Has FYERS cover orders
The broker - criteria for working with insurance companies
Table of Contents
1.1 Problem definition and delimitation of the topic
1.2 Objective and structure of the work
2 Contract and Claims Management
2.2 Processing of applications and contracts
2.3 Claims management
2.4 Service at the broker
3 information policy
3.1 Representation by rating / ranking
3.2 EDP and IT instrumentation
4 Product Policy
4.1 Structure of the product portfolio
4.2 Application and sales material
4.3 Framework agreements and concepts
5 sales organization
5.1 Broker support
5.2 Sales orientation: brokers
5.3 Brokerage Agreement
5.4 Sales Support
6 Conclusion and Outlook
8 List of Abbreviations
10 Declaration of Independence
In the introductory chapter the problem of the present work is described and the delimitation of the subject is made. The chapter ends with the presentation of the goal and structure of this work.
1.1 Problem definition and delimitation of the topic
In many German insurance companies, the implementation of planning to reduce the administrative apparatus has already begun. While employees are being laid off in many places, salaried sales representatives have to start their own business and branches are being relocated abroad under the pressure of industrialization, the strategy for the coming periods has long been determined. Investments in customer loyalty, information processing and the expansion of sales capacities are very popular with many insurers. The variety of distribution channels is growing, with the sale of the products through brokers predominantly becoming increasingly important.
The broker sales medium is not new - on the contrary. The example of the German Insurance and Reinsurance AG (DARAG) shows that it is even worthwhile to set up your own company for this distribution channel. Almost half of all insurers are of the opinion that in the future of sales there will be no getting around the broker. The second most important distribution channel should continue to be the exclusivity organization.1
The customer has already recognized the advantages of an insurance broker. Assuming that the quality of their own advice is high, the broker can offer the customer not only differentiating the insurance market but also representing his interests vis-à-vis insurance companies. The broker is not just an insurance broker for his customers, but also puts his services at the customer's service on a partnership level.
An insurance broker must provide service to the customer. Only through the type and scope of these services can he successfully assert himself against the competition of insurance brokers. Cost reduction-oriented customers, degressive premium rates and stronger competition in this predatory market force the broker to keep the quality standard of his services permanently high. In addition to the continuous improvement process (CIP) of the company's own process organization, criteria for cooperation with insurance companies are defined and continuously evaluated. With the implementation of the EU Mediation Directive, according to which a broker, inter alia. must justify why he offers or recommends a product from a certain company to the customer, the standards for a cooperation between the broker and an insurer come more to the fore.
In his work, the author deals with a selection of possible evaluation criteria for cooperation with insurance companies from the perspective of the insurance broker. The assortment was created after empirical studies at insurance brokers, broker associations and insurers and does not comply with any regulations. The intrinsic value of the individual criteria is determined in the opinion of the author and can be defined individually. This work also excludes the procedures of structured sales, special brokers and multiple agents.
1.2 Aim and structure of the thesis
The main aim of the work is to present the perspective of an insurance broker in relation to different areas of the insurer and to evaluate these in view of the own objectives for service to the customer. For a closer look, work processes in the contract and claims, the communication and products of the insurer as well as activities for sales were used.
2 Contract and Claims Management
In the chapter "Contract and Claims Management", after preliminary considerations, some work processes of insurers from the perspective of the insurance broker in the offer, contract and service phase are examined. The last section deals with possible services to the broker, which are possible on the part of an insurer.
As with any insurance broker, a broker attaches great importance to the acquisition of new customers. While with an insurance company every new customer leads to a better risk balance in the collective and thus increases the ratio of the premium income to the claims payments in positives, the broker initially sees every new customer as a measure to diversify his portfolio. In contrast to an exclusive broker, he can take over existing contracts of the customer and finance the support with the resulting brokerage income. A steady growth of the stock thus compensates for larger disposals.
The aim of the insurance broker is to get the mandate for his service from the customer. The customer seldom receives the authority to take care of his insurance matters before submitting an offer. One reason for an early granting of a power of attorney is often evidence of a higher level of advisory competence in contrast to the customer's previous advisor - e.g. a non-binding assessment of the facts. However, the broker will carry out a review of the existing contracts in the further support of his newly acquired customer and, if necessary, submit an offer to change the previous insurance situation.
The insurance company is only involved at the end of the acquisition process. The new customer has indicated that he is interested in working with him and has asked for a comparison offer. The willingness of the customer to switch is very high in this phase. The broker would like to optimize the benefit for the customer and will want to present a convincing offer in addition to his service. In an invitation to tender, the insurance companies are asked to submit an offer for the desired scope of insurance.
After compiling the tender documents, the insurance broker defines a group of insurance companies that he commissions to prepare the offer. The selection of companies is primarily determined by observations made during previous tenders.
An important benchmark is the speed of submitting offers. The mentioned offers are expected from the customer at the follow-up appointment that was promptly agreed upon during the initial meeting. A quick offer from an insurer gives the agent the freedom to thoroughly examine the offer and the underlying conditions. The examination of an offer is an indispensable prerequisite for the broker in order to fully carry out his advisory assignment.
The speed rating point is supplemented by the type of transmission in which email has increasingly established itself as a communication medium. Since the fast transmission of written documents by fax always means a loss of quality, the intermediary is forced to take an additional step in order to prepare the documents properly. Companies that refuse to use email as a form of communication when submitting an offer will no longer be able to be considered in the long term. The capacities for an additional preparation of the offer are increasingly restricted on the part of the broker.
In addition to speed, the professional competence of the insurer is also decisive. In the initial meeting, the broker got an idea of the customer's risk situation and recorded relevant facts. An offer submitted by an insurer must correctly assess these relevant facts. The insurance concept and the sublimits must cover the customer's risks as well as possible. Ideally, the broker can call on experts from the insurer to assess and / or inspect a difficult risk. In the case of industrial brokers, experts are usually provided in-house to assist the brokers in assessing the risk and also to negotiate with the company.
So-called “broker helplines” or “clearing points” can help to deal with difficult inquiries quickly and provide expert support. The types are completely different and range from a medical preliminary assessment in life and health insurance, to the insurance of luxury goods in household or car insurance, to service providers providing support in international business. The decision-making levels are by no means shifted, only the decision-making paths are shortened. In this way, insurers demonstrate flexibility and reliability to the broker and ultimately also to the customer.
The technical competence is one of the few characteristics that can be mirrored on both sides in this context. Proven expertise on the part of the intermediary helps the insurer and supports the preparation of the offer considerably. On this basis, framework agreements are created or special discounts are possible, which create a win-win situation for the customer, the broker and the insurance company.
On the part of the broker, experience with their acceptance policy is also checked when selecting the insurance companies to be contacted. Almost all insurers offer insurance cover for every risk. If a risk deviates from the tariff catalog or does not directly correspond to the acceptance guidelines, it is all the more important for the broker to receive assistance in finding a solution for the customer. The goal must be to reach acceptable agreements on proprietary insurance coverage. In the case of difficult risks, success can usually only be achieved by entering into compromises. However, this assumes that both sides are willing to compromise. If the insurance broker has the feeling of being uncompromisingly rejected in the search for helpful support for hedging a risk, he will also place the standard business elsewhere. The reason for this lies in the greater trust in reliability that has built up due to the support.
The group of companies to be inquired about also depends on the respective insurance concepts. An insurer that specializes in medical risk management, for example, will be involved in every request in this area - provided there are no reasons against working together. Insurers who want to serve a large area of the market should have a concept for coverage for each risk group, which particularly stands out in its distinctions. Depending on the orientation, the distinction can be made according to the premium rate or terms and conditions. However, an individual consideration and assessment of the risk must still be possible.
The points mentioned do not guarantee any insurance company a permanent participation in the tendering process. However, they provide the basis for positive experiences in the offer system, which leave a good impression that the insurance broker will gladly fall back on. The decision to start an active collaboration always begins with a request for an offer to the insurance company.
2.2 Processing of applications and contracts
The offer phase ends with the conclusion of the contract and the issuing of a broker mandate. It is now important for the insurance broker to confirm the trust placed in him. It is difficult to increase customer satisfaction when preparing an offer. On the other hand, there is much more the risk of losing the newly won customer again through negligence in the application and execution of the contract. Similar to the insurance contract itself, the initially presented service in support and in the event of a claim is an intangible asset for the customer. The natural skepticism about intangible things is only reinforced by the negatively burdened good "insurance". Even small mistakes can lead to a loss of customer confidence.
When submitting the application, the insurance broker sets quality standards which the insurance company should adhere to. This includes, on the one hand, the duration from the application to the issue of the insurance policy and dispatch to the customer, and on the other hand, the correctness of the information provided.
In the case of new applications, immediate insurance coverage or, when applying for, prompt insurance coverage is often desired. In order to guarantee this, a provisional cover will be granted after receipt of the complete application documents. This presupposes that all documents are actually received by the insurer; in case of doubt, the intermediary must provide evidence. In order to avoid possible liability here - the customer has instructed the broker to apply for insurance cover - a clause can be set in the broker agreement. This clause can stipulate that insurance cover applies as soon as it is received by the broker or that coverage already exists when it is sent to the broker and not only when it is received by the insurer. This requires a high degree of trust from society towards the insurance broker. Such a clause has often proven itself in the mediation of standard business, which also makes the attached administrative act with cover confirmation and monitoring leaner for all parties involved.
A paid contribution invoice secures the broker's brokerage claim. That is why every broker tries to keep the issuing times for the insurance policies as short as possible. The customer benefits from it. But the reality looks different. At least 30 percent of all insurance policies issued by the insurer are incorrect and must be corrected.2 Long processing times or incorrectly issued policies not only entail additional work, but can also give the customer the impression of being unprofessional. Especially if a correction has been initiated but no change has been made. Most often this concerns agreements or special regulations on the insurance cover applied for. The causes lie in the lack of communication in sales and the lack of flexibility in the back office at the insurer, which would inevitably improve through greater process responsibility. However, the broker does not draw the consequences after an error or processing that is too long. The assessments are of individual importance. However, it can be stated that the average accepted processing time is 10 to 14 working days. If the insurance policy has not yet been received by the customer or the broker after this time has elapsed, a reminder will be sent.
The frequency of errors and application processing times are measured and analyzed. It is not uncommon for errors to be corrected by making small modifications, e.g. changing the font size in the application. In serious cases, the insurer is confronted with the corresponding problem. If there is no improvement in the situation afterwards, this has a massive effect on the scope of the brokered business and often ends with the suspension of the cooperation for an indefinite period. This is intended to force the insurer to rethink existing work processes. In well-organized brokerage houses, which are certified according to the valid and recognized standard for quality management DIN EN ISO 9000: 2000, this works with the help of a "black list". Once on this black list, it is very difficult for the insurer to enter into a sales cooperation with the broker or to expand it.
The insurer can counteract this. The Nuremberg Insurance Group, for example, equips its agents with laptops and signature pads. The customer's application can be electronically signed on site and forwarded to the application review via email. Specified application fields prevent information from being forgotten and errors in the execution.
The electronic sending of applications by email is already offered everywhere and is widely used today, preferably in motor vehicle insurance, although mostly only the post is saved. As long as the applications are still being printed out and distributed by society, the revolution will still be a long time coming. The software house Indatex Service for Finance and Insurance AG has developed an interface that connects the systems of the insurers with the systems of the brokers. The exchange of data and documents between those involved is electronic and automated. This eliminates the time required for sending and receiving at the insurer, and processing is made easier. The savings potential in administrative costs is estimated at 30%.3 The savings are only part of the benefit, because the additional time available can be used sensibly on both sides to concentrate on the core business. So far, this program is only in operation with a few insurers and brokers. However, the technology remains forward-looking for everyone involved.
Züritel, a Swiss direct insurance company for motor vehicle insurance from the Zurich Insurance Group, had set itself the goal of presenting the policy to the customer within 24 hours. The core of this company consisted of a new premium calculation concept and the appropriate system, which was called the Business Handling System (BHS).4 The project was successfully introduced in 1994. Unfortunately, no information is available as to whether the amortization of the costs planned for 2002 has actually materialized.
Despite the speed and correctness of the insurance policy, there is another aspect that comes to the fore. In times of increasing customer and service orientation, the customer attaches great importance to an attractive appearance and useful additional information. He buys the product "insurance" and wants to maximize his benefit from it - often even before the claim is made. The insurance broker can give the customer this benefit, e.g. in the form of special agreements. In addition to the insurance policy, the customer receives a letter of protection, a credit card or an information brochure for trips abroad. These instruments contribute to customer loyalty on the part of the broker and the insurer. The broker tries to stand out from the market with additives and to achieve a monopoly position with his product. He chooses the insurer who can give him the prospects for this. Another possibility are concepts that are designed directly with an insurance broker - see point 4.3.
With his service, the broker guarantees his customers support in their insurance matters. He carries out complex administrative tasks, conducts correspondence with the insurer on the contents of the contract and changes the risk protection according to the needs of the customer. The basis for this is functioning communication with the relevant insurance companies. Many companies offer service centers that are easily accessible, but are usually limited in their freedom of choice. It often happens that the centralization of all requests leads to a loss of effectiveness. Even adding general support to the specialist department in the rarest of cases has a quantifiable benefit. Long waiting times, false statements, a lack of replies and multiple communication are the most common complaints made by intermediaries. The reason for this is that most of these service centers have been designed for the customer. Many telephone operators are overwhelmed with a request from a specialist operator. A subdivision into customer and agent hotline can help in the short term. In the long term, it makes sense to have a well-functioning Internet portal on which all relevant information about the contract can be viewed and changed to a limited extent at any time. The data protection guidelines must be taken into account. Insurance companies with such a solution are very popular with the broker.
In order for the insurance broker to receive information about the contract or its components, he must be registered as the supervising broker. After the broker mandate has been granted, the broker gets an overview of the existing insurance situation and decides which contracts should be maintained and expanded or improved. To manage the existing contracts, the broker submits his mandate to transfer the portfolio. Depending on the type of contract, this secures him the portfolio maintenance fee or the brokerage fee of the current contract. Without a successful portfolio transfer, the ongoing support of the contract or even of the customer takes place without remuneration and is initially unsustainable from a business perspective. If cross-compensation can be placed or is already in the process of being initiated, a transfer to the portfolio will be waived in individual cases.
For the broker, however, it is not acceptable if the insurer on the one hand does not allow portfolio transfers and on the other is seeking cooperation with the broker. Often the reason for denying a broadcast is to protect one's own exclusivity organization. This practice is best known from the Victoria Insurance Company. A contract that is going well with a respectable loss ratio must then be terminated in order to accommodate it with an insurer of the same type on homogeneous terms. This approach secures the broker the financing of his support and has no disadvantages for the customer. From a profit-oriented point of view of Victoria Versicherung AG not justifiable, especially since the company is doing itself damage in two ways. It loses a positive contract and receives neither new business nor new business inquiries from the broker who lacks the reasons for cooperation.
Contracts that are already in the insurance broker's portfolio should be updated as necessary. There are differences depending on the final year in the tariff concluded, depending on requirements in the agreed sum insured or in the underlying terms and conditions, which have been revised in the meantime. This represents a liability potential for the broker, since he is responsible for a suitable risk protection. That is why the insurance broker constantly strives to align its portfolio as best as possible to the needs. The insurer can support him in inventory campaigns. Among other things, an information letter to update the soft tariff characteristics or the sum insured as well as the dispatch of conversion offers for the extended set of conditions are possible. For the broker, it is less about cost sharing and more about making capacities available. Not infrequently, the stationery is provided by the broker and the sales activities are taken over for the further conclusion. Unfortunately, the potential of such actions is often underestimated. As the first insurer with the broker target group, the newly founded Janitos Versicherung AG - originated from a former MLP property insurance subsidiary - introduced an "update guarantee" in April 2006. This means that the contracts automatically benefit from improved conditions and customers receive better insurance protection free of premiums.5 For the broker and his increasing liability problem, the possibility of such activities or guarantees is increasingly becoming a decision criterion for cooperation.
The number of contracts in the insurance broker's portfolio stagnates over time, is constantly increasing or decreasing. The procedure for the latter option is well known to every broker. Active termination management is a prerequisite for possible customer recovery. Every insurer can, however, inform the intermediary of problems in fulfilling the policyholder's obligation to pay premiums through early detection of the cancellation. The quick information to the broker about outstanding contributions ultimately also helps the customer. Claims in an existing dunning procedure are not insured. The broker rates the speed and quality of this information as high. Also benefiting from the fact that a loss of the premium goes hand in hand with the loss of brokerage fee for this contract and thus the financing of the care can be ensured.
When processing applications and contracts, the broker uses a number of different assessment criteria as a basis for making decisions about the scope of cooperation with insurance companies. The weighting mostly depends on the respective situation and is assessed differently depending on the subject of the contract.
2.3 Claims management
As already described, the insurance contract is an intangible good, the value of which only becomes apparent in the event of a claim or benefit. In order to justify the trust placed in society towards the customer, many insurers try to prove their competence in the event of a claim in advance. Haptic items accompanying the contract, such as an emergency card with the claims hotline that fits in every pocket, give the policyholder the feeling that in the event of a claim, they are not on their own and that they can get support at all times. However, the special right of termination after a claim, which is anchored in the Insurance Contract Act (VVG) alone, means that customers are legally attested to a certain degree of dissatisfaction with claims processing. For a broker, the satisfaction of his customer after the claim has been processed, similar to an insurance company, is of great importance. This customer satisfaction further strengthens the trust placed in the agent and in society. The customer feels well looked after and properly insured. This aspect creates the basis for a long-term contractual relationship from which all parties can benefit.
Since the insurance company is the only party involved in making an insurance protection decision, the broker is dependent on their claims processing. The greater the attention that the insurance broker places on claims processing with his contractual partners. In the recent past it has been observed time and again that insurance companies, especially in the case of major losses in the liability insurance sector, seek a comparison in which they paid less than the agreed sums. That is unsatisfactory for customers.6 In the event of inadequate regulation or regulation, the broker is as much in the focus of the dissatisfied customer as the insurance company. Not infrequently, a wish to terminate the contract also expresses the termination of support by the broker. The broker can only counteract this by comparing the practice of claims processing by insurers and, if necessary, terminating or suspending contractual relationships. In rural areas in particular, the old rule of thumb that bad news spreads ten times faster than good news is very true.
As in the preparation of offers and contracts, the speed of claims processing is decisive for the broker, on behalf of the customer. Apart from major losses and legal proceedings, it should only take a few days from the admission to the final report.
An insurer can do this through a claims hotline. The most common points of criticism, however, are the availability and the lack of decision-making ability. Such a claims hotline also makes little sense if it only ensures that the customer receives a claim notification from the insurer. Especially since it usually only contains standardized text modules. In the case of tap water damage with a damage amount of EUR 650.00, it is sufficient to have its occurrence and extent confirmed by a photo or a testimony from the agent. Submitting a cost estimate only has a time-lag effect on claims settlement and gives the impression of unprofessional and unworldly behavior. Normal tap water damage can rarely be regulated below this limit.
If the duty to inform in the event of a claim is satisfied, the documents are forwarded to the company. Here, too, the use of new media in the IT age can simplify the process.
1 See Beenken, Matthias: Damage insurance for brokers too labor-intensive, insurance journal of July 7th, 2006 in www.versicherungsjournal.de/mehr.php?nummer=90953
2 Cf. Fromme, Herbert: Insurance is becoming sloppy; Financial Times Deutschland page 23 - Insurance from September 15, 2006
3 See Buchbender, Christoph: Rhion: The new broker insurer, AssCompact issue 03 from March 2006
4 See Salzgeber, Florian: Customer and process orientation in insurance companies; VVW Karlsruhe 1996; Page 187
5 Cf. Schneider, Peter: Janitos: Designing insurance from the broker's point of view, AssCompact issue 04 from April 2006
6 Fromme, Herbert (insurance industry is sloppy)
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