Why a broker is not an agent?
Both intermediate in the purchase of an insurance policy and this is enough to treat them identically in popular opinion. In fact, however, more separates them than connects them. What are the basic differences between the activities of a broker and an insurance agent?
The activities of brokers and agents are described in detail in the Law of 15 December 2017 on Insurance Distribution. In its articles, it also defines the most important distinction and answers the question: on whose behalf do these entities act?
An insurance agent acts on behalf of the company with which it has signed an agency agreement. There are also entities that represent several insurers – these specific agents are then called multiagents.
A broker performs activities on behalf of the entity seeking insurance. According to the law, he cannot be affiliated with an insurance company. In practice, he ensures impartiality and provides the Client with a wide selection of offers. The act specifies that brokers cannot perform agency activities, as well as be members of management or supervisory boards of insurance companies. They also cannot have a permanent contractual relationship with insurance companies or own their shares bought outside the regulated market.
Brokers act on the basis of a power of attorney granted by the Client. The trust expressed by a signature is of particular importance here – especially at STBU Brokerzy Ubezpieczeniowi. It is not without reason that our logo features a pen nib symbol taken from the story of the famous Lewis Edson Watterman. The creator of the iconic fountain pens abandoned his career as an insurance broker in search of the perfect writing instrument… after a failed attempt to sign a power of attorney and the loss of a Client.
Scope of service
Agents have a limited number of ready-made insurance products to offer. This is because these offers come from a single company (or just a few insurers they work with). Usually, they use the most popular ones with standard protection conditions. Their business is a mass activity and there is no room for individual offers with preferential pricing, and cooperation with the agent ends when the policy is concluded.
The scope of services offered by brokers is much wider.
Its effect is, first of all, a recommendation of the most beneficial insurance agreement for the Client. However, in order for this to happen, a broker identifies the risk accompanying the activity performed by the Client, analyzes its needs in the context of safety and widely examines the offers available on the market. He also has the possibility to negotiate with insurance companies – both with regard to adding specific clauses protecting the Client’s interest and the price. This leads to the greatest possible individualization of the final offer and maximum extension of the protection provided. The broker stays with the Client all the time – also after the insurance agreement has been concluded (e.g. in the process of loss adjustment, assistance in providing legal services, etc.).
Safety provided by a broker
Insurance brokers are liable towards the Client, therefore, their activity must be secured with a special civil liability policy. According to the Regulation of the Minister of Finance, the minimum sum insured is the equivalent (in PLN) of EUR 1,250,618 per year in respect of one event and EUR 1,875,927 per year in respect of all losses. In practice, experienced brokers go far beyond the minimum values – in the case of STBU Brokerzy Ubezpieczeniowi, the civil liability policy is the equivalent of 15.1 million euros/year.
An indispensable element of trust and safe co-operation is also an obligatory entry in the register of the Polish Financial Supervision Authority.
However, it is worth noting that the requirements for insurance agents are less restrictive. An agent who wants to conduct business must pass an exam organized by the insurance company with which he cooperates.
In the case of a broker, it is necessary to pass an examination organized by the PFSA. It is also possible to obtain a brokerage license without taking part in the exam. In this case, however, it is necessary to document at least 5 years of experience (in the last 10 years) in performing activities directly related to brokerage activities in the field of insurance.
According to the latest data – there are nearly 35 thousand insurance agents and multiagents in Poland. Entities with brokerage qualifications are… over 20 times less! The latest report of the Polish Financial Supervision Commission indicates their exact number at the end of 2017: 1416. The significantly smaller number of insurance brokers further emphasizes the special nature of cooperation with them.
And this particularity is the most important in understanding the role of an insurance broker. This is because in its relationship it goes beyond the standard Client-intermediary obligations. A broker spreads a protective umbrella over the principal, helps him to find individual, tailor-made solutions – cooperates with him throughout the whole period of insurance, and thanks to his actions makes the conditions of protection more and more advantageous every year.