INTERMEDIARY, BROKER OR AGENT?

The description “intermediary” is usually synonymous with the concept of a third party whose role is to ensure that the parties to a contract both obtain what they want, the third party working for both parties for their joint benefit (underwriting agents are fully dealt with in Chapter 2). This explanation reflects the European or American approaches, but under English law an intermediary in its purest form is very difficult to find, because the intermediary is usually held to be the agent of one party. English reinsurance uses the words “agents” or “brokers” to reflect the rather more one-sided position. Agency is the legal relationship between two parties in which one is invested with power by the other to affect the other’s legal relationship with third parties. Agency is consensual since the principal and agent must agree (by words or conduct) that the agent should act for the principal, and to all intents and purposes effectively as the principal. The relationship is almost invariably contractual, and usually the agent is intended to be paid for his services by commission, which forms part of and is usually taken out of the premium.