entity
An insurance agent may be an organization or company. As a rule, this is a company that, by the nature of its activity, has an indirect relationship with the insurance business. It can be tourist organizations, car dealerships, car services, law firms (notaries, appraisers, lawyers).
Also, insurance companies can be law firms that are created with the aim of providing insurance companies with intermediary services (agents).
Insurance broker
Intermediary activities as an insurance broker can be carried out by an individual or legal entity. To do this, you must go through the mandatory registration procedure. If a company operates as an insurance broker, then it is mandatory to indicate this type of activity in its charter or regulation. If an individual decides to engage in broker insurance work, then he must be registered as a business entity with an indication of broker activity in the registration documents.
For the legal conduct of insurance operations, an insurance broker must be entered in the register of insurance brokers. He must insure his civil liability for possible losses resulting from his activities. Entering into a contractual relationship with an insurance broker, the insurance company determines the types of insurance products for its implementation, the size of the brokerage fee for the work done, and the procedure for transferring fees for sold insurance policies.
General parameters of mediation
Comparative characteristics of insurance agents and insurance brokers allows us to conclude that both individuals and legal entities can act as intermediaries. Both the agent and the broker work with insurance companies, enter into a contractual relationship with them. These intermediaries work with potential insurers who enter into insurance contracts. Insurance brokers and insurance agents do not have the legal right to speak and record themselves as beneficiaries.
Insurance intermediaries are not responsible for the financial results of the insurance company. Also, they cannot participate in determining the amount of insurance compensation upon the occurrence of an insurance event. Based on the results of the work done, insurance brokers and insurance agents receive agent remuneration, which is calculated in a certain percentage of the received insurance premiums.
The difference between an insurance broker and an insurance agent
The main discrepancy between the activities of these insurance intermediaries is that the agent acts only on behalf of the insurance company, and the broker can represent the interests of both the insurer and the insured. The agent reports on his work only to the insurer. The broker is responsible both to the insured and to the insurance company for the quality performance of contractual obligations.
Both ordinary citizens and law firms can engage in mediation in insurance.The difference between an insurance agent and an insurance broker is that brokerage is possible only with permits for this type of activity. Therefore, in most cases, legal brokers work as insurance brokers.
As a rule, the activities of insurance agents are limited to working with one insurance company. There are situations when, when concluding an agency contract, the insurance organization obliges the agent not to work in the interests of other insurers. In most cases, this applies to work under labor agreements. An insurance broker in its asset has the unlimited right to work with any number of insurance organizations.
In addition to working with clients and insurance companies, an insurance broker can provide legal services to buyers of insurance products. So, upon the occurrence of an insurance event, the intermediary organizes the collection of documents confirming the fact of the incident and the size of the losses incurred. Also, the broker can be an intermediary between the insured and the insurance company to resolve issues related to the payment of insurance compensation.
Organization of insurance intermediaries
The control of the work of insurance agents and insurance brokers is carried out by the insurance company and the insurance supervision organization defined by law. Insurers organize the accounting of insurance intermediaries with whom they signed contractual agreements. Such registries are usually posted on official Internet pages so that potential insurers can verify the information about the intermediary.
Insurance agents are not full-time employees of insurance organizations. To conduct work with insurance agents in the offices of insurers, provisions were developed on the procedure for their work, settlements with them, liability for violations, deadlines for submitting reports on the work done.
Today, insurance companies are trying to reduce the cost of paying insurance brokers and insurance agents. To this end, direct sales and the acquisition of an insurance policy via the Internet are gaining more and more turnover. Direct sales are connected with the visit of a potential client directly to the insurer's office and the purchase of the necessary insurance document from the manager. The growth in online sales is due to the reluctance of policyholders to lose their time visiting insurance offices. In this situation, insurance agents and brokers are required to find new methods and approaches to attract customers and increase the volume of insurance premiums received.