INSURANCE: Are Brokers still relevant today?

I reminiscence my experience when I was working with Inter Africa Insurance Brokers. One day, I entered a potential client’s office and tried explaining the work we do as insurance brokers and how our activities would benefit him at no extra cost to him. But it appeared dreamlike to him and was full of disbelief that, do these insurance brokers exist and the public have not heard so much about them?

The following were some of the few questions he asked when I introduced myself;

• Who pays me and my broking firm for the work we do?
• Are our services to him going to bring additional cost to him?
• How come more people have not heard about brokers?
• Why are more people not using insurance brokers then?
• When I have a loss, can the broker assist me to make a claim?

When the answers are given looked positive to him, he made me insure his vehicle for him and later introduced me to his colleagues in the office. He was so astonished that he could have that service at no extra charge especially in Ghana. The question is, are brokers still relevant today? Someone might be wondering why this question. Brokers are professionals and become relevant when they perform certain roles and duties diligently. Why is the oversight of the roles of insurance brokers in insurance markets so important to consider? Their good conduct is essential to protecting consumers and promoting confidence in the insurance industry.

We have over eighty (80) insurance brokers in Ghana currently. The insuring public is still not feeling their presence. Almost 90% of these brokers have their offices and operating in Accra. Most of these Brokers concentrate so much on non – life companies and cooperate businesses for reasons best known to them. What would the impact be if insurance brokers were to take over the larger part of the insuring public and act professionally? Is the Ghanaian insurance industry deriving the right benefit from insurance brokers? Are brokers in Ghana performing their professional duties? Are the brokers in Ghana professional in their dealings?

Brokers are supposed to perform certain functions which include offering the products of many insurers and, in most respects, represent the interests of policyholders. Insurance brokers typically involve themselves in:

• analyzing the insurance and related needs of prospective buyers of insurance coverage
• researching the insurance markets for products that meet their clients’ needs
• assisting with the policy issuance process and liaising between clients and insurers, including making claims

• Insurance brokers are supposed to be independent of the insurers whose products they ‘offer’ to their clients. Brokers typically are involved with several insurance companies and offer clients a wide choice of vehicle, home, business, and life insurances.

• advising clients on how to file a claim and other administrative procedures
• providing information as to how to mitigate the consequences of the loss

Insurers can also benefit from the involvement of brokers if they are acting professionally. Brokers can facilitate entry for insurers into the market, helping new insurers reach a wide client base without having to incur the cost of building a distribution network.

Brokers can identify insurance cover needs and assist insurers in the development of products to satisfy those needs, thereby creating markets. Furthermore, they work with multiple clients and in different geographic areas, and brokers can help insurers spread the risks in their portfolios.

Brokers could be one of the main tools to reach a double-digit insurance penetration rate. Brokers acting professionally and explaining the terms and conditions properly to the insuring public could help win the trust of the insuring public. Poor advice provided to clients can result in them purchasing policies that do not adequately cover their needs. Some brokers even fail to read and explain the coverage of policies to their clients. Some brokers are mainly concern with affordability for their clients instead of proper protection. Most brokers always think that the best service they can give to their clients is to help them pay the lowest rate or premium in the market.

Further, improper appropriations of sums of money paid to a broker by a client may result in clients having no recourse to the insurer and being without critical insurance coverage. Some brokers are not able to act professionally towards their clients because of some of the following reasons:

• Some insurers have significant ownership interests in some brokers and this makes the brokers committed to the insurers rather than the clients or the policyholders.
• Some brokers also have significant ownership interests in some insurers and this makes them place more businesses with them forgetting the interest of the policyholders.
• Some insurers sponsor the staff and activities of some brokers and this makes them remain loyal to them instead of protecting policyholders.
• Some insurers use very attractive remuneration structures to convince the brokers to place more business with them, forgetting the policyholder’s interest.

All these hamper the penetration, confidence of policyholders, and growth of the insurance industry. All brokers must begin to conduct their business professionally and ethically so that policyholders obtain the insurance coverage that meets their needs.

Brokers should begin to spread out to the other regions (not only Accra) and involve themselves in educating policyholders. Insurance brokers should also take much interest in individual clients and pay much attention to them as they do for their corporate clients. Broker’s main concern should not just be limited to business acquisition cost and profit but the development of the insurance industry should also be one of their top agenda.

Again, brokers should take interest in life companies’ business. Most of the mis-selling are done in the life insurance and brokers moving into this area could help correct this menace. Brokers should continually build the capacity of their staff to help them act professionally.

We have over eighty (80) insurance brokers in Ghana and we believe they should have a significant impact in the industry and on the insuring public to remain relevant. I hope you agree with me!!!