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 occur in exchange for a fee, the premium. The insurer, in turn, may pass on some of that risk to other insurers or reinsurers. Insurance makes possible ventures that would otherwise be prohibitively expensive if one party had to absorb all the risk.

Advancements in medicine, product development, space exploration and technology all have become a reality because of insurance.

Consumers buy automobile insurance to cover both their cars and people who may be injured in accidents. Homeowners and renters buy insurance policies to protect their property and protect themselves from liability. People buy life and health insurance to protect themselves and their families from financial disaster in case of illness or death.

In some instances, governments require businesses to purchase insurance. Known as financial responsibility requirements, government-mandated purchases of insurance is intended to ensure that injured parties will be compensated. Businesses also require other businesses to buy insurance. For instance, a retailer may require its suppliers to carry product liability insurance. Similarly, hospitals may require doctors to carry medical malpractice insurance, and mortgage firms often require their clients to insurance the properties used as collateral.

Distribution of insurance is handled in a number of ways. The most common is through the use of insurance intermediaries.

Insurance intermediaries serve as the critical link between insurance companies seeking to place insurance policies and consumers seeking to procure insurance coverage.

Intermediaries, traditionally called "brokers" or "agents" or "producers," 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;

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.

This paper will explain what an insurance intermediary is, the role of intermediaries in the insurance marketplace and the wider economy, and the services provided by intermediaries to insurance providers and consumers. It will also briefly describe the legal and regulatory regimes governing the business of insurance around the world.