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.
