1.1 Introduction
Insurance middlemen are individual that provide crucial access to insurance products and services for customers by representing multiple insurers and offering a wide range of options (Anderson & Fiedler, 2015). Insurance middleman in business growth presents a comprehensive analysis of the pivotal role played by insurance intermediaries in fostering the growth and sustainability of businesses. Insurance middlemen, including brokers and agents, serve as intermediaries between insurance companies and customers, playing a pivotal role in various aspects of the insurance industry's growth and development. Through a thorough examination of the functions and contributions of these intermediaries, the paper sheds light on their significance in the contemporary business landscape.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of terms.
1.2 Background of Study
Modern insurance was introduced in Nigeria in the early 20th century by British merchants. The first insurance company Royal Exchange Assurance started as an outpost of its British parent and was upgraded to a branch in 1921. Following the advent of Royal exchange, other companies followed in 1949. Hoyt et al., (2011) opined that the role of insurance middlemen contributes significantly to the growth and development of the insurance business, providing several benefits to both insurers and customers. One key benefit is the facilitation of market access and expansion, which fosters competition and innovation within the industry (Hoyt et al., 2011).
The evolution of insurance intermediaries dates back centuries, intertwining with the development of modern insurance practices. From the emergence of Lloyd's Coffee House in the 17th century to contemporary insurance brokerage firms, intermediaries have been instrumental in shaping the insurance landscape. With globalization, technological advancements, and shifting consumer preferences, the role of insurance intermediaries has undergone significant transformations. This background sets the stage for exploring their contemporary significance in driving the growth and development of the insurance business (Borch, 2010).
In the early days of insurance, intermediaries emerged to bridge the gap between insurers and individuals or businesses seeking insurance coverage. These intermediaries played a crucial role in educating potential policyholders about the benefits of insurance, assessing their needs, and facilitating the placement of insurance policies with insurers. Throughout history, various types of intermediaries have emerged to serve different market segments and insurance needs. This includes insurance agents, brokers, underwriters, and other intermediaries with specialized roles and functions. Over time, intermediaries have evolved to adapt to changes in technology, market dynamics, and regulatory environments, shaping the structure and operations of the insurance industry.
The historical background of insurance intermediaries reflects the broader trends and developments in the insurance business, including the expansion of insurance markets, advancements in risk management practices, and shifts in consumer preferences. While specific historical accounts may vary based on geographical and cultural contexts, the overarching role of insurance intermediaries in the growth and development of the insurance business remains consistent across regions and time periods.
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Role of Insurance Middleman in the Growth and Development of Insurance Business.
1.3 Statement of Problems
Investigation revealed that the presence of numerous insurance middlemen with varying levels of expertise and market reach can lead to fragmentation in the insurance market, hindering efficient distribution and increasing operational complexities (Harrington & Niehaus, 2001). Also, lack of transparency in commission structures and conflicts of interest may erode trust between insurance middlemen, insurers, and policyholders, potentially deterring consumers from purchasing insurance products (Baranoff & Sager, 2010).
Additionally, compliance with evolving regulatory frameworks poses a significant challenge for insurance middlemen, requiring continuous adaptation to legal requirements and standards, which may strain resources and impede growth (Nelson, 2018). It is on the backdrop that this research tends to examine the contribution and role of insurance middleman in the growth and development of insurance business.
1.4 Aim and Objectives of Study
The aim of the study is to examine the role of insurance middleman in the growth and development of insurance business using Alpha Broker Limited, Enugu as a case study. In achieving this aim, the following specific objectives were laid out as follows:
- To analyze the functions and responsibilities of insurance middlemen in the distribution, risk assessment, and claims management processes;
- To assess the impact of insurance middlemen on enhancing insurance penetration and promoting financial inclusion;
- To explore strategies and best practices for optimizing the role of insurance middlemen in driving the growth and development of the insurance business;
- To identify the challenges and constraints faced by insurance middlemen in their operations; and
- To provide recommendations for policymakers, insurers, and insurance middlemen to enhance collaboration, transparency, and efficiency in the insurance ecosystem.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- What are the functions and responsibilities of insurance middlemen in the distribution, risk assessment, and claims management processes?
- What is the impact of insurance middlemen on enhancing insurance penetration and promoting financial inclusion?
- What are the challenges and constraints faced by insurance middlemen in their operations?
- What are the strategies and best practices for optimizing the role of insurance middlemen in driving the growth and development of the insurance business?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: The presence and effectiveness of insurance middlemen does not significantly contribute to the growth and development of the insurance business by facilitating market access, enhancing customer trust, providing expertise and personalized services, and optimizing risk management processes.
- H1: The presence and effectiveness of insurance middlemen significantly contribute to the growth and development of the insurance business by facilitating market access, enhancing customer trust, providing expertise and personalized services, and optimizing risk management processes.
Hypothesis Two
- H0: There is no significant relationship between insurance middleman or intermediaries and the development of Nigerian economy
- H1: There is significant relationship between insurance middleman or intermediaries and the development of Nigerian economy
1.7 Significance of Study
Studying the role of insurance middlemen in the growth and development of the insurance business is crucial for several reasons:
- Enhancing Distribution Channels: Middlemen often act as intermediaries, facilitating the distribution of insurance products and services. Understanding their role can help insurers optimize distribution channels, improve reach, and enhance customer access to insurance products.
- Impact on Industry Innovation: Middlemen influence the introduction and adoption of innovative insurance products and services. Researching their role can shed light on how innovations are disseminated within the industry and how middlemen contribute to or hinder the adoption of new technologies and practices.
- Regulatory Implications: Middlemen are subject to various regulatory frameworks that govern their activities in the insurance market. Studying their role can provide insights into regulatory challenges, compliance issues, and the overall regulatory environment affecting the insurance industry.
- Customer Relationships: Middlemen often serve as the primary point of contact between insurers and customers. Researching their role can help understand how customer relationships are managed, including issues related to trust, satisfaction, and loyalty.
Furthermore, this research study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.8 Scope of Study
The scope of the research is focused on the role of insurance middleman in the growth and development of insurance business using Alpha Broker Limited, Enugu as a case study.
1.9 Limitations of the Study
During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
- Initial Cooperation Delay from Respondents: A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.
1.10 Definition of Terms
Insurance Middleman:
An intermediary entity, such as insurance brokers, agents, or intermediaries, that facilitates the purchase and sale of insurance products between insurers and customers. Middlemen may provide advisory services, negotiate terms, and assist in claims processing on behalf of clients.
Growth:
It is the increase in size, scale, market share, or profitability of the insurance business over a specific period. Growth can be measured in terms of premiums written, policyholder equity, market penetration, or other relevant metrics.
Development:
It is the advancement, improvement, or evolution of the insurance business, encompassing factors such as innovation, expansion into new markets, product diversification, regulatory compliance, and enhanced customer service.
Insurance Business:
It is the industry involved in underwriting insurance policies to mitigate financial risks faced by individuals, businesses, or other entities. This includes insurance companies, reinsurers, intermediaries, and related service providers.
