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.

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