Insurance: The Broker’s Role…versus supermarkets and other direct vendors

There is a significant push on selling insurance products through mainstream retailers. Their foray into insurance is a calculated move that relies heavily on the established reputation of these retailers to provide convenience and savings in commoditised household goods.

It’s a tactic popular with banks as they design products that will try to cater for all financial of their customers, and thereby, keep them ‘in house’.

So what’s the difference between insurance brokers and the direct sellers?

Both earn a commission from the placement of cover with the insurer. The product the client receives is only as good as the results when it’s needed at the time of a claim. The role of the insurance broker is to provide professional, advice-based service that represents the client’s best interests. The broker has a suite of product options available depending on clients’ circumstances, cover requirements and affordability.

The direct market relies on promoting a cheaper product as the bottom line. This is heavily supported by mass media advertising that keeps the subject matter in their campaigns light on detail and high on entertainment value – think of domesticated aliens, man folding underwear at counter, French girl struggling with Aussie accent, happy customers portrayed by actors etc. The product is deliberately made cheaper by using strict acceptance criteria and restricting policy coverage and benefits.

A recent study by Vero Insurance surveyed business owners as to why they prefer to deal with a broker. A common theme in the feedback was that a broker would see many claim scenarios and may be able to suggest the most appropriate cover based on previous experiences. This gave business owners more confidence rather than trying to understand the complexities themselves.

An important factor in any insurance buying decision should be how claims are settled. Brokers often recommend insurers based on their ability to provide excellent claims service. Insurance contracts and claim settlements can be complex and having professional guidance through the process is invaluable. Policy wordings often have limits, sub limits, conditions and exclusions that can potentially create situations where confusion reigns and the insurance industry is perceived as untrustworthy and deceitful.

The broker has the ability and responsibility to eliminate this confusion and provide the most suitable product for the clients’ needs.

If price is ever the single most important criterion in the insurance buying decision, then there can be benefits in using direct market insurers. However, always bear in mind that when price is optimised, the quality of cover usually suffers. Cheaper policies have strict acceptance criteria and the retailers’ call centre consultants have scripts to follow. The highly regimented and efficient transaction process is designed to deal with the large volume of phone calls. Closing the deal is likely to be the number one priority.

Aliens, Meerkats or Brokers? When buying insurance, which way to go?

Whilst it’s true to say that the TV ads of the Direct Insurance Marketers are very ‘catchy’ and ‘humorous’, prospective buyers of these classes of insurance from these vendors should be aware that the product being promoted is actually ‘protection’: protection of the livelihoods, incomes and assets of individuals and businesses. Not something to be treated lightly.

Generally, the Direct Market will promote their offerings on a ‘price’ model and whilst this is always part of any consideration, claims service and Policy Wordings and Conditions are of equal importance.

If only the quality of the coverage provided by the Direct Insurance Marketers was as comprehensive as their advertising campaigns.

This is where an Insurance Broker adds value to the purchasing proposition. The insurance broker’s role is to ‘canvas’ the ‘market’ with a view to obtaining a recommended ‘product’ that is appropriate to the individuals needs, taking into account any specific requirements. Additionally, many brokers are members of insurance Cluster Groups and these have policy wordings that are far superior, and ultimately of more benefit to the buyer, than that of the Direct Insurers.

Why wait in the long queue of a call centre or attempt to navigate the hurdles of a direct seller’s website when a broker can make the transaction a much easier and safer option?

The main point of difference though is at claim time when the consumer is totally ‘on their own’ in respect of Policy interpretation as well as having to arrange and manage the claim from start to finish. Brokers understand and manage claims. It’s what they do. They add to the process rather than detract from it. The broker will advise clients what information is required and then prepare and forward the claim to the insurer. A broker goes in to bat for you and manages the process from start through to settlement while their client can relax knowing he or she is in good hands.

Another major point that a broker offers over the Direct Marketer is the fact that at Renewal / Anniversary of the Policy time, the premiums are market checked to ensure that a client’s existing insurer is still providing the most competitive and comprehensive terms available. When dealing with a Direct Insurer, each year is just like starting over again.

As a client of a broking firm you are also able to access varied other services of your chosen broker. They have a range of valuable services and offers, available to you, all under the one roof and accessible by one phone call. Over time, clients of brokerages become trusted business partners and friends, thanks to the professional way their insurance business is transacted. To your broker, you are never merely a number.

On balance, when you weigh up the pros and cons of insurance from the Direct Marketer’s call centre or the professional broker alternative, the choice is clear.