Agents and Brokers

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Agents and Brokers

Companies which sell largely through part-time agents vary widely in their attitudes to selection. The "granting of an agency", the empowering of an individual to sell a company's policies, is not legally restricted and a company may select whom it likes.

Some companies are far less demanding about qualifications and experience than others, and, while some will generally restrict themselves to people with professional qualifications, others will allow the local garage owner to have an agency if he reckons he can sell policies.

Clearly the composite companies (those which transact general as well as life insurance business) are more likely to grant agencies including life insurance to those who specialise in certain types of general insurance (such as motor insurance) and who are not necessarily at all qualified to sell life insurance.

One reason for this, in some respects unsatisfactory, situation is that a company is in law not liable for the actions of its agents. Though the company grants the agency, the agent, when acting as an agent, is held to be acting for the proposer and not the company.

Thus if an agent, in filling out a proposal form, makes an error that results in loss to the policyholder, he makes that error as the policyholder's and not the company's representative, and the policyholder would have no legal claim against the company.

In practice, if this happened, most reputable companies would ensure that the policyholder did not suffer, but they are under no legal obligation to do so. Recent proposals concerning insurance intermediaries put forward by the Department of Trade include an alteration in the law to make companies legally liable for their agents' actions, which would have the effect of encouraging companies to be more selective.

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Making a Sale

Life insurance companies have two basic methods of selling policies, either direct to the public by advertising or via their own salesmen, or through brokers and other agents (what the latest EEC jargon styles "insurance intermediaries"). Many companies use both methods but many also concentrate on one only. For example, there are a handful of companies which pay no introductory commission on their policies and since they cannot therefore sell through agents are restricted to direct public advertising.

Many more companies have no salesmen of their own who canvass the public directly, but... see: Making a Sale

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