CONCEPT OF INTERMEDIARIES IN INSURANCE

CONCEPT OF INTERMEDIARIES IN INSURANCE

A basic definition defines an intermediary as ‘action between two parties - mediatory’ or ‘situated or occurring

between two things - intermediate’. The latter form refers more to a position within a process or level of

achievement. The former, by contrast, refers to an intermediary as an agent in some form, as ‘one who acts

between others - a do-between or mediator’, or as ‘something acting between things persons or things’. As

actors then, what intermediaries do is mediate, they work in-between, make connections, enable a

relationship between different persons or things. Indeed in common parlance the meaning implied by the

concept intermediary tends to refer to a neutral player trying to mediate between different sets of interests.

The assumption of neutrality is however, problematic. Rather than focus on everything as an intermediary,

the interesting question is to ask in what ways, where, when and how particular things, people, organisations

etc. are/ become defined as ‘intermediaries’. Further still, there is the question of the active role that

intermediaries play in defining the relationship between other actors.

In Insurance industries, an insurance intermediary is a person or a company that helps you in buying

insurance. Insurance intermediaries facilitate the placement and purchase of insurance, and provide

services to insurance companies and consumers that complement the insurance placement process.

Traditionally, insurance intermediaries have been categorized as either insurance agents or insurance

brokers.

ROLE OF INTERMEDIARIES IN INSURANCE INDUSTRY

As players with both broad knowledge of the insurance marketplace, including products, prices and

providers, and an acute sense of the needs of insurance purchasers, intermediaries have a unique role –

indeed many roles – to play in the insurance markets in particular and, more generally, in the functioning of

national and international economies.

Intermediary activity benefits the overall economy at both the national and international levels:

The role of insurance in the overall health of the economy is well-understood. Without the protection from risk

that insurance provides, commercial activities would slow, perhaps grinding to a halt, thus stunting or

eliminating economic growth and the financial benefits to businesses and individuals that such growth

provides. The role of insurance intermediaries in the overall economy is, essentially, one of making

insurance – and other risk management products – widely available, thereby increasing the positive effects

of insurance generally – risk-taking, investment, provision of basic societal needs and economic growth.

There are several factors that intermediaries bring to the insurance marketplace that help to increase the

availability of insurance generally:

Innovative Marketing

Insurance intermediaries bring innovative marketing practices to the insurance marketplace. This deepens

and broadens insurance markets by increasing consumers’ awareness of the protections offered by

insurance, their awareness of the multitude of insurance options, and their understanding as to how to

purchase the insurance they need.

Dissemination of information to Consumers

Intermediaries provide customers with the necessary information required to make educated purchases/

informed decisions. Intermediaries can explain what a consumer needs, and what the options are in terms of

insurers, policies and prices. Faced with a knowledgeable client base that has multiple choices, insurers will

offer policies that fit their customers’ needs at competitive prices.

Dissemination of Information to the Marketplace

Intermediaries gather and evaluate information regarding placements, premiums and claims experience.

When such knowledge is combined with an intermediary’s understanding of the needs of its clients, the

intermediary is well-positioned to encourage and assist in the development of new and innovative insurance

products and to create markets where none have existed. In addition, dissemination of knowledge and

expansion of markets within a country and internationally can help to attract more direct investment for the

insurance sector and related industries.

Sound Competition

Increased consumer knowledge ultimately helps increase the demand for insurance and improve insurance

take-up rates. Increased utilization of insurance allows producers of goods and services to make the most of

their risk management budgets and take advantage of a more competitive financial climate, boosting

economic growth.