London Economics was commissioned by the British Insurance Brokers' Association (BIBA) to conduct research into the value that the general insurance intermediary sector contributes to UK plc.
Insurance brokers make a critical contribution to the functioning of the insurance market. Yet, their activities, roles and contribution are often little understood and the purpose of the present report is to address this information gap and highlight the contribution of insurance brokers to the UK economy.
The theoretical and empirical literature on the role of intermediaries in a wide range of sectors identifies four core economic contributions that they make. These contributions also apply to insurance intermediaries. In general, through their activities, intermediaries:
1) Decrease search and matching costs
2) Allow economies of scale to be reaped
3) Help reduce adverse selection
4) Help overcome moral hazard issues.