People who are considering entering into contractual relationships should remember to fully understand the terms of each contract. It is important for them to understand not only their position but also that of other parties in the contract relationship. They are advised that anything less than this would be to enter into a contract blindly, which can lead to many regrets throughout their lives.
As such, a person who is considering purchasing an insurance policy (which is basically a contract), would be interested in learning about the relationships among the parties and the identities of the different parties. This is precisely what we will be exploring together.
The policyholder, the person who purchases the insurance policy, would be the first to enter into a contractual relationship. Because the sale of insurance policies is geared towards protecting the interests of that person, the whole structure is built around him. You become the other party in the relationship if you purchase an insurance policy. This is your contractual obligation. You must continue to pay your insurance premiums. Your contractual rights include fair compensation in the event that you take out insurance to protect yourself from what happens.
An assurance company is the second party in an assurance contractual relationship. The assurance company is the party that collects the assurance premiums from policyholders and pools it together. This party also invests the money in order to make sure that if any of the things policyholders have taken out of insurance against come to pass, there is money to compensate them. Like a bank, the company will often be insured to protect its customers in the event it goes under. This “insurance” adds another party to the assurance contract relationship (who is not seen by the policyholder) and is called the re-insurer.
The insurance broker is the third party in the insurance contractual relationship. The insurance broker is the person briefed by prospective policyholders to help him find suitable insurance policies. An assurance company could brief the insurance broker to help it find potential insurance buyers. This would be in return for a salary or a commission. This is not a brokerage. You are purchasing insurance through a broker and the assurance company is the one you deal with. The broker is there only to help you connect. The contract is between the policyholder and the insurance company. The role of the broker is temporary. It is important to mention that broker’s role is transient. We have done so.
The assurance agent would be the fourth party in the insurance contractual relationship. The assurance agent would be the fourth party in the insurance contractual relationship. Agents work under the direction of both assurance brokers and companies. Their role is primarily marketing: they identify potential buyers for insurance and sell them insurance. Remember that you’re actually purchasing insurance from an agent if you purchase insurance through them. Agents are only relationship facilitators. His role is temporary. Your contractual relationship with the insurance company will continue to exist.
