Most consumers are careful when choosing various service providers, conducting background research, getting recommendations and ensuring they are au fait with the finer details in the contract. Unfortunately, when it comes to choosing a broker and short term insurance, consumers are not as diligent. “Perhaps,” says Bertus Oosthuizen, Head of Short term at PSG Konsult Corporate (PSGK Corporate), “It is because people are unsure of how to go about choosing a broker and which are the pertinent questions which need to be asked to ensure an informed choice is made.”
Asking the right questions is pivotal to ensuring that you can make an informed choice regarding an insurance broker. Regulation in the industry has tightened up for precisely this reason and the Financial Advisors and Intermediary Services (FAIS) General Code of Conduct (GCoC) has been instrumental in implementing two fundamental changes. Firstly, to focus on client retention and the best interests of the client have become far more important than sales targets. Most financial advisors have realised that renewing existing business and perhaps extending cover for current clients, is of far more value than arbitrarily looking for new business. Another change in the way brokers do business, as stipulated by the GCoC, is that all disclosures to the client should be made prior to them receiving the policy document, in other words before the client has accepted the cover.
How do you choose a broker?
· Establish your needs and then look for a broker that can fulfill these
· Present various brokers with your needs, in writing, and get the commitment from them – in writing – that they will be able to fulfill your requirements. Focus on three Broker Institutions and ask them to analyse your risk profile to establish what should be insured and what not. Make sure that the recommendations fulfill the original needs that you identified yourself
· Ask for references or contact details of previous and current clients
· Contact underwriters via their website and present these names to them and ask them to rate these brokers
What is the role of the broker and what should they do for the client?
· Brokers or Intermediaries represent the needs of the client and not the risk carrier or insurer. Agents represent the insurer because they only have the one institution they present.
· Brokers analyse client’s Risk Profiles and based upon that profile will recommend various types of cover that are available in the market.
· Brokers should supply the client with alternative quotes from alternative underwriters and discuss the various quotes and help you to make a calculated decision.
· An Uninsured Report is presented to the client which will include the list of covers recommended to the client but were not taken up.
· To assist the client in adding and deleting covers on insurable items.
· When losses or damage occur on insured items, the broker should assist the client to be placed back in the position they were prior to the incident that lead to the loss or damage.
Disclosures: What about Commission and Fees earned by the broker?
“Remember this is not a secret,” says Oosthuizen. “Ask your broker for details.”
· Legislated Commission and Fees should always be disclosed to the client but do not have to be agreed upfront . These commission and fees are controlled via regulations and the FAIS Act.
· Non – Legislated Commission and Fees should first be agreed upfront with the client and details given of what it is for and the value of it. Clients should also be able to cancel these amounts without being penalised or reduce cover imposed upon the policy.
Remember fees paid to third parties or referral fees are included in information which needs to be disclosed and if your broker’s incentive for selling the product to you is a trip to an exotic island, sponsored by the risk carrier and not so you enjoy the best policy for your needs, you need to know this!
What should you know about your broker of choice?
The individual presenting the Broker Institution should provide you with a Letter of Introduction containing the following information:
· Name, physical and postal address and telephone number
· Legal status and any interest in the insurer
· Whether or not they are in possession of Professional Insurance Cover
· Details of how to institute a claim
· Particulars of the brokers’ Compliance Officer
· Non – Mandated or Mandated Broker*
· Whether the broker representing the broker institution is qualified to provide you with advice or not
· Confirmation of any Conflict of Interest between any parties.
· Membership of any Insurance Institution
· Information of the Ombudsman Office
What is the difference between a *Mandated Broker and Non – Mandated Broker?
· Mandated Broker:
Independent Intermediary who holds a written mandate from a policy holder that authorises the Intermediary to act and perform to his/her discretion.
· Non-Mandated Broker :
An independent Intermediary that will first have to obtain permission to do any changes to the profile of the client.
NOTE: A Non –Mandated Intermediary is not allowed to conduct business with any Mandated Intermediary who is an associate of the Non-Mandated Intermediary.
Renewals and Reviews
Just as in the case of taking new cover, disclosures have to be made when it comes to renewals and reviews. Again this information should be given when the broker provides the information, not on receipt of the policy document.
This includes changes between the existing and new products including fees and charges, terms and conditions, penalties charged if the product is cancelled, whether any rights and benefits are lost (or gained)
Does your broker’s institution comply with the ‘Treat Your Customer Fairly’ Regulation
· Treating the customer fairly is contained in the culture of the institution
· Does the product being sold perform and is it designed to meet the needs of the insured
· Will the product provide clear information and keep the insured informed of any changes and develops during the period of the policy. The advice is correct and did take into account the circumstances of the client
· Will supply acceptable standards of services as was led to believe
· The client will not be faced with unreasonable post sales obstacles to change from provider or to submit a claim or complaint
· Will the broker control the monthly deduction process and if so does the broker have sufficient Guarantee Cover either with a policy, as in Intermediary Guarantee Fund (IGF) or outside institution.
· Did the broker have any previous successful Professional Claims against him or his Institution
Choosing short term insurance should be done only when clients are empowered with all the information they need, the process is transparent and they are able to identify possible pitfalls in the process. “Having all the facts at your disposal is the only way to ensure that you make the right choices,” says Oosthuizen.