Canadian Accredited Insurance Broker (CAIB) One Practice Exam

What is the role of a brokerage in an insurance context?

1. To provide direct insurance coverage

2. To act as an intermediary between insurers and clients

3. To regulate insurance prices

4. To adjust claims on behalf of the insurer

The correct answer is: To act as an intermediary between insurers and clients

In the insurance context, a brokerage plays a crucial role as an intermediary between insurers and clients. This function involves helping clients identify their insurance needs, providing access to various insurance products from different insurers, and facilitating the selection of the most appropriate coverage. The broker acts on behalf of the client to ensure that they understand their options and find the best policy tailored to their specific circumstances. By working with multiple insurers, brokers can compare different insurance offerings, terms, and prices, aiding clients in making informed decisions. Furthermore, brokers maintain relationships with insurance companies, which helps in negotiating terms or coverage options that align with the client's needs. This intermediary role is essential in promoting transparency and ensuring that clients are well-informed about the policies they are considering. In contrast, direct insurance coverage is provided by insurers themselves, regulating prices is typically the responsibility of regulatory bodies, and adjusting claims falls under the purview of claims adjusters who work either for the insurer or as independent contractors. The brokerage's primary function remains centered around connecting clients with the right insurance provider rather than acting in those other capacities.