Understand Your Risk: Insurance Broker vs. Going Direct

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Insurance products are increasingly being sold through popular retailers. This is a calculated move that relies heavily on the standing reputation of these retailers for convenience and household savings.

This is a common strategy used by banks as they design products that cater for all their customers’ financial needs, thereby keeping them within the bank.

How are Insurance Brokers different from retail sellers?

They both earn commissions from the placement of coverage with the insurer. The product the client receives is only as good as the results in the case of a claim. The role of the insurance broker is to offer professional advice based on the client’s best interests. The broker has a variety of insurance products available based on the client’s requirements, circumstances, and budget.

With the direct market, the goal is to offer a cheaper product. Efforts in mass media advertising rely heavily upon keeping their campaign subject matter and entertaining value to achieve this effect. The product is made deliberately cheaper, utilizing strict acceptance criteria and limiting policy coverage and benefits.

Business owners were asked in a recent study why they prefer dealing with a broker.

Common feedback was that a broker could suggest the most appropriate cover based on their previous experience of the situation. This gives business owners more confidence than dealing with complex insurance policy.

The process of settling claims should be a major consideration in any insurance purchase. Brokers recommend insurers based on their ability to provide excellent claims service. Contracts and settlements of insurance claims can be complex and having professional guidance during the process is invaluable. Excessive conditions, exclusions, and policy wording can result in confusion, lack of trust, and poor perception of the insurance industry.

It is the broker’s responsibility to remove any confusion and provide the most suitable product for the client.

Direct market insurers can be beneficial if price is the most important factor when purchasing insurance. However, product quality diminishes when cover price is optimized. Cheaper policies often have strict acceptance eligibility, and the retailer’s call-center consultants must follow scripting. High volumes of phone calls mean highly regimented transaction processes. Often, ‘closing the deal’ becomes the most important part of the process.