With more than 50 years’ of experience in the insurance industry, and over 20 years with a leading insurance and re-insurance broking company in Kuwait, Ramesh Kohli who currently heads Aarkay Insurance is an indisputable expert on all matters related to insurance. In this second-part of a series on the insurance industry in Kuwait, Mr. Kohli speaks about the benefits of selecting an insurance broker to advise on insurance.
During the past 10 years, the number of insurance companies in Kuwait has increased many folds from the five local companies and a few foreign firms that operated in the country before. The arrival of other GCC registered insurance companies and the advent of Takaful Insurance (Islamic Insurance) in the country has led to many new players entering the market.
Each insurer is approved by the Ministry of Commerce and Industry and licensed to carry classified insurance business, and all are equal in the eyes of legal requirements. So the big question for those looking for insurance coverage, whether it is an individual or a corporate, small or big, private or government entity, is which will be the most appropriate insurance company for their needs.
Most of the insured’s are influenced in their decision by the price of the insurance premium. They follow a simple process of obtaining quotes from two or three of the insurers known to them, or who have approached them, compare the price and decide in favor of the lowest one.
For existing insurances, normally the insured does not even carry out this exercise and simply renews the policy on due date or obtain cover from designated insurer by the management. Indeed this is a very simple and wise approach but only if, like any economic theory, all other things remain the same.
However, this is seldom the case. Other important factors like scope of cover, appropriateness for specific requirements, market trends, post claim services and security, to list a few, are also very important factors to consider in choosing an appropriate insurance company.
To ensure that these factors are also given due weightage in the decision making process, it is important to know the market place, specialty of staff and officers of the insurers, specialties of insurers, their attitude towards service of insured’s requirements, negotiating for scope of cover, deductible and other important terms and conditions of cover, premium payment terms and most important, claim service. But this is easier said than done.
An individual or even a medium-sized corporate insured has hardly any time or resources to decipher all the above. Even large corporations assign this task to their finance or admin staff, who then have to divide their available time to fulfill the various tasks assigned to them.
In such a scenario hardly any scope is left for, among other things, real analyses, studying the market trends, incorporation of new products available in the market, assessing the adequacy or otherwise of sums insured and risks.
This is where an insurance intermediary, or broker, plays a role.
With various products available for a variety of insurance requirements in the market, the problem today is not the lack of choice, but the proliferation of choices.
An insurance broker is constantly analyzing the products and offers from various insurance companies in the market and keeping himself updated on the market trends and new products and developments in insurance worldwide. Not being an employee of any insurers, he is independent and judicious in his assessment of various factors in choosing the right product, insurer and price.
Working on behalf of the insured, the broker can provide unbiased information on what coverage best suits the insured’s requirements, and which insurer provides such cover at the most appropriate and competitive cost.
Some of the benefits in using an insurance broker
An insurance broker, who carries multiple products, is by definition, a professional in the insurance field. He knows the small print, the advantages and disadvantage of each product and stays informed about the best products available in the market for his clients.
A professional insurance broker will be the best analyzer of the insured’s requirements and gets the insured adequately protected and ignores ornamental covers, to save cost. Timely review of existing policies on periodic basis helps improve scope of cover and its appropriateness for optimum security and risk transfer.
Optimal Insurance protection: Broker will always ensure inclusion for various add–on covers at no additional premium
Insurance broker’s service is generally available at no expense to insured, when insurance is obtained through their sources. A broker is remunerated by insurers as they market their products. One need to remove the myth that direct placement with insurer saves cost as compared to insurance through brokers. Companies are likely to spend more on marketing costs whilst dealing with direct clients, hence are unlikely to differentiate the premium between direct and in-direct business.
Price, of course, is one of the reasons for using an insurance intermediary. A broker who brings in volume business to insurers can often negotiate premium costs with companies. Especially since a broker has access to special rates that are not available to the general public, they can do a better job at negotiating for discounts.
An experienced insurance intermediary can offer day to day guidance for follow up of a claim and get best results. There could be multitude of reasons and several conditions, such as breach of policy condition, underinsurance, exclusions and others that insurers and loss adjusters use to try and minimize any claim. Negotiating power of a professional consultant helps achieve optimum settlement. Moreover an insurer will not object a claim for petty reasons, keeping in mind the longstanding business relationship with the broker and other business considerations.
Insurance brokers guide the staff and officers of the client in respect of various insurance related aspects and thus can be a free of charge knowledge hub and guide.
Risk Management / Risk Improvement: Intermediaries advise various risk improvement measures, technically feasible for the firm (like fire protection/safety measures) and thus get discount in premium for the improvement in risk / reduction in loss ratio etc. Also various Alternative Risk Transfer (ART) methods to reduce the Insurance cost can be advised through analysis and Insurance audit of existing arrangements.
Moreover it saves quality time of senior executives, who can continue to concentrate on their chief aims than spending time on analyzing insurance portfolio.