The contract of Insurance is based on future events, which in their nature are contingent and uncertain. The contract revolves around the happening or non-happening of such uncertain events as agreed by the parties. Insurance is basically facilitated with the help and assistance of insurance brokers and insurance aggregators. Insurance brokers and insurance aggregators differ from each other on various grounds, but the primary intention of both of them remains the same, i.e. to sell the insurance policy.
The use of services provided by the insurance broker as well as insurance aggregator comes with its own pros and cons, making it very important for the person willing to buy insurance to be extra vigilant. The person or party, whether an individual or a company, who is willing to buy the insurance is referred to as insured. On the other hand, the entity that provides the person seeking insurance with an insurance policy is known as an insurer. However, the contract of insurance is not only limited to the insured and the insurer; there is another party known as a ‘nominee’ who plays an indirect role in the contract of insurance.
1. Insurance Broker
An insurance broker, in simpler language, can be described as an expert consultant who has vast knowledge of the risk management and insurance industry. In short, he/she works for the best interests of his client, i.e., that of the insured, and not for the companies that provide insurance. Insurance brokers can be depended on to provide professional advice and guidance in the best interest of the client. Insurance brokers specialise in identifying the specific needs and risks associated with an individual client/ business entity and help them make a firm decision in choosing the best policy that fits their needs and convenience. Insurance brokers are experts who can help you find the right insurance policy to protect your assets and income. They know the ins and outs of insurance and can spot important details that most people miss. This includes benefits, exclusions, terms and conditions, and the costs of different policies from various companies.
Modus Operandi of Insurance Broker
For last many years, people have relied on old generally followed methods to secure insurance coverage i.e obtaining an insurance policy through an insurance broker. This traditional approach is characterized by its slow pace and cumbersome nature, requiring significant time and effort to navigate the complexities of the insurance market.
However, it has its own benefits as well. For example, in the event of any fraudulent promise or information by the broker, he/she can be easily dragged into a court of law as the broker acts as an agent of the customer. A broker is required to have a valid license and necessary training but with a different mandate. The primary duty of the broker does not lie with the insurer but with his/her clients. Brokers are bound by a fiduciary duty towards their customers. Fiduciary duty means a legal-ethical responsibility of trust and confidence existing among two parties who are connected by the broker. Brokers are required by law to keep the interests of their clients supreme, as to the interests of the insurance company. So before suggesting a particular policy to their client, brokers understand the request of their client, browse through a plethora of insurers and suggest the best-fitted policy to his/her client.
As witnessed earlier, in various cases, it has also been observed that a party can take a broker to a court of law if there is a deficiency of service by the broker. The party is free to approach the Insurance Regulatory and Development Authority of India (IRDAI) regarding the malpractices, if any, by the broker, and the IRDAI has the power to cancel the broker’s license if found guilty. The Insurance broker offers the following advantages:
- A party can have direct personal contact with the insurance broker of his choice.
- The regular visits of the clients to the insurance office results in making his/her presence more robust as an investor.
- Once the finalization of policy is done by the parties, the payment in cash mode ensures quick receipt generation.
2. Web Aggregator
A web aggregator is generally a company that is incorporated under the Companies Act 2013 and is regulated by IRDAI. The aggregator which owns or maintains a website for insurance policies. The aggregator provides clients with information on multiple insurance products of different insurance companies. In short, a web aggregator for insurance is an online website portal or a search utility that helps the client to avail a huge number of different types of insurance quotes by providing a common platform for various insurers to display their policies and enabling the client to choose the best from it.
The online Insurance Web Aggregators have entered into various agreements with a number of insurance providers available in the market to show a comparative quote/ price of the policy based on a pre-determined list of individual needs as submitted/requested by customers.
Purchase of Policy via Web Aggregator
In recent years, India has become a tech-savvy country rapidly, and over a period of time, e-commerce businesses have acquired a major share in the Indian industries and have taken the country by storm. In the present day, a person can buy anything and everything online just by pressing a button on the computer or mobile device and make swift payments immediately without any hassle, like in older times. This process is not only faster but also less cumbersome as everything happens at the option and call of the customer and is within the control of the customer only and not of any agent or insurance company.
At present, the concept of web aggregator is used for online inquiries or shopping, enabling end consumers to retrieve information and prices on various financial products. Web aggregator is typically an insurance portal that helps a person compare different products available online and help in purchasing the one that is best suited to the insured by directing the customer to the insurer or insurer to the customer. As per the IRDAI’s list published in July 2018, 29 web aggregators were continuing their operations in the insurance sector.
Various Advantages Offered by Web Aggregator
- They offer a very prompt payment process through multiple online payment gateways.
- Policy aggregator and comparison tools helps in efficient comparison and provide an overview of the salient features, benefits, and coverage of the various insurance policies. This not only helps in selecting and buying the one preferred policy with a qualified online insurance agent but also provides a with 24 X 7 support access.
- As the banks have already verified the payment method, the online purchase is genuine and authentic. The transaction made via payment gateways of banks also acts as evidence of purchase of policy by the client via a web aggregator.
- Online web aggregators have made purchase o the policy very convenient as one can buy from his/her home, office or any other remote location and while even travelling as well.
Other Differences – Insurance Web Aggregator and Insurance Broker
Premium for Companies
The companies have to pay both the brokers and the web aggregator. For aggregators, the IRDAI has issued a guideline that a company can pay up to Rs. 50000/- annually to display their policy on the website. However, for the insurance brokers, the insurance companies pay nearly 2% to 8% towards the sale of a single policy. The rate of payment depends upon regulations by the government,
Premium for Customers
Like the insurance companies, the customer are also charged for purchasing of the policy via aggregator platform but the charges for the customers are comparatively lower as compared the companies. Also, they take 30% of the first-year premium for generating a lead for the business. Whereas, insurance brokers can charge fees from the customers for the insurance claims and for initiating changes.
Connect with Customers
The purchase of policy on the web aggregator platform solely depends upon the decision of the customer as there is no one there to suggest to the customer what is best for the customer as per his needs. Although the aggregators have representatives who work like brokers, their sole job is to take the customer to the aggregator platform, and from there, the customer only has to make informed choices. On the other hand, the broker connects with the client personally, suggests the policies that are best suited to the client, and assists them throughout the process.
Eligibility Criteria
Only a Limited Liability Company is eligible to become a Web Aggregator. The company shall not be included in any other sort of business except the web aggregator business. To become an insurance broker, the applicant first has to choose the type of broker he/she wants to become, i.e., direct broker, re-insurance broker or composite broker. Brokers have different criteria that they are required to fulfil to become brokers and obtain a license.
