Direct broker

A direct broker is one of the intermediary categories under the IRDAI (Insurance Brokers) Regulations, 2018. Unlike an insurance agent, who represents the insurer, a direct broker represents the client — matching the client's needs against multiple insurers.

A direct broker can charge a fee to the client, or earn a commission from the insurer, or both. Beyond simply placing a policy, a direct broker can also provide claims consultancy and risk management services to the client.

Table 1.2 of the workbook lines up a direct broker against an ordinary insurance agent and a corporate agent, on three parameters:

The defining feature that separates a direct broker from every other category in this table is who it works for. Because a direct broker represents the client, the workbook expects it to "dispassionately advise the policyholder on the products of all insurers whom he is representing," recommending the product best suited to the client's needs — a duty an agent, working for the insurer, does not carry in the same way.

Illustrative scenario.

Mr Sharma wants Rs 2 crore of term life cover and Rs 20 lakh of health cover for his family. He approaches Clearview Insurance Brokers, a direct broker. Clearview compares quotes across six different life insurers and four different health insurers, and recommends the combination that best fits his budget and health profile — charging him an advisory fee of Rs 5,000 for the comparison and paperwork, in addition to earning commission from whichever insurers he finally buys from.

Had Mr Sharma instead approached an agent tied to a single life insurer, he would only ever be shown that one insurer's products, with no fee charged to him directly, but also no comparison across the market.

Chapter 1 (Basics of Insurance), section 1.8.3, defines direct broker alongside reinsurance broker and composite broker, and Table 1.2 contrasts it with insurance agent and corporate agent. Expect a question on who a direct broker represents, and on the "can charge" column of Table 1.2.

• A direct broker represents the client; an agent and corporate agent represent the insurer. This is the single most tested distinction in this section.
• A direct broker can charge the client a fee, on top of commission from the insurer — agents and corporate agents earn commission only.
• "Direct broker" is one half of "composite broker" — a composite broker is a direct broker who is also a reinsurance broker.
• Direct brokers can also provide claims consultancy and risk management services, beyond simple policy placement.