Is Insurance industry moving towards a broker driven market?

Is Insurance industry moving towards a broker driven market?

The Indian Insurance industry is the fifteenth-largest insurance industry in the world in terms of total premium income.

With the relentlessly growing businesses and markets, the risk of financial loss or risk of uncertain loss also increases. This is where the insurance comes into the picture.

Insurance, in simple words, is a contract between the Insurer i.e. Insurance Company and the Insured i.e. Policy Holder.

The Insurance sector in India has the potential to grow exponentially, but the question is “Is our insurance industry moving towards a broker-driven market?

	Insurance Broker
Represents:	You i.e. Customer/Client
What do they do?	Help you choose the most suitable insurance policy amongst different insurance companies and products.
How do they work?	They can give you information about several insurance companies and help you compare their products.

Yes, they are customer centric and provide variety.

1. Customer Centric

Brokers score well in negotiating customers’ interest with insurance companies, with 87% of corporate entities satisfied on this aspect. Price and service are the two most important concerns of customers and more than 70% of corporate entities cited that they are satisfied with prices and servicing by brokers as compared to that of the agents.

2. Preferred Channel

About 80% of the corporates and major business lines prefer the broker channel over direct channel or agents for information and advises related to risk-management, insurance policies.

Brokers are highly educated which enables them to develop niche and customized product as per the customers' requirement.

On the other hand, Agents are bound to sell and promote the products/policies of only the company, they are associated with.

3. Independence and Variety

Brokers can offer a whole array of insurance products and services for an individual or a prospective policy holder to consider. Unlike agents, Brokers are not bound to represent any specific Insurance company, they can offer services and insurance products of various companies all-under-one-roof.

Brokers are required to have a broker’s license issued by IRDA (Insurance Regulatory and Development Authority) which means that the broker will have additional technical and professional expertise as compared to an Insurance agent.

No, they have a limited reach and interest.

1. Limited Services

Insurance broking in India is still emerging. Beyond a select few large and organized brokers, most brokers offer limited range of services. In India, majority of brokers are considered as price-discoverers. Brokers need to scale up to represent customers fully across major services provided by Insurance Agents.

2. Inadequate Reach

High concentration of brokers in major states and cities, preferably in industrial areas implies low penetration in other areas.

This is more severe for semi-urban and rural retail segment. Lack of focus of some brokers on retail customers, geographical constraints, non-traditional platforms such as Mobile and Internet are reasons for under-penetration in the retail segment.

Agents have a better reach across the retail customers and rural areas.

3. Lack of Awareness

The focus of Indian insurance brokers is on business development and corporate insurance sector; hence, most brokers have invested in these departments only, which has led to weakened grip on the retail-customer segment, semi-urban and rural segment.

Most of the customers are unaware of the wide variety of products that may suit their needs better, but are forced to opt for the services offered by Insurance agents.

The insurance broking market is poised for strong growth in the times to come. The drivers for this growth will be expansion in role of brokers, and increase in size and number of corporate entities in India. Brokers focusing on retail lines and rural segments of the society have an important role to play in enhancing network, providing choices to and representing customers.

Furthermore, to protect customers’ interests, the regulator (IRDA) needs to recognize the role of brokers as representing their customers, bring in flexibility in remuneration, and enable brokers to better serve their customers.