In today’s article we will begin by explaining what insurance mediation is, what mediators are and, later, the different types of mediators that exist, including insurance brokers and brokerages, their functions and the advantages of arranging insurance through them.
What Is Insurance Mediation?
Insurance mediators, as we will see below, exist in different forms. They are responsible for “mediating” between insurers and their clients, that is, the policyholders.
Fundamentally, they must advise the insured party when the insurance is taken out and later assist the insured party in situations such as claims.
Law 26/2022 requires insurance mediators to provide insured parties with information about the policy they are interested in that is as simple and truthful as possible.
Mediators are considered depositaries of the amounts paid by their clients for policy premiums on behalf of insurers. Likewise, they are also considered depositaries when insurers deliver money to them on behalf of insured parties in cases where claims must be indemnified or premiums reimbursed.
Mediators must be registered with the DGSFP, the Spanish Directorate-General for Insurance and Pension Funds.
Mediators may be individuals or legal entities.
Differences Between the Different Types of Insurance Mediators
Insurance mediation regulations broadly distinguish between:
- agents
- brokers
Both insurance agents and insurance brokers may be individuals or legal entities.
Insurance agents may be exclusive or tied. Exclusive agents mediate with only one insurer, while tied agents work with several.
Mediators may use external collaborators to assist in insurance distribution. These collaborators act on behalf of and under the responsibility of the mediator.
Below we explain the role of insurance brokers.
Credit institutions use the forms of exclusive or tied bancassurance operator.
Insurance Brokers and Their Functions
Insurance brokers, or insurance brokerages when they are legal entities, are insurance mediators subject to the highest level of technical training, both initial and continuous, as well as certain financial solvency requirements.
This type of mediator can arrange policies with different insurers in order to provide the best service and offer the variety of proposals needed to properly meet the insured party’s needs.
Requirements to Become an Insurance Broker
To be registered in the administrative register, brokers must meet a number of requirements. Among others, they must have legal capacity to carry on trade, have passed the required training standards, both initial and continuous, and, in the case of a brokerage, the administrator must have suitable experience. They must also hold professional liability insurance, have a minimum financial capacity and submit an activity programme.
Functions of an Insurance Broker or Brokerage
Although many of these functions are common to the mediators described at the beginning, here we summarise the specific functions of insurance brokers or brokerages:
- provide impartial, professional and independent advice to people who wish to insure certain risks;
- inform potential insured parties about the policy conditions that, in the broker’s opinion, they should take out, focusing on what the policy must include in order to be truly effective;
- inform the insured party, and the other parties to the policy, about clauses or any other matter they need to understand, as well as advise or manage matters in the event of a claim;
- when the client pays the premium to the broker, it is not considered paid to the insurer unless the broker or brokerage issues a receipt.
We hope this summary has clarified the functions of an insurance brokerage and the advantages of working with a brokerage such as ours. If you need our services, we are at your disposal.