There is often some confusion as to what insurance brokers actually do, and why anybody would choose to use an insurance broker rather than cutting out the middle man and going directly to the source.
Insurance Broker vs Insurance Company
Some consumers are under the impression that it is more cost-efficient and simpler to go straight to the source and get insurance directly from the insurer. However, there have been multiple case studies which actually prove this to be quite untrue. Using an insurance broker to find the right insurance policy for you can often work out far cheaper in comparison.
Insurers will provide different rates to insurance brokers than they do to the end-consumers. Working with an insurance broker actually reduces the risk for the insurance company, as insurance brokers are likely to choose the right policy for their customers without under-insuring and are more likely to get all of the details from the customer before deciding upon a policy. Insurance brokers are often better equipped than insurance companies to handle the detailed discussions with the customer about the type of insurance that they need and who best to get it from. They are able to ask the more specific details in order to better protect you.
What do Insurance Brokers actually do?
Insurance brokers will take into consideration all of your individual insurance requirements to ensure that they find you the best insurance policy to suit you as an individual based on your required cover and cost. Ultimately, insurance brokers work for you and not the insurance company, so it is in their best interest to keep you happy. Their primary objective is to find the best deal for you.
Rather than picking a generic insurance policy based off of a few standard questions, insurance brokers can offer professional advice tailored to you and your individual circumstances. They can look at your existing insurance policies to see what you already have covered, and can often find combined insurance packages to ensure that you get a better deal and do not have any unnecessary overlap in policies. They are also able to be more flexible on pricing this way. This is especially popular with types of business insurance where policies can get a little more complicated depending on the business as different businesses will need to protect against different situations.
All insurance brokers are regulated by the FCA (Financial Conduct Authority), and are expected to work to a high standard due to the heavy regulation of the industry. Even the term “insurance broker” became regulated under the Insurance Brokers Act 1977 after firms were caught holding themselves as brokers when in reality they were employed agents representing insurance companies. Unlike agents, insurance brokers are not employed by an insurance company. Instead, they represent multiple insurance companies and work on commission. They will work with various insurers to find the insurance that matches your needs and share their industry knowledge to help you understand what you need to protect against, often helping you with the details and things that you may have overlooked. They are able to offer you a whole range of products from different insurance companies, rather than representing a single company and only offering insurance products and services from that company.
You may even find certain insurance brokers that specialise in specific industries and can design bespoke policies for you. Due to the nature of the industry, insurance brokers are very effective at searching the market for you, as they have to keep up on all of the industry news and standards as well as all of the insurance companies’ different products and services. Insurance brokers have to become extremely knowledgeable in order to stay current.