Intermediaries in Insurance Industry

What is an Intermediary?

An insurance intermediary is a professional or entity that acts as a bridge between insurance companies and consumers seeking insurance coverage. Their primary role is to facilitate the purchase of insurance policies by helping clients understand their options, assess their needs, and find suitable coverage. 

Role of intermediary

The intermediary has a responsibility towards both parties i.e. insured and insurer. An agent or a broker, who acts as the intermediary between the insurance company and the insured has the responsibility to ensure all material information about the risk is provided by the insured to insurer.

IRDAI regulation provides that intermediary has responsibility towards the client.

Duty of an intermediary towards prospect (client)

IRDAI regulation states that “An insurer or its agent or other intermediary shall provide all material information in respect of a proposed cover to the prospect to enable the prospect to decide on the best cover that would be in his or her interest Where the prospect depends upon the advice of the insurer or his agent or an insurance intermediary, such a person must advise the prospect in a fair manner.

Where, for any reason, the proposal and other connected papers are not filled by the customer, a certificate may be incorporated at the end of proposal form from the customer that the contents of the form and documents have been fully explained to him and that he has fully understood the importance of the proposed contract.”

Who are the Intermediaries in Insurance Industry?

Insurance Broker: who may be individuals or corporates and work independently of insurance companies. They represent the people who want insurance and connect them to insurance companies obtaining best possible insurance covers at best possible premium rates

Insurance Agent: are usually individuals but some can be corporate agents too. Unlike brokers, agents cannot place insurance with any insurance company but only with the company for which they have been granted an agency.

Third Party Administrator (TPA): They are a new type of service providers who came into business since 2001. They are not authorized to sell insurance but provide administrative services to insurance companies. 

Insurance Web Aggregator: They are one of the newest types of service providers to be governed by IRDAI regulations. Through their web site and/or telemarketing, they can solicit insurance business through distance marketing without coming face to face with the prospect and generate leads of interested prospects to insurers with whom they have an agreement. They also display products of such insurance companies for comparison.

Insurance Marketing Firm: They are the latest types of intermediaries to be governed by IRDAI. They can perform the following activities by employing individuals licensed to market, distribute and service such products : Insurance Selling Activities, Insurance Servicing Activities, Financial Products Distribution

Importance of Intermediaries in Insurance

Expertise and Knowledge : Intermediaries, such as insurance brokers and agents, possess specialised knowledge of the insurance market. They understand the complexities of various insurance products, coverage options, and regulatory requirements.

Personalised Service: Insurance intermediaries offer personalised service, taking the time to understand the unique circumstances of each client. They assess individual risks and recommend tailored solutions.

Access to Multiple Options: Intermediaries have access to a wide range of insurance products from various insurers. This access enables them to compare policies, coverage limits, and premiums, providing clients with multiple options. As a result, clients can make informed decisions based on their preferences and budget.

Claims Assistance: In the event of a claim, intermediaries serve as advocates for their clients. They assist in the claims process, helping clients navigate the often complex procedures involved in filing a claim. Their support can lead to quicker resolutions and better outcomes for clients.

Risk Management: Intermediaries play a vital role in risk management by helping clients identify potential risks and recommending appropriate insurance solutions. They can provide insights into risk mitigation strategies, ensuring that clients are better prepared for unforeseen events.

Conclusion:

In summary, intermediaries are essential to the insurance industry, providing expertise, personalised service, and valuable support throughout the insurance process. Their role enhances the overall experience for clients, ensuring that they are well-informed and adequately protected against risks. As the insurance landscape continues to evolve, the importance of intermediaries will remain significant in helping clients navigate their insurance needs effectively.

Regards,

Honves Team.