Analysis of the role and importance of insurance intermediaries in Malta

Abstract

This thesis explores the function of Insurance intermediaries in Malta. Using statistical data provided by the Malta Financial Services Authority; agents, brokers and managers have been compared and their contributions to the industry and to the country were measured. Gross Premium Written is the business that is underwritten by insurance companies. This is an extremely important figure in insurance as is signifies the size of the insurance industry. It is from this figure that insurers receive their revenue from which they must pay claims. Intermediaries are often paid remuneration as a percentage of the gross premium placed with insurance companies. The total gross premium written by local insurance companies in 2011 was 2,202,921,581. Agents placed a total of 53,812,000 while Brokers placed 70,941,000. The number of intermediaries in Malta has not grown dramatically over the last 12 years , only increasing from 55 to 59. However, the composition of the industry has changed significantly. Managers are a relatively new addition and have grown dramatically from 3 to 15 in 12 years while agents have halved during the same period. Brokers have shown some limited growth over time, indicating a mature market. In addition to quantitative data, the thesis examines how insurance intermediaries add value to the process of insurance. Agents write business on iii behalf of an insurance principal according to the terms of the agreement between the agent and the Insurance company. Brokers act on behalf of customers and attempt to find the insurance product that best serves the needs and requirements of their client. Managers are a means by which insurers as well as brokers can outsource insurance functions. Tied Insurance Intermediaries sell simple insurance products on behalf of an insurance company. These were not tackled in detail as they are not dedicated insurance related entities. It is the intention of this study to provide a snapshot overview of the various insurance intermediaries in Malta, exploring their role and functions and identifying key areas of their business and how these have changed over time.