Purpose of Insurance Brokers
Brokers and agents are the retail side of insurance. Some insurers underwrite insurance only through brokers, who obtain raw data from layman customers and fill in the complex forms which insurers need in order to thoroughly assess the risk they are being asked to underwrite. Some jurisdictions have special rules about how policies must be printed, assembled, and delivered to insureds, and brokers are responsible for such compliance issues.
Most importantly, insurance brokers assist prospective insureds with developing risk management strategies appropriate to their risk profiles. They work with insureds to find out what kinds of risks they regularly encounter, and educate insureds about what policies are available for each type of risk. Often, an insured may buy a regular policy plus endorsements or additional policies to fill in exclusions in the regular policy.
Insurance brokers also may help insureds obtain multiple layers of excess/surplus lines policies from different insurers over a primary policy, and can work through scenarios for reducing premiums with deductibles or self-insured retentions. For huge risks (e.g., the "slip and fall" risk of a multinational retailer with hundreds of stores), a single policy may not be available to cover the entire risk from the first dollar (or euro) of loss incurred. In the United States, if an insurance broker helps insureds obtain multiple layers of excess/surplus line policies, then the insurance broker also must be licensed as an excess/surplus lines broker.
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