Egbeyemi List Roles of Insurance Brokers

Leo Aligwo, Jan 04, 2010 (Daily Champion/All Africa Global Media via COMTEX) -- ONE of the most critical roles of the insurance broker is the selection of insurer or group of insurers, This is because of the fact that most clients , whether individuals or large companies have little knowledge of more than handful of insurers.

In a market that consists of not more than three or four insurers, there would be little need for a broker as the insured could easily pick one or all of them for a particular risk.

However, in Nigeria today, with a total of 73 insurers, whatever form of risk, there several insurers to choose them.

Therefore, the broker performs a prime role in the selection of insurers and matching their qualities to the clients' individual needs.

According to an insurance expert, Mr. Saheed Egbeyemi , an insurance broker needs adequate knowledge of the market in order to make reasonable assessment of the insurers thereby the listed objectives, reduction of exposure to a sudden change in underwriting philosophy, reduction of exposure to an insolvency and provision of widest knowledge of what is available.

Others are ensuring that competitive terms are obtained, ensuring the availability of capacity and ability to deal with uninsured risks.

Mr. Egbeyemi who was delivered a lecture at 2009 annual conference of the Nigerian Institute of Registered Brokers (NCRIB) held in Lagos, said the broker would find it necessary to undertake a detailed appraisal when selecting insures for each risk, stressing that in most cases he would have compiled a list of approved insures with whom he habitually transacted the business.

He made it clear that the criteria for selection of the insurers must be clear and updated regularly.

In his paper titled, "Insurance Broking Corporate Creativity and Profitability" Mr. Egbryemi listed the criteria for selection of quality insures to include, financial strength adding that the shareholders fund is worthy of note and should be a major factor in the brokers selection process.

The items to watch in the balance sheet of any insurer are share fund (paid up capital, investment at cost, debtors profits among others., fixed assets and nets assts employed.

In addition, he said the insurers capacity is divided their perception of the risk , the risk itself (oil & gas, engineering, large manufacturers , textiles, foam industries, drinks),the insurers size and its willingness to use and the availability of reinsurance.

On the size and frequency of claims experience, he said the insurance broker must decide the number of insurers on a particular risk and what proportion to offer depending on the capacity of each of the insurers.

A broker is also expected to engage his knowledge and experience of the market , to know whether a rate quoted is truly competitive otherwise alternative quotation should be obtained. Also, consideration must always be given to claims history .It is essential that a competitive price is not obtained at the expense of reduced cover unless the client is aware of the position.

Large excess or deductible must equally be discussed with the client, as in all businesses the cheapest is not necessarily the best, the cover needed by the insurers must not be compromised for cheaper cost, he cautioned.