What is Insurance Market?
Ordinarily, a market is a defined location that brought in contact buyers and sellers together for the exchange of goods and services or any other related value items aimed at satisfying human most pressing needs.
Kotler defines the market as a collection of buyers and sellers who transact over a particular product or class of product.
However, a location, a site, or a place is no longer valued in the definition of the market this is because the market of this present era can assume different means, a system of information and communication courtesy of information technology, some markets of these type includes banking market, furniture market, insurance market, foreign exchange market, and electronic market.
Insurance Market: This is a market for insurance protection and it refers to the institution that propels the placing of insurance which consists of the insurance buyers, the insurance sellers, and the insurance intermediaries.
In other words, the insurance market consists of the buyers of insurance and the sellers together with the intermediaries, agents, or brokers who unite the two together. moreover, there are also the regulators, representative bodies or organizations, consultants, and technical advisers who are part and parcel of the market
Composition of Insurance Market:
The composition of the insurance market implies the nature of the ingredient constituents of the insurance market among which includes the following.
Those with a valid and reliable insurable interest that is legally recognized, can ensure their interest.
The relationship may arise through ownership, part-ownership or responsibility for goods, or liability to pay damages or certain benefits.
The buyer of the insurance service comprises of the following.
1. The general public
2. State government
3. Federal government
4. Social clubs
7. Companies and corporations
8. Local governments
9. Presessional association
10. Commercial enterprises
12. Government and private hospitals
13. Banking industries
15. Educational Institutions.
All these categories of buyers of insurance services need one or more types of insurance covers for themselves. For the individuals, the target population is those between the age of 25 and 60 or more years.
Insurance sellers are insurance and reinsurance companies. Insurance companies are called the insurers and persons providing direct insurance protection to the insuring public. Also, they are individuals but person companies duly incorporated as limited liability companies under CAMD 1990 or the bodies duly established by or pursuant to any other enactment to transact the business of insurance.
Some types of sellers in the market include
1. Mutual indemnity clubs
2. State insurance companies
3. Reinsurance companies
4. Co-operative insurance companies
5. Self-insurance companies
6. Government-owned insurance companies
7. Property insurance companies etc
Most importantly, Reinsurance companies also transact insurance business and are called insurers. They insure part of the risks particularly those above the retention capacity of the insurance companies.
The intermediaries are insurance market middlemen who introduce business to insurance companies or who act as facilitators in arranging insurance contractual relationships between the insured and insurers.
They are entitled to remuneration by the insurers through the payment of a commission.
There are two types of insurance middlemen.
a. The insurance Agent.
b. The insurance Agents
An insurance agent is a person who has the legal function of bringing the insurer that is the principal into a contractual relationship with the insured [the third party]. However, an insurance agent must be a person licensed as insurance under the prevailing insurance legislation.
An insurance agent does not profess to be an expert in the insurance business and can hardly be sued for professional negligence. they may be classified as part-time agents, full-time agents, cash agents, credit agents, and ownership agents.
The insurance broker is limited liability companies registered under the insurance Decree or Act to transact insurance broking business and they are independent operators.
Their duties are to place risk, prepare policies, keep record cards, collect premiums on behalf of the insurer, collect claims for the insured maintain an elaborate system of accounts between the insurer and himself one part and his clients and himself on the other.
Having opined that the insurance market is a market for insurance protection and it refers to the institution that propels the placing of insurance which consists of the insurance buyers, the insurance sellers, and the insurance intermediaries.
We also stated that the buyer, the sellers, intermediaries, insurance agents, and brokers are the major constituents or composition of the insurance market.