The particular role of a car insurance broker would be to act as an intermediary between the consumer and the underwriting Insurance Company. Within this role there are various functions that they carry out in interaction both with the car insurance buying public and the Insurer with who also they place the business.
When a broker places car and motor insurance risks on cover, their function has a major difference to other forms of insurance in that the spread associated with risk is smaller. This is because an extremely high proportion of motor business is eventually placed on the basis associated with ‘one risk, one underwriter’ : that is to say, a Lloyd’s underwriter or Motor Insurance company.
When a member of the general public goes to a motor insurance broker these people expect that the broker should be fully aware of all the covers available and offered in a standard car insurance policy and a commercial motor policy. A broker also must be knowledgeable about the differences in policies plus prices offered by the various Insurance Companies and underwriters with which his brokerage does business.
The Car Insurance Brokers role does not just stop with the supplying and purchasing of the insurance. They should be available to become an intermediary with the Insurer at any time, acting upon the client’s behalf should there be any changes to the policy mid-term of the contract period, or to deal with any claims that need to be made.
The two main insurance areas dealt with by the car insurance broker would be the private individual’s motor policy and the commercial fleet motor policy.
A marked tendency in the large broking house during the past few years has been to concentrate more and more on the commercial motor insurance fleet placings, and less and less on the private sector of the market.
Many large international insurance brokers view the private motor insurance as uneconomic for a fully sustainable business, and so specialist sub-brokers or large provincial and regional brokers are dealing with a greater proportion of this class of motor business.
Car Insurance Brokers receive commissions due to their role as intermediaries which are received from the Insurance companies with which the business is placed.
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The commissions available in the motor market varies somewhat and the recent ‘soft market’ where premiums and commissions are low, have also led the high street insurance broker to seek more profitable business in insurance classes other than Motor. Commissions for a car insurance policy could range from 7½ per cent to 20 per cent although with commercial vehicle legal agreements and large fleet business, brokerage may be agreed on a fee basis which is frequently charged over the whole portfolio with the particular client. In the past a standard amount or tariff which was agreed and even reviewed by the Association of English Insurers professional body (ABI) was used in the UK car insurance market. This is not anymore the case, but this approach still impact on some underwriters in some specialist car insurance policy areas.
In recent years, however , many larger brokers have developed what is known as a ‘direct dealing account’. This is where the brokerage introduces a sub-broker to underwriters and then permits him to offer directly with them under a fronting deal with their own marketing. The trading accounts, however , will still pass through the key broker. The commission is split between the main broker and the sub-broker, with the sub-broker usually commanding the larger percentage. An important restriction applied to this sub-broker within the fronting agreement is the fact that he must pass the premium to the main broker within 30 days connected with inception of the risk.
The role of the motor broker has changed to some degree in recent years with the development of Internet based estimate systems.
In particular the insurance comparison sites who have taken over the role of the broker to some extent. These quotation systems have been used successfully however by way of some car insurance brokers who have designed and embraced the technology and today offer full on-line comparison rates from their panels of insurance providers. The advantages are a very quick service, although it might still be advantageous for the broker in order to ‘shop around’ for the best deal for one’s client, particularly if the cover is perfect for a non standard driver or maybe car.
Whatever the changes in the technologies and methods of Car Insurance delivery there will always be clients who want a human face and to speak to someone directly about their insurance demands. The role of the broker is ultimately communication.