Insurance intermediary

Insurance intermediary
See also
Direct writer Indirect sales Export management company Franchising Reinsurance broker Trade house Cooperative insurance Employers association Corporate sponsor

Insurance intermediary is a legal entity that assists on the placement and purchase of insurance. It also provides additional services both to consumers and to insurance companies that complement the process of insurance placement^[1].

Classification of insurance intermediaries

Depending on the manner in which insurance intermediaries function in a marketplace, two main groups of them can be distinguished^[2]:

Insurance agents - they are entitled to lead business transactions on behalf of insurance companies. Insurance agents speak for the insurers during the insurance process and they generally comply with the regulations of an agency agreement with the insurer. Insurance agents can work in different forms:
- independent (cooperating with several companies),
- exclusive (also called captive agents or direct writers, they are cooperating with only one particular insurance company),
- self-employed,
- insurer-employed.
Insurance brokers - they are the entities that usually perform insurance services for policyholders and are independent on the insurers. Brokers support and assist their clients with choosing the most suitable insurance alternative. In order to place coverage for the clients, insurance brokers tend to work with multiple companies.

In some markets, insurance brokers are divided into different groups depending on which type of insurance they are licensed to intermediate, for example property insurance, casualty insurance or life/health coverage. Another division of insurance brokers is the division into retail brokers, who lead insurance transactions directly with the customers, and wholesale brokers, who conduct these transactions not directly with the customers, but with retail agents and brokers.

Role of insurance intermediaries

The main role of insurance intermediaries is to match insurance products or risk management systems to their client's needs^[3]. Therefore, insurance agents and brokers should possess a wide knowledge and access to the insurance marketplace. Moreover, brokers’ ability to find the most suitable coverage with the best conditions at competitive fees is crucial during the process of insuring one's businesses and business ventures. Insurance intermediaries assess not only the insurance products, but also the insurers in terms of their solvency or the quality of their customer service and claims-paying record. Furthermore, insurance intermediaries emphasize and support modern risk management services in order to provide their clients with alternative methods of insuring their assets. Another duty of brokers is to speak for the consumer during transactions with the insurance provider or underwriter. Finally, insurance intermediaries provide their clients with additional services, such as claims and risk control services or research end development.