THEROLEOFINSURANCEINTERMEDIARIES-CIAB.pdfVIP

THE ROLE OF INSURANCE INTERMEDIARIES Introduction The importance of insurance in modern economies is unquestioned and has been recognized for centuries. Insurance “is practically a necessity to business activity and enterprise.” But insurance also serves a broad public interest far beyond its role in business affairs and its protection of a large part of the country’s wealth. 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, it may be, repaired.” Insurance is an essential element in the operation of sophisticated national economies throughout the world today. Without insurance coverage, the private commercial sector would be unable to function. 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 that otherwise would be unavailable from banks and other credit-providers fearful of losing their capital without such protection, and it provides protection against the business risks of expanding into unfamiliar territory – new locations, products or services – which is critical for encouraging risk taking and creating and ensuring economic growth. 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 insurance coverages are essential to the financial stability, well-being and peace of mind of the average person. Insurance is a financial product that legally binds the insurance company to pay losses of the policyholder when a specific event occurs. The insurer accepts the risk that the event will occ