Although the insurance contract is an agreement between 

 insured and insurer, business for the latter is obtained by the 

 insurance broker. Except in the case of an agent who is a 

 representative of the insurer, the insurance broker is an 

 independent businessman who represents the insured. A matter 

 of extreme importance is that the business interests of the 

 insurance broker and the insurer are not identical. The broker 

 representing the interests of the insured vessel o\mer operates 

 on a commission basis, irrespective of the profits or losses of 

 the insurer with whom he places (sells) the risks. The agent's 

 position is less independent than that of the broker in many 

 respects, yet even the agent's earnings are largely determined 

 on a coiamistion basis. 



Obviously, a conflict of interest may arise from this 

 relationship between sellers and buyers of risks. Brokers are 

 likely to be interested in the insurance premium rather than in 

 the quality of the risk inasmuch as their immediate earnings 

 depend on a commission. The presence of this conflict and its 

 intensity depends on several, considerations. For an insurance 

 agency which represents the insurer whose earnings are determined 

 partly on commissions and pairtly on the loss experience of the 

 accepted risks and whose managers are members of the home staff 

 of the insurer, the presence of this conflict and its intensity 

 £u:e at a minim\am. In contrast, emphasis on the collected premium 

 rather than on the quality of the risk is likely to be most 

 intense among independent brokers with short-run outlook in 

 business or who dote on premium volume smd opportunistic policies. 

 The chief goal of the broker is profit through commissions and 

 there is little loyalty to the underwriter. 



\lhile, for all intents and purposes, bairriers to underwriting 

 vessels are negligible, economies of scale and better operation of 

 the law of averages can be obtained through an increase in the 

 volvune of business. Insurers accept or refuse to undeirwrite risks 

 offered by the brokers for reasons not always related to particular 

 risks. Acceptance of a particular risk depends not infx-equently on 

 the volume of business the broker brings in andJhis total loss 

 experience rather than on the quality of the risk itself. With 

 regard to acceptance of vessels, the opinion of quite a few insurers 

 is that underwriting commercial fishing vessels nowadays is largely 

 "companionate" or "accommodation" business. 



From the point of view of risk underwriting, the insurance 

 market resembles a vast web of connections. The outer portion of 

 the web is occupied by Insurance brokers, and agents; insui'ers are 

 located close to the center, while the center itself is occupied 



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