Why
is insurance needed?
Insurance is one way of protecting yourself against the risk of
unexpected financial losses. It does not remove the risk, but
it can partially compensate for losses incurred. Through the payment
of premiums, you transfer the cost of a major loss from you to
an insurance company.
Insurance
operates on the principle of shared risk. A group of people pays
in specified premiums to a common pool. Funds from the pool are
used to cover individual losses. The amount of premium each individual
pays is based on the frequency of past losses by the group, plus
the costs of administration and selling, divided by the number
in the group.
Insurance
is the foundation of financial security for you and your family.
It protects your financial resources against the uncertainties
of life so you can plan for the future.
Choosing
an insurance product is an important decision, but it can be complicated.
This is where the role of experts, i.e. insurance brokers comes
into play.
What
does a broker do?
The broker's task is to help one identify the risks that a person
or his business may be exposed to. Broker can then advise on what
risks should be insured against, and then the broker will canvass
the insurance market to obtain the best insurance protection to
meet your needs, at a competitive price. The broker then arranges
the insurance policy, and documentation, and can also help you
with information when required, especially if you have a claim,
and your broker will remind you when policies are due for renewal
or amendment.
Your
broker will provide ongoing services?
Insurance brokers undertake all the detailed
discussions and negotiations on insurance matters for you, leaving
you free to get on with running your business or tending to your
own daily responsibilities.
As
your circumstances change, the broker will review your policies
ensuring that the policy is appropriate, and that you remain well
protected. He may suggest amendments to the policies in the light
of market changes or changes in your business or domestic situation.
This expertise is aimed at saving insurance costs and improving
the effectiveness of the cover.
What
is risk management?
Brokers suggest to their clients to adopt risk management procedures
and systems to reduce their risks, and make savings on their insurance
premiums. Risk management is all about taking precautions to reduce
the risk of loss - this might include fitting smoke alarms or
sprinkler systems, or extra security on windows and doors. In
commercial premises, it might involve safer working practices
within the factory or more staff training in safety, or even practice
fire drills and evacuation procedures. There are financial risk
management techniques as well for larger businesses, which are
all designed to lower insurance risk exposures and costs.
Which
broker should I deal with?
It is always important to deal with an insurance broker who is
a member of the Insurance Brokers Association of India. This is
the professional body, which ensures that broker members operate
with accuracy, efficiency, and professionalism, as set down in
the Code of Conduct to protect you as their client.
Can
I change broker at any time?
Yes, you can change brokers without any risk to your insurance
programme. Policies are normally put in place for twelve months,
and it makes sound sense to let the policy run for the year unless
there are serious reasons for shifting it. However, you can change
brokers at any time. A simple letter of appointment is all that
brokers need to begin acting on a client's behalf, and your new
broker can negotiate a change in insurer also if that is really
required. However, if you change mid term, you may incur cancellation
charges from the insurer.
Isn't
it cheaper to go to the insurance company direct?
Insurers have to pay for administration by their own staff, and
many direct sellers incur heavy advertising costs, so you wont
necessarily find it cheaper to go direct to the insurer. Not all
policies are the same so you would have to telephone or call around
at about eight major companies to get an impression of what is
available.
Brokers are often able to get more competitive prices for insurance
because they handle much of the administration for the insurer,
and because they place a volume of business, which earns them
cheaper prices, which they pass on to you.
Consumers should also be wary of a "cheap product".
Brokers select the most suitable cover for your particular needs,
which may not always be the cheapest.
How
can I be sure they are not just selling me a product off the shelf?
Everyone's insurance protection needs are different. Brokers are
able to negotiate with insurers to extend or adapt policies to
their client's advantage. They are able to tailor protection programmes
to your requirements and they can often achieve results, which
you could not achieve as an individual.
Brokers
want to develop long-term relationships with their clients so
they want to the do the right thing by you. They don't want to
sell you an unsuitable product, just because it is easy or pays
high commission. That is not being profession or ethical. They
want the product, which is best, suited to you and your needs
and this may not necessarily be the cheapest available.
Claims?
A broker provides a very useful service in processing insurance
claims. An integral part of the broker's service is to lodge claims
on your behalf. If required they can assist with the completion
of all the necessary documentation and coordinating the loss adjuster,
the insurance company and the tradesmen necessary to make any
repairs.
A
broker can ensure that no time is lost in processing the claim
by ensuring all the necessary information is provided to the insurer.