In the UK, the car insurance industry is an extremely important part of our economy. It creates around £18 billion annually, representing around 1% of GDP, and it provides thousands of jobs for people living in the UK.
The car insurance industry is made up of several different types of company which fulfil their own purposes and roles. Of course central to these are the insurers themselves, such as Norwich Union, which create the insurance policies.
However, the insurers are not the full story of the UK car insurance industry. There are also companies which act as intermediaries between the insurer and the client. Insurance intermediaries are the most common route of car insurance distribution and often provide a greater range of services than insurers do.
Car insurance intermediaries can be further broken down into two types: agents and brokers. In the most basic terms, insurance agents work on behalf of insurers whilst insurance brokers work on behalf of the client.
Car insurance agents tend to be smaller companies which tend to work for either one insurer or a small number of insurers. They may be employed by a single insurer to sell their car insurance policies, in which case the term “exclusive insurance agent” can be used to describe them. Alternatively, they may operate without influence from insurers, in which case they are “independent insurance agents.”
Car insurance brokers, on the other hand, work primarily for the customer and generally do not have any ties to a particular insurer. They will generally be able to access a large range of car insurance quotes from different insurers. As well as introducing clients to suitable car insurance policies, brokers will often provide further guidance and assistance to their customers.
However, the definition between car insurance agents and brokers can get blurred. This often occurs when a firm acts as a broker in identifying and placing a policy with a customer, but also provides services such as claims handling which would usually be dealt with the insurer, making the firm act as an agent.
There are a number of reasons why insurance intermediaries are such a vital aspect of the car insurance industry. One such reason is the fact that they manage to match customers with appropriate policies very effectively. Their marketing is often very accessible, bringing fresh custom to insurers who would otherwise have been overlooked by the client. Another effect of shifting marketing from insurer to intermediary is that the insurer doesn’t have to worry about funding costly marketing campaigns.
Intermediaries are also central in improving customer knowledge so that clients can make informed decisions when purchasing motor insurance. They provide a great deal of information about the insurance choices available to customers, helping people to select the right car insurance policy for them, hopefully at the right price.
A further useful aspect of car insurance intermediaries is their intimate knowledge of the UK marketplace. The research carried out by many firms has led to the development of new aspects of insurance, leading to added value and higher satisfaction for the customer. However, this information is not just of use to the client. Better client knowledge allows insurers to better judge the level of risk their customers present and thus helps them to provide car insurance quotes of an appropriate cost.
Intermediaries are a vital part of the UK car insurance industry. Their “match making” role provides an extremely valuable service to customer and insurer, in terms of both the cost and the quality of car insurance policies. Without them, our car insurance market would surely be a great deal less effective and efficient.
Bodies such as the World Federation of Insurance Intermediaries (WFII) support and promote insurance agents and brokers within business circles on a global basis. The WFII informs industries of the important role that intermediaries can play are extremely important in ensuring fair, effective practices in the insurance intermediary industry. In doing so, they build a positive future for car insurance intermediaries around the world.