Explain the following: (a) Insurance underwriter (b) Promoters (c) Auctioneer (d) Factor (e) Broker.

Answer Details

Explanation of the terms:

(a) Insurance underwriter: An insurance underwriter is the person or body that accepts (underwrites) a risk on behalf of an insurance company. The underwriter examines the proposal, assesses the degree of risk involved, decides whether to accept it, and fixes the premium to be charged. In effect the underwriter is the insurer who agrees to bear the risk and to pay compensation should the insured event occur.

(b) Promoters: Promoters are the persons who conceive the idea of forming a company and take all the necessary steps to bring it into existence. They prepare and file the formation documents, raise the initial capital, appoint the first directors and bankers, and generally carry out all preliminary work needed to float the company. Their work ends once the company is legally established and begins operations.

(c) Auctioneer: An auctioneer is a mercantile agent who sells goods by public auction on behalf of the owner to the highest bidder. He arranges and advertises the sale, conducts the bidding, and knocks down the goods to the person offering the highest price. He earns a commission on the sale proceeds and may sell in his own name without disclosing the owner.

(d) Factor: A factor is a mercantile agent who is entrusted with the possession of goods and sells them in his own name for a commission. He has authority to sell, receive payment and give a good title to the buyer, and he may make advances to his principal on the security of the goods. He may also have a lien on the goods for money owed to him.

(e) Broker: A broker is a mercantile agent employed to buy and sell goods for a commission (called brokerage) but who is not given possession of the goods. He merely brings the buyer and seller together to make a contract and does not sell in his own name. Examples include stockbrokers and insurance brokers.