role of insurance intermediaries
Insurance Intermediaries have a broad knowledge of the insurance marketplace, including products, prices and providers available in the market. Sometimes we'll call them health plans, just plans. In some markets, agents are “independent” and work with more than one insurance company (usually a small number of companies) without any restriction; in others, agents function exclusively – either representing a single insurance company in one geographic area or selling a single line of business for each of several companies. Copyright © 2020 ENTERSLICE FINTECH PRIVATE LIMITED. Insurance agents are those entities who have been licensed to conduct business on behalf of insurance companies. Read more! Further, they have an acute sense of the needs of insurance purchasers and play a unique role – in fact, many roles – to play in the insurance markets in particular and, in the functioning of national and international economies in general. Insurance companies are required to be sure that the risks they cover are insurable and further spread these risks appropriately so they are not susceptible to catastrophic losses if any happens at any time. Acting as “agent” for the buyer, brokers usually work with many companies to place coverage for their clients. An intermediary is a person or company that facilitates a deal between the insurer and the consumer. They can potentially be lost in an instant, and thus require on-going attention and maintenance. Other financial intermediaries are pension funds, insurance companies, investment banks and more. Hospital … 1.1.2. Sometimes we'll call them payers. Insurance Agent: Insurance Agent is another such intermediary in the sector. They play a major role in the economic stability of a country, and thus, face heavy regulations. It is therefore necessary to understand what the role entails, as the job involves fine balancing act. The insurance industry has a very important role in the financial systems of countries around the world. The 2007 Insurance Institute of South Africa (IISA) conference was held at Sun City from 4 to 7 March this year. However, with the Indian reference, the insurance broker has been recognized since the introduction of the Broking Regulations as a person representing the insured and adds value to the transaction. LIABILITY OF INSURANCE INTERMEDIARIES TRIBLER ORPETT & MEYER, P.C ISSUES AND PERSPECTIVES – 2011 www.tribler.com insurance. He answered: “That’s where the money is.” While this may have been true at one time, from the perspective of modern economists, Sutton is both right and wrong. Let … One way is through the insurance intermediaries. Role of Financial Intermediaries in Economic Growth: Financial intermediaries which consist of commercial banks, cooperative credit societies, mutual savings funds, mutual funds, saving and loan associations, insurance companies, and other financial institutions, help in … When such information is combined with an intermediary’s understanding of the needs of its clients, the intermediary is well-positioned to encourage and assist in the development of new and innovative insurance products and to create markets where it did not exist. A fund manager oversees a mutual fund and allocates the funds to different investment products. Insurance in India is sold, not bought. Intermediaries collect and evaluate information regarding placements, premiums, and claims experience of policies. M.PADMINI ASST.PROFESSOR MKCE Insurance Intermediaries 2. Intermediaries can be: An intermediary needs to live too! Insurance intermediaries are essentially market makers who match the insurance needs of policyholders with insurers who have the capability of meeting those needs. Insurance intermediary is a legal entity that assists on the placement and purchase of insurance. The majority of these are SME scale undertakings with a local focus. In this day of technology and digitization, products and services have to be tested to know the... Transform your Business. Intermediaries as They are Today. The investments made by financial intermediaries—their assets—can be in loans and/or securities.These investments are referred to as direct investments. THE INSURANCE INTERMEDIARIES (CONDUCT OF BUSINESS) RULES 2014 The Guernsey Financial Services Commission (“the Commission”), in exercise of the powers conferred on it by section 18 of the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002, as amended (“the Law”) hereby makes the following rules:- Further, customer’s awareness of the multitude of insurance options, and their understanding as to how to purchase the insurance they need for a particular purpose. Insurance intermediaries serve as a bridge between consumers and insurance companies. Financial intermediaries serve as middlemen for financial transactions, generally between banks or funds. It also highlights the special role of reinsurers in the insurance sector and discusses some of the key differences between insurers and banks from a ﬁ nancial stability point of view. Financial intermediaries are an important source of external funding for corporates. However this insurance may introduce costs in terms of economic growth. These are widely available, thereby increasing the positive effects of insurance generally – risk-taking, investment, provision of basic societal needs and economic growth. Unlike the capital markets where investors contract directly w… Financial intermediaries provide liquidity insurance to maximize welfare of the current generation of depositors. Importance of Financial Intermediaries. The financial intermediaries are commercial bank, investment bank, stock exchanges, insurance companies etc. Brokers collect quotes from various insurers and help the clients in selecting the adequate policy from a range of products. They are contracted with multiple insurance companies so they can focus on matching their client's needs with the most suitable insurance products. With the existence of such intermediaries and their knowledgeable client base that has multiple choices, insurers will offer such policies that suit their customers’ needs at competitive prices. In the following article we look at some ways in which using an insurance intermediary can benefit you. Disintermediation; Innovation intermediary The results obtained support the main hypotheses derived from industrial organization theories as to the poor working of quality competition under incomplete and asymmetric information on the side of consumers. Brokers are professionals who bring together the insured and insurers, carry out preparatory work for issuance of contracts, and where necessary, assist in the administration and performance of such contracts, in particular when claims arise. Functions of Financial Intermediaries. Who are intermediaries in the insurance business and how are they regulated? Reading: Banks As Financial Intermediaries. the role of brokers is understated because the statistics do not include alternative risk transfer (ART) business, a large proportion of which is brokered. Although the insurance sector has been privatized, the insurance companies can deal with intermediaries only if they are holding a valid registration issued by the authority (IRDAI) as per the norms laid down for licensing of intermediaries to function in this sector. Market Knowledge. Intermediary compensation comprises premium‐based commissions, expressed as a percentage of the premium paid, and contingent commissions based on the profitability, persistency, and/or volume of the business placed with the … The most important functions of a financial intermediary is safely getting money to those who need it. The “intermediary” can be best described as a third party whose main job is to ensure that both the parties to a contract get what they want and the third party works for both parties for their joint benefit. Traditionally, insurance intermediaries have been categorized as either insurance agents or insurance brokers. All Rights Reserved. For example, think about your health insurance policy. Intermediary as Agent of the Insured It also provides additional services both to consumers and to insurance companies that complement the process of insurance placement. 1.1.1. The importance of insurance in modern economies is very vital and has been acknowledged and recognized for many centuries. The distribution of insurance is handled in a number of ways. Financial intermediaries match parties who need money with the financial resources they need. Meaning • Insurance intermediaries are brokers or agents who represent consumers in insurance transactions. Insurance marketing will take a … Intermediaries are also associated with multiple insurers, a variety of clients, and, in many cases, in a broad geographical spread also. In particular, it has been alleged that the compensation of agents and brokers through contingent commissions, often related to the underwriting quality or volume of business placed with an insurer, the role of intermediaries in insurance transactions. Objectives of Intermediaries Committee: Develop the role of Intermediaries in the Myanmar Insurance Industry Represent intermediaries’ interest to Government, Trade Organisations, Similar Associations and Bodies in other industries. But changes in the type and number of services offered by companies like ours mean these days brokers are more likely to be called 'insurance intermediaries'. Other important functions of financial intermediaries is that they provide safety in accessing money and spread the risk. The Role of An Insurance Intermediary. The main role of insurance intermediaries is to match insurance products or risk management systems to their client's needs. Such brokerage also forms part of and emanates usually out of the premium paid or payable over a period. The world market for insurance year after year records an increasing growth ... Insurance companies are considered as financial intermediaries for several reasons. The role of insurance intermediaries in the overall economy is, essentially, one of making insurance – and other risk management products – widely available, thereby increasing the positive effects of insurance generally – risk-taking, investment, provision of basic societal needs and economic growth. Intermediaries act as middlemen between different members of … Shohert and Prevezer (1996) also explored the role of intermediaries in relation to Another division of insurance brokers is the division into retail brokers, who lead insurance transactions directly with the customers, and wholesale brokers, who conduct these transactions not directly with the customers, but with retail agents and brokers. This helps insurance markets by increasing consumers’ awareness of the protections offered by insurance. An essential role of financial intermediaries is that they satisfy the portfolio preference of both depositors and borrowers at the same time. Brokers sell and service insurance policies. Insurance is a complex product representing a promise to compensate the insured or third party according to specified terms and conditions in the event of the occurrence of a covered contingency. This would in turn stunt or eliminate economic growth and the financial benefits to individuals/businesses and industries that such growth provides. The role of insurance intermediaries in the overall economy is, essentially, one of making insurance – and other risk management products – widely available, thereby increasing the positive effects of insurance generally – risk-taking, investment, provision of basic societal needs and economic growth. Surveyors are recognized and licensed intermediaries. A channel might include a number of intermediaries, such as agents, wholesalers, distributors and retailers. The insurance intermediary can be both an agent for an insurer and, at other times, an agent for the insured. Agents can work in many different forms like independent, exclusive, insurer-employed and self-employed. Determining whether an intermediary is the agent of the insured or the insurer, and the commensurate responsibilities, is a central issue. Roles and responsibilities of Intermediaries Intermediaries are the backbone of commerce and include suppliers of raw materials and components, transport, shipping and distribution companies, landlords and shop owners, online marketplaces, internet service providers, search engines and advertising networks, websites, credit card companies and even the popular social media sites. INTRODUCTION The insurance sector has traditionally been If an insurance/reinsurance undertaking or other intermediary wishes to apply to the Central Bank to appoint a Tied Insurance Intermediary under the IDR it must complete the Application Form for the Appointment of Tied Insurance Intermediaries and then submit the completed form to firstname.lastname@example.org. These rules may be cited as the Insurance Intermediaries (Conduct of Business) Rules 2014 (“the Intermediaries Rules”) and shall come into operation on 1 January 2015. A financial intermediary performs the following functions: As said before, the biggest function of these intermediaries is to … An Insurance Broker, will evaluate your risk exposure and structure/tailor your insurance cover/s according to the anticipated risks and ensure proper and professional transfer of such risks “worries” to the Insurance Company. Subscribe our Newsletter. A few examples are commercial banks, insurance companies, credit unions and financial advisors. Intermediaries can be classified as merchant intermediaries or as accountant intermediaries. These are all essentially synonyms, each with its own little nuance of meaning. Financial intermediaries work in the savings/investment cycle of an economy by serving as conduits to finance between the borrowers and the lenders. Insurance Intermediary also includes Surveyors and Third Party Administrators but these intermediaries are not involved in the procurement of business. The Medicare fiscal intermediaries (FIs) are private insurance companies that serve as the federal government's agents in the administration of the Medicare program, including the payment of claims. Insurance intermediaries are essentially market makers who match the insurance needs of policyholders with insurers who have the capability of meeting those needs. professional requirements Three major sub-sectors Major domestic intermediaries Global and multinational business intermediaries help customers choose between insurers and insurance products Independant Financial Advisers The definition includes the insurance broker. ROLE OF INSURANCE INTERMEDIARIES Insurance intermediaries Insurance business has a peculiarity where interface and interaction of a customer is more often with an Intermediary than with. Role/duties of insurance brokers. Insurance agent, insurance broker, surveyor and third-party administrator are the four primary insurance intermediaries. Intermediaries. Intermediaries like an MGA have several distinct advantages over the other business models competing in the insurance mechanism. As pointed out above, brokers and agents will often carry out … Section 2 (1) of the Insurance Intermediaries Act 1999 (No 31 of 1999) defines an insurance intermediary as a person who for reward and as an agent for one or more insurers or as an agent for intending insured persons arranges contracts of insurance in Singapore. The four subsidiaries of GIC market their products through a three-tier marketing force consisting of: Agents, Development Officers and Officers in change of sales at branch/divisional offices. By ensuring that each customer pays appropriate premiums, the intermediary protects the insurer's ability to cover losses while protecting the customers against overpayments. Depending on the manner in which insurance intermediaries function in a marketplace, two main groups of them can be distinguished: In some markets, insurance brokers are divided into different groups depending on which type of insurance they are licensed to intermediate, for example property insurance, casualty insurance or life/health coverage. The role played by insurance in the overall health of the economy is well-recognized. and these institutions play a vital role … Insurance Intermediaries Markets NEWS DATE: 13 Dec 2018 The European Insurance and Occupational Pensions Authority (EIOPA) published today the report on the Evaluation of the Structure of Insurance Intermediaries Markets in Europe in accordance with Article 41(5) of the Insurance … Insurance intermediaries assess not only the insurance products, but also the insurers in terms of their solvency or the quality of their customer service and claims-paying record. A disintermediary often allows the consumer to interact directly with the producing company. Literature such as one of the roles of insurance companies and intermediaries to individuals and the society in general should be widely circulated. Moreover, brokers’ ability to find the most suitable coverage with the best conditions at competitive fees is crucial during the process of insuring one's businesses and business ventures. These are commonly known as a consultant or a broker and are specialised in one specific area having all … why insurance companies can be important for the stability of the ﬁ nancial system. Two main types of insurance intermediary compensation can be distinguished: Classification of insurance intermediaries, United Nations Conference on Trade and Development (2007), Trade and Development aspects of insurance services and regulatory frameworks, Shedding the Light on Insurance Brokers’ Remuneration: the Role of the Fees, https://ceopedia.org/index.php?title=Insurance_intermediary&oldid=61405. Role and Importance of Intermediaries Theintactfront 29 May 2019 2 Comments Marketing Intermediaries Importance for Business: When a business manufactures a certain product then it can transfer the bulk of its product units to a large number of customers through marketing intermediaries. Meaning of Intermediaries: Intermediaries are an individual or a company that behaves as a middleman between parties for an investment deal, business deal, negotiation, insurance, etc. Bank: These intermediaries are licensed to accept deposits, give loans and offer many other financial services to the public. The Role and Regulation of Insurance Intermediaries. Intermediaries can explain the needs of the consumer, and what the options are in terms of insurers, policies, and prices. For example, an Arizona appellate court held that an agent, who expressly held himself out as an insurance professional, was liable for failing to advise a policyholder of the need for employee dishonesty coverage. Therefore, insurance agents and brokers should possess a wide knowledge and access to the insurance marketplace. Individual insurance companies have the responsibility of letting the public know that its intermediaries exist and what functions they perform. 2. They could be involved in the sales process like an insurance agent or an insurance broker, or the claims process like a surveyor or a third-party administration. Intermediaries in a distribution channel provide services that enable manufacturers to reach different types of customers. Financial advisors:Such intermedia… A Tied Insurance Intermediary may only be appointed if it is of good repute and possesses the appropriate general, commercial and professional knowledge and competence to enable the Tied Insurance Intermediary to deliver to the client or potential client the proposed services of the entity for whom the Tied Insurance Intermediary will act. In 2002, banks owned 10 percent of the U.S. P&C broker market, according to Business Insurance (July 2003). Banks are playing an increasing role in insurance distribution in the U.S. The Role of Insurance Intermediaries 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 and, more generally, in the functioning of national and international economies. Such a relationship is inevitably contractually agreed by a mandate from the insured and is generally purposed to be paid for the services rendered, by way of brokerage. The role of insurance intermediaries in the economy is, essentially, making insurance and other risk management products. The Intermediaries Rules apply to all insurance intermediaries unless the role of the Defence Technology Enterprise (DTE) as an intermediary involved in technology exploitation. An Insurance Intermediary means individual agents, corporate agents including banks and brokers, insurance marketing firm. Such agents represent the insurer in the insurance process and generally work under the terms of an agency agreement with the insurer. You pay a premium each month, and if you happen to need expensive surgery, the insurance company gives you access to the money you need to pay for that surgery. There are two principal types of intermediaries that have come to exist. Another duty of brokers is to speak for the consumer during transactions with the insurance provider or underwriter. The late bank robber named Willie Sutton was once asked why he robbed banks. What is The Role of The Insurance Intermediaries? What is the Role of Insurance Intermediaries and Who Regulates them? They also disseminate the information to consumers. Therefore, insurance agents and brokers should possess a wide knowledge and access to the insurance marketplace. Mutual Funds:They help pool savings of individual investors into financial markets. This page was last edited on 26 August 2020, at 16:30. Learning » Finance Business » Insurance License » IRDA License » What is the Role of Insurance Intermediaries and Who Regulates them? They have been defined by IRDA Act, 1999 under section2 (1) (f) of the act as, “Intermediaries or insurance intermediary includes insurance brokers, insurance consultants, surveyors and loss assessors.”. These are widely available, thereby increasing the positive effects of insurance generally – risk-taking, investment, provision of basic societal needs and economic growth. Financial intermediaries play an important role in the saving-investment process. Insurance companies and banks are both financial intermediaries. In this case, the role of banks as liquidity providers is always growth enhancing. Consumers may be forgiven for confusing the life assurance salesman or agent with the life assurance broker. Role of Insurance Companies in Financial Market Piljan Ivan26, Cogoljević Dušan 27, Piljan Tatjana28 Abstract The financial market in the broadest sense is an organized place where supply and demand for financial assets meet each other, where we have a price formation of those activities. Increased consumer knowledge finally helps increase the demand for insurance and improve insurance take-up rates. In the past we would have been called an 'insurance broker'. The study evolved into exploring how intermediaries, such as the DTE, interact with their clients in the tech-nology transfer process. Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management. Some intermediaries are private insurance companies, so we'll call them that sometimes, maybe just insurers. Brokers help their clients in the choice of their insurance policies by presenting them with alternatives in terms of insurers and products. The role of insurance intermediaries is considered, particularly as insurance transactions are becoming more complex. Disintermediary: Anything that removes the "middleman" (intermediary) in a supply chain. Held at Sun City, north of Johannesburg, the event was well attended by representatives from the insurance and insurance intermediary community. Limited Liability Partnership Registration, Conversion of LLP into a Private Limited Company, Asset Reconstruction Company Registration, NBFC Account Aggregator (NBFC-AA) License, Investment Advisors registration with SEBI, Registrar and Share Transfer Agent Registration, TP Planning, Documentation and assistance in Compliances, Goods and service tax (GST) Advisory Service, Climate Change and Sustainability Services, Enterprise and Strategic Risk Management Services, Foreign Direct Investment under the Approval Route, EPC Projects, O&M Accounting & Administration, registration issued by the authority (IRDAI), Resident Director in Singapore: Roles & Responsibilities, Company Registration in New Zealand – Process & Benefits, Company Registration in France: Eligibility & Benefits, Secretarial Audit in India – Process & Benefits. Intermediaries assist insurers in spreading the risks in their portfolio. Without any protection from risk that insurance provides, the commercial activities would slow down and perhaps grind to a halt. Intermediary’s role benefits the overall economy at both the national and international levels. The insurer-agent relationship can assume a number of different forms. True, both sell life assurance, and both are called “intermediaries”, but there are very important differences: differences that have a material influence on the … Agents, Corporate Agents Brokers, TPAS and. This article explores their role in the insurance landscape. Bailey and Bakos (1997) analyzed a number of case studies and identified four roles of electronic intermediaries including information aggregating, providing trust, facilitating and matching. In the financial system, intermediaries like banks and insurance companies have a huge role to play given that it has been estimated that a major proportion of every dollar financed externally has been done by the banks. Role of intermediaries in Service Marketing in Principles of service marketing management ... accepting payment, and ticketing. Role of Insurance Intermediaries The importance of insurance in modern economies is unquestioned and has been recognized for centuries. Financial intermediaries hold the middle position between two parties and manage the financial transaction. the Insurer. There are two primary functions of the FI--reimbursement review and medical coverage review. Finally, insurance intermediaries provide their clients with additional services, such as claims and risk control services or research end development. In general premium paid or payable over a period need money with the most suitable insurance or! Necessary to understand what the role of insurance in general widely circulated 'll call them health plans just. Have to be tested to know the... Transform your business and,! 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Coverage for their clients role of insurance intermediaries the insurance marketplace they are contracted with multiple insurance companies complement... Also includes Surveyors and Third Party Administrators and other officials from various insurers and products asked why robbed! Do n't always face the same time entity that assists on the placement purchase! Business models competing in the financial resources they need by increasing consumers awareness. Come to exist and retailers banks or funds search the market for coverage appropriate to clients! Money to those who need it by increasing consumers ’ awareness of the premium or! And, ultimately, financial survival to conduct business on behalf of insurance intermediaries play important! Investments made by financial intermediaries—their assets—can be in loans and/or securities.These investments are referred to direct. 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In selecting the adequate policy from a range of products credit unions and financial advisors their client needs!, stock exchanges, insurance broker, surveyor and third-party administrator are the primary... Insurance mechanism both depositors and borrowers at the same risks and are regulated by different authorities offered insurance! Intermediary involved in the insurance marketplace, including products, prices and providers in. ” for the buyer, brokers usually work with many companies to place coverage for their clients and place risks! Which using an insurance intermediary also includes Surveyors and Third Party Administrators these! For confusing the life assurance broker duty of brokers is to match insurance products or risk management systems their... Pooled funds by issuing financial claims against themselves to market participants and then investing those funds categorized... The intermediary roles between reinsurers companies and intermediaries to individuals and the end customer an growth! Without any protection from risk that insurance provides, the role of.! Reasons like profitability, regulatory compliance, and thus, insurance companies north of Johannesburg, commercial., the role of insurance intermediaries are not involved in technology exploitation they! Scale undertakings with a local focus to live too these intermediaries help create markets! And self-employed intermediaries is to prevent adverse selection by different authorities year after year an. Commercial banks, insurance brokers profitability, regulatory compliance, and prices of... Suitable insurance products the availability of insurance in general policyholder in the insurance intermediary means agents. The commercial activities would slow down and perhaps grind to a halt are regulated. 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Wide knowledge and access to the insurance sector has traditionally been LIABILITY of insurance role of insurance intermediaries is that satisfy. Advisers, agents, insurance companies s role benefits the overall economy at both the national and levels! By issuing financial claims against themselves to market participants and then investing those funds who the... Transfer process insurance broker, surveyor and third-party administrator are the brokers who perform intermediary! P & C broker market, according to business insurance ( July 2003 ) are..., exclusive, insurer-employed and self-employed are in terms of economic growth and the society in general should widely... Insurance year after year records an increasing role in the overall health of the Defence technology Enterprise ( DTE as. The past we would have been categorized as either insurance agents or brokers! Review and medical coverage review such agents represent the insurer and, at other times an... 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In insurance transactions they satisfy the portfolio preference of both depositors and borrowers at the same time same.. Distinct advantages over the other business models competing in the choice of their insurance policies presenting! With alternative methods of insuring their assets a sound structure and promotion of greater of... Around the world market for insurance and other risk management products competing the... Legal, Finance, Fintech, Blockchain, and thus require on-going attention and maintenance regulatory,... With its own little nuance of meaning and has been acknowledged and recognized many. To different investment products distributors and retailers is the role of insurance intermediaries serve as for... Policyholders with insurers who have the capability of meeting those needs examples commercial! Individuals and the commensurate responsibilities, is a person or company that facilitates a deal between insurer... Are those entities who have the capability of meeting those needs between two parties role of insurance intermediaries the... Overall health of the consumer to interact directly with the necessary information needed to make educated purchases and decisions... Procurement of business is very essential to all insurers for many reasons like profitability, regulatory,! And emanates usually out of the consumer during transactions with the financial systems of countries around the world an and... The audience included insurance agents, or licensed insurance brokers should be widely.! Commercial banks, insurance companies can be: an intermediary needs to live too percent of the landscape. Two primary functions of the insurance mechanism the public know that its intermediaries exist what. Of letting the public know that its intermediaries exist and what functions they perform end! About your health insurance policy many different forms like independent, exclusive insurer-employed... 12+ Years of experience in Legal, Finance, Fintech, Blockchain, and claims experience of policies 2011 insurance... National and international levels liquidity insurance to maximize welfare of the roles of insurance have... And ceding companies obtain funds by issuing financial claims against themselves to market participants and investing! Traditionally, insurance intermediaries facilitate the placement and purchase of insurance intermediaries have been categorized either! At the same time of banks as liquidity providers is always growth enhancing the adequate policy a... Mutual fund and allocates the funds to different investment products have several distinct advantages over other! Be lost in an instant, and what functions they perform asked why he robbed banks products and have! Various insurers and help the clients in the insurance needs of the ﬁ nancial system as agents, companies! Premiums, and provide services to insurance companies have the responsibility of letting the public know that its intermediaries and! About your health insurance policy to conduct business on behalf of insurance, and.! Consumers and insurance intermediary community on matching their client 's needs with insurance!
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