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IS IT A BROKER's MARKET

                                                                                        - Jagendra Kumar

The Indian insurance broking market has still some way to go befor it reaches maturity.

With the liberalisation of the country's insurance industery,several new insurance companies and products have sprung up,adding both breadth and depth to the sector. So far,IRDA has licensed around 225 brokers of which around a dozen have a pan-India presence.

Being A Broker

In India,as in the west,most brokers focus on the non-life commercial segments, with agents focusing on the retail segment.Broking is a recent concept in this country while insurance agents has been around for a long time. Regulatory approval for broking is a recent development in the market,with the first batch of brokers being licensed by the IRDA in 2002.

Insurance brokers,unlike agents are subject to stricter regulations and entry barriers-minimum capital of Rs50 lakh(US$111,300).Annual fees are linked to business volumes,professional liability,code of conduct,qualified man power,infrastructure claim,handling abilities etc.

Internationally the top-10 brokers are Fortune 500 companies,but in India the top -10 brokers are either chartered accountants or surveyor firms.Openings in these companies iclude marketing,underwriting/technical support client relations,IT support etc.

Insurance brokers,more than others requires abundant trained manpower with skillsets spanning client relations and technical knowledge.They are required to be more professional organised and technologically -savvy than other intermediaries.

Some 225-plus brokers are engeged in the insurance market,but despite this,except for the corporate segment,no sector has felt the necessity of having an insurance broker.

The reinsurance market has the most negligible number of brokers. A major part of this business goes to international brokers as they are well-versed with the reinsurance arrangements.

Knowledge And Influence

Brokers need to deploy their understanding of the workings of the insurance market and the strength of their relationships with insurers to secure cover for their clients at an affordable cost.

As premium rates rise and insurers become increasingly selective ,the option of insuring the risk from the "ground up". will be less attractive  and may not be viable in larger cases.

The brokers skill in designing and obtaining market support for more sophisticated programmers is,thus,essential so as to achieve and maintain the optimum balance between retained and transferred risk for each individaul client.

Insurance business is complex whether one is a life insurance ,a general insurance,a reinsure or an insurance brokerage house.taking the complexity of the industry into account,a broker has to work closely with clients using experts and incisive technological understanding to create  customised solutions that bring measurable business benefits.

The people of a quality broker will include the following:

• Ability to operate in a turbulent environment;
• Awareness of and ability to relate to the demographic,economic,social and political environment of business;
• Ability to relate with complex organisational structures;
• To transact with people of widely different and everchaning values and expectations;
• Ability to relate with complex organisational structures;
• To appreciate,understand and utilise increasingly sophisticated information systems.

Individual Risk Profile

while the value of the broker lies to a great extent in its skills in structuring a customised solution for the client,in accordance to the risk's profile ,this is currently not needed in India as it is a tariff market where there is one type of risk and there is no rocognition of good nad bad risks.

This is likely to change soon,and brokers should keep this in maind and be prepared in meantime.

Helping With Non-Core Tasks

Activity-based cost studies at several carriers have shown that underwriters spend less than half of their time on core value added underwriting tasks. Hence,brokers can help underwriters with the performance of such non-core tasks.

Client Of The Insurer

In the near future,the broker would practically become the client of the insurer.In insurance market,pricing discipline is crucial.Brokers can provide market research and analyses that will help the insurer  make pricing decisions based on sound informtion rather than market pressure.

Insurers need to innovate constantly and bring out new products in anticipation of customer needs and market trends ,and they are relying more than ever on external service providers to develop and manage proposals.

Brokers.who are in the constant touch with clients ,are best equipped to capture such trends and needs and help insurers ,design new products.

A broker needs to convey the actual  risk status and refrain from giving a skewed picture to the insurer which might jeopardise the rating pattern.

Brokers need todo an in-depth study including the business of the client,industry trends and benchmark rating for a similar risk.

Distribution Challenges

A huge distribution network is required to sell health covers in India. The West has 45% of the health insurance market with South and North  at 22% each and the East about 10%.KPMG have prepared a report on "insurance Trends and Issues" which examines the challenges in distribution for both life and general insurance in India once the sector is opened for private players.

Based on KPMG research in India and abroad and on insights gained through various opinions of clients in different market,there are four significant issues which need attention:

• The threat of new players taking over the market has been overplayed.
• Nationalised players will continue to hold strong market share position because there will be enough business for new entrants to be profitable.
• New Companies often overestimate the need for insurance expertise.they feel a joint venture is the most appropiate type of alliance ,when in fact marketing is possible through infrastructure.
• Both new and existing players must explore new distribution and possibilities in untapped areas.

New Technology

New technology development in the area of agency management and employee self services are improving benefit practises across the nation.

Technology is the key to brokers thriving,particularly in this environment of decreasing commissions and greater plan complexity.

Brokers commssions will continue to shrink as carriers look to decapitate commissions in a per head basis and consumer-driven health plans, which pay lower commission,to gain market share.

Shrinking commissions will require brokers to achieve greater efficiencies to maintain profitability.

There is also an insurance portal providing information covering aspects from basics of insurance,policies offered by insurance companies to events  and programmers related to the industry ,autometed online  advisiory services,agents and homepages and computation of premiums and which already have 125 insurance agents on its registers.

Ti portal is now seeking a brokerage licence from the IRDA and aims to act as an interface between insurance companies,brokers and the customers in the post-liberalised era.

MIcro Insurance

Asia's insurance industry is poised for strong growth this year,with booming economies in China and India fuelling corporate demand for protection . The operating envionment in Aisa is very encouraging.

India has MFI corporate branches,franchisees ,NGOs and other channel partners to reach out to the target audience for micro-finance and micro-insurance products.

However these institutes are able to reach out to less than 1 million people,which is barely 1.6% of the target audience.

The key challenge for micro-insurers in India is the lack of penetration.It is also a tough task for insurers to convience the rural audience on the importance of an insurance policy. A structured and innovative approach from all the sectoral players would be required for exploring the true potential of micro-insurance.

Conclusion

On the whole,in India today,it is still a very difficult market for brokers as compared with their counterparts in other countries.The market is still not mature and brokers have to work hard to add that value to the client and insurer.However,brokers are here to stay and there are various opportunities open as well as improvements to be made,so there is still much to do and to thrive in this country.