If you need business medical insurance for your employees or a life insurance policy for you and your spouse, you need to sign a contract with an insurance company. However, you may apply for coverage through an insurance broker, too.
What’s the difference between insurance companies and insurance brokers, and what’s the role of brokers in insurance? How about insurance agents — where and how do they fit in?
Below, we discuss what insurance companies, insurance brokers and insurance agents are. Clarifying their related but distinct roles in the insurance industry will hopefully ease insurance decision-making moving forward.
What Are Insurance Companies?
Insurance companies are insurers. They are legal entities licensed and authorised by the Central Bank of the UAE (CBUAE) to underwrite primary insurance and reinsurance operations. Insurance companies include Takaful insurers or those that follow an insurance model compliant with the principles of Islam.
HAYAH — technically HAYAH Insurance Company P.J.S.C. — is an example of an insurance company. We are licensed and authorised by the CBUAE to carry out insurance operations in the UAE.
Insurance companies insure clients — i.e., consumers (individual persons and businesses), other insurance companies, and reinsurance companies — in exchange for a premium (or a contribution, in the case of Takaful). They may be incorporated in the UAE or the branch of a foreign company licensed to provide insurance in the UAE.
Side note: What is reinsurance, and what are reinsurance companies? Reinsurance companies are insurers licensed to insure other insurers, including those that insure reinsurance companies. Reinsurance companies are also called reinsurers.
What Are Insurance Brokers?
According to the Insurance Brokers’ Regulation (i.e., the Regulation) issued on 25 July 2024 and slated to take effect on 15 February 2025, insurance brokers are legal entities licensed by the CBUAE to intermediate in insurance and reinsurance operations. They help clients (i.e., individuals, businesses, insurers, or reinsurers) obtain insurance coverage from insurance companies.
Insurance brokers are juridical persons established in accordance with the Commercial Companies Law of the UAE for the purpose of insurance brokerage. Like insurance companies, they may be incorporated in the UAE, or they may be a branch of a foreign company with a licence to engage in insurance brokerage activities in the UAE.
What is insurance brokerage? It is soliciting, negotiating and selling.
Soliciting means attempting to sell insurance or reinsurance to clients, or asking them to apply for insurance or reinsurance.
Negotiating means directly discussing with a client (or a prospective client) the benefits, terms or conditions of a particular insurance contract, or directly advising them about such matters.
Selling means exchanging an insurance or reinsurance contract on behalf of an insurance company.
Insurance brokers facilitate the establishment of an insurance contract between clients and insurance companies with which they have an insurance brokerage agreement. On the one hand, they help clients find and procure insurance policies or reinsurance contracts that fit clients’ needs, preferences and budgets. On the other hand, they help insurance companies find and sign clients.
Brokers in insurance fulfil this intermediary role for remuneration. Such remuneration can take various forms, including commissions, fees, service charges, economic benefits, financial incentives, and non-financial advantages, and they earn it upon contract signing and renewal. The remuneration comes directly from insurance companies, not the clients.
Insurance Broker vs. Insurance Company
Insurance brokers and insurance companies both require a licence to operate from the CBUAE. Both are insurance operators, selling or facilitating insurance or reinsurance operations. However, insurance brokers do not underwrite insurance agreements.
Therefore, they do not decide whom to insure and are not obligated to settle insurance claims. They cannot receive insurance premium payments from clients, just as they cannot receive refunds and claim settlements from insurance companies. Reinsurance brokers may be exempt from this rule as long as their brokerage terms allow it.
Insurance brokers are independent from insurance companies. They are not insurance company employees, and neither are they exclusive affiliates of a particular insurer. In fact, the law insists that insurance brokers must have brokerage agreements with at least two insurance companies. None of these agreements may restrict brokers from working with more insurance companies.
Insurance Broker vs. Insurance Agent
Insurance agents can help clients (i.e., individuals, businesses, insurers, and reinsurers) find and procure coverage from insurance companies. Are they insurance brokers, too? While the duties of an insurance agent may seem to overlap with that of an insurance broker, insurance agency and insurance brokerage are two distinct domains.
An insurance agent is a natural or corporate person approved and authorised by an insurance company to carry out insurance operations on its behalf. They work for and with a single insurance company for a salary, a commission, incentives, or a combination of these.
Meanwhile, an insurance broker is an independent legal entity that can work with multiple insurance companies. It can sign clients for and accept remuneration from whichever insurance company it has a brokerage agreement with.
An insurance agent can receive premium payments. It can facilitate communication and correspondence between the insurance company and the client about compensation claims, receive claim settlements from insurance companies, settle undisputed claims, and carry out many other operations on behalf of the insurance company with which it is exclusively affiliated.
Insurance brokers have a more straightforward role. They simply facilitate insurance operations, soliciting clients, conferring with them, giving them advice, and providing them with options from multiple insurance companies. However, they cannot interfere with the communication between clients and insurance companies regarding premiums, refunds and claims settlements.
Where to Get Insurance
If you require life insurance, health insurance, personal accident insurance, or a savings plan in the UAE for yourself, your family or your employees, you can execute a contract with an insurance company. To obtain a policy, talk to an insurance broker, contact an insurance agent, or get in touch with the insurance company directly through official company channels (telephone, email, website, etc.).
HAYAH is a CBUAE-licensed and regulated insurance company. Learn more about HAYAH, our insurance policies, and how we can help secure you and your business. Contact us now.