Car insurance brokers serve as intermediaries between customers and underwriting Insurance Companies. They perform a variety of functions in this role, both with the car-insurer buying public and the Insurer placing the business.
Brokers are responsible for placing motor and car insurance risks on coverage. This is a significant difference from other types of insurance because the spread of risk in this case is much smaller. Because a large proportion of motor business is placed on the basis ‘one risk and one underwriter’, that is, a Lloyd’s Underwriter or Motor Insurance Company, this is why it is so popular.
A motor insurance broker is expected to be familiar with all the coverages available in both a standard motor insurance policy and a commercial motor insurance policy. Brokers should also be familiar with the prices and differences between the policies offered by different Insurance Companies and underwriters to which they are affiliated.
The role of Car Insurance Brokers does not end with the purchase and supplying of insurance. They should be available to act on behalf of their clients should they need to make any changes to the policy during the contract term or handle any claims.
The main areas of insurance that the broker handles are the motor policy for private individuals and commercial fleet motor policies.
In recent years, a large broking house has focused more on placing commercial motor vehicles and less on the private market.
Private motor insurance is considered uneconomic by many international insurance brokers. Therefore, specialist sub-brokers and large regional and provincial brokers deal with a larger percentage of this motor business.
Car Insurance brokers receive commissions from Insurance companies for their roles as intermediaries. There are a variety of commissions in the motor market. The recent soft market, where commissions and premiums are low have led high street brokers to look for more lucrative business in other insurance classes than Motor. Although commissions for car insurance policies can range from 7 1/2 percent to 20%, large fleet contracts and commercial vehicle contracts may require brokerage fees. These fees are often applied across the entire portfolio of the client. In the UK, a standard rate or tariff was used. It was reviewed and approved by the Association of British Insurers (ABI). Although this is no longer true, some car insurance specialists still use this approach.
Many larger brokers have created what’s known as a “direct dealing account” in recent years. The broker introduces the sub-broker to the underwriters, and then allows him to deal directly under a fronting arrangement with their marketing. However, the accounts will still be handled by the main broker. The commission is split between sub-brokers and the main broker, with the subbroker typically commanding a higher percentage. The fronting agreement stipulates that the sub-broker must transfer the premium to the main broker within thirty days of the risk being taken.
With the advent of internet-based quotation systems, the role of motor broker has seen some changes in recent years.
Particularly, the insurance comparison websites have assumed some of the brokerage role. Some car insurance brokers have successfully used these quotation systems and can now provide full online comparison quotes from their panel of insurance providers. Although the benefits are immediate, it is still beneficial for the broker to “shop around” for the best deal for their client, especially if it is for a non-standard driver or car.
No matter how much technology and delivery methods for Car Insurance delivery change, there will always be clients that want to speak to someone face to face about their insurance needs. Communication is the ultimate role of the broker.
