- Date : 21/05/2020
- Read: 4 mins
Who is an insurance intermediary? They act as a bridge between the end customer and the insurance provider.
It was announced in the budget speech that foreign companies will be allowed to own insurance intermediaries in India fully. If you have been wondering who an insurance intermediary is, read on.
Who is an insurance intermediary?
Insurance is considered a complex product, and it is not easy for the insurer to take care of all the processes involved in sales and administration of related services. An insurance intermediary acts as a bridge between the insurance provider and the end customer. They could be involved in the sales process like an insurance agent or an insurance broker, or the claims process like a surveyor or a third-party administration. Let us look at each of the intermediaries in some detail below.
Related: 5 Mistakes you must avoid when buying a term plan
Who is an agent?
An agent is an individual or a corporation that is authorised to solicit and procure insurance business for the insurance company they represent. The business could be related to renewal and revival of existing policies or sale of new policies. An agent who represents both a life insurer and a general insurer is known as a Composite Insurance Agent.
Who is an Insurance Broker?
An insurance broker is an individual licenced by IRDAI to arrange insurance contracts with an insurer on behalf of a client. A broker can represent multiple insurance companies.
How is broker different from an agent?
An agent is permitted to represent only one insurance company within a sector – i.e. a general insurer, a life insurer, or both, but not two general insurers. A broker can represent multiple general or life insurers or both.
IRDAI licences both agents and brokers for general insurance or life insurance or both. They have to follow the code of conduct laid down by IRDAI under respective regulations.
It is important to remember that neither an agent nor a broker can give you a discount on the premiums to be paid for the insurance policy. Any such offer would be against Section 41 of the Insurance Act. Only an insurance company can offer a discount on premium, and it has to be in accordance with the policy’s terms and conditions.
Related: Did you know you can avail a loan against your insurance policy?
Who is a Surveyor?
A surveyor or a loss assessor plays the role of determining the extent of damage sustained by the insured. When a loss event occurs, the insured and the insurer may not agree on the actual loss. An independent surveyor brings them on the same page. To be a surveyor or loss assessor, the company or the individual has to meet the criteria laid out by IRDAI. The criteria vary based on the kind of surveys to be performed. For example, a surveyor for motor insurance must be either a mechanical engineer or an automobile engineer. On the other hand, a surveyor for marine insurance must be a marine engineer or a naval architect. A surveyor is engaged only if the claimed losses are over Rs 50,000 in motor insurance or over Rs 1 lakh in other insurance. These limits are reviewed and revised by IRDAI every three years.
Who is a Third-Party Administrator?
Third-party administrator or TPA is an organisation that has been licensed by IRDAI to process claims and provide cashless facility. Insurance companies outsource claim management or some aspects thereof to TPA with an aim to provide a quick turnaround to end customers. They act as an intermediary between the insurance provider, the policyholder and a service provider (for example, a hospital in the case of health insurance and a mechanic in case of motor insurance). While TPAs can be involved with various aspects of claim processing, their primary responsibility is to provide cashless services – especially cashless hospitalisation.
These are the primary insurance intermediaries currently defined by IRDAI. They can add other intermediaries based on the evolution of the insurance industry. Intermediaries help in achieving standardisation of the service provided and allow insurers to achieve greater efficiency. Further, they also help increase insurance penetration in a wide market like India. Understand what is a term plan? And see what it entails and how the intermediaries have a part to play in making the process easier.