The role of the intermediary in the distribution of insurance.

The importance of insurance in Botswana is unquestioned and has been recognized for many years. Insurance “is practically a necessity to business activity and enterprise.” It is the essential means by which the “disaster to an individual is shared by many, the disaster to a community shared by other communities; great catastrophes are thereby lessened, and, may be, repaired.”

Insurance enables businesses to operate in a cost-effective manner by providing risk transfer mechanisms whereby risks associated with business activities are assumed by third parties. It allows businesses to take on credit and it provides protection against the business risks. Beyond the commercial world, insurance is vital to individuals. Lack of insurance coverage would leave individuals and families without protection from the uncertainties of everyday life. Life, health, property and other types of insurance are essential to the financial stability, well-being and peace of mind of the average person.

Insurance intermediaries serve as the critical link between insurance companies seeking to place insurance policies and consumers seeking to procure insurance coverage. Intermediaries offer advice, information and other services in connection with the solicitation, negotiation and sale of insurance. Over the last two decades, many professional intermediaries have developed services that go beyond the services related to the transferring of risk from insureds to insurers; Intermediaries now offer services such as the evaluation and implementation of alternative means of funding for potential losses, risk management strategies and claims management. The inherent complexity of financial products adds to the need for sound advice in the purchase of many insurance products.

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.

There are services that intermediaries bring to the insurance marketplace that help to increase the availability of insurance generally:

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Innovative marketing
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, the multitude of insurance options, and their understanding as to how to purchase the insurance they need.

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Dissemination of information
Intermediaries provide customers with the necessary information required to make educated purchases/ informed decisions. Intermediaries can identify what a consumer needs, and what the options are in terms of insurers, policies and prices.

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Market Research
Intermediaries gather and evaluate information regarding placements, premiums and claims experience. When such knowledge is combined with an understanding of the needs of its clients, the intermediary is well-positioned to  assist in the development of innovative insurance products and to create markets where none have existed.

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Spreading Risk
Quality of business is important to all insurers for a number of reasons including profitability, regulatory compliance, and, ultimately, financial survival. Insurance companies need to make sure the risks they cover are insurable – and spread these risks appropriately – so they are not susceptible to catastrophic losses. Intermediaries help insurers in the difficult task of spreading the risks in their portfolio.

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Reducing Costs
By helping to reduce costs for insurers, intermediary services also reduce the insurance costs of all undertakings in a country or economy. Because insurance is an essential expense for all businesses, a reduction in prices can have a large impact on the general economy, improving the overall competitive position of the particular market.

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Are you receiving these services?
Are they aiding in reducing your costs, identifying new market segments, spreading your risks or innovating new products? As we speak to more and more executives in the industry, the resounding answer is no and this is evidenced by the increasing pressure on underwriting profits being experienced in the market, in both Life and General insurance.

It goes without mention that intermediaries can only achieve the above if they themselves have a sound understanding of the products they sell, an understanding of pricing, underwriting and risks, the regulatory and legislative environment and critically the ability to identify customer needs and match those needs to products (needs based segmentation).

The Insurance Academy of Botswana offers several courses which can aid in enhancing the intermediary skills and expertise and can enhance their value in your distribution value chain.

Speak to us today about some of the insurance courses that we have on offer.

Ester Madzivanyika
General Manager

Tel: +267 313 3706 | Email: ester@iab.co.bw
The Insurance Academy of Botswana
Plot 145, Office 20F | Gaborone International Finance Park

www.iab.co.bw | info@iab.co.bw

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