Historically, insurance companies didn’t like dealing directly with the public. It was costly, time consuming and a lot of hassle.
This meant that the public had to take out insurance through an insurance broker. There was a company in the UK called Direct Line, set up in about 1985, which made a big play on the fact that they did deal directly with the public, and offered them a 15% discount on the insurance, which was the amount of commission they would have paid an insurance broker.
Growth of the Internet
in one sense, it is quite obvious that the Internet has changed this profoundly. Companies can now do you face to face with the public, either directly through their own website or through comparison sites.
This is often hailed as being able to generate cheaper insurance for the consumer, which is sometimes questionable, but misses two really important aspects of taking out insurance.
Role of the Insurance Broker
The role of an insurance broker is essentially twofold. Firstly is to find the most appropriate insurance policy for their client, which may not necessarily be the cheapest, but will have the best level of cover to meet their needs.
This is something that a consumer may not necessarily understand the importance of, or may lose sight of when seeing a cheaper premium.
Truth is if the insurance cover is not appropriate, or is lacking areas of cover that the consumer needs, then any premium paid is essentially throwing money away because the cover they need simply isn’t there.
Secondly, the role of an insurance broker is to help their client deal with any claim that they may have under a policy.
This matters for fairly obvious reasons, in that a broker should be well placed to know both the insurance policy itself, what is covered and what is not, and is able to fight the corner of the insured when problems arise with any claim payment.
This is not simply about whether the insurance company agrees to pay a claim or not, but often the amount they are willing to pay, and how it might affect a new premium.
It should be remembered that an insurance policy is a legal contract, and like lots of matters to do with the law, there are lots of areas that are not simple or clear cut and are open to dispute in the event or claim.
Having an insurance broker, who takes that commission off the insurance company and therefore there is no cost to the consumer, can make a significant difference both in terms of making sure the right level of cover is in place, at the most appropriate cost, and be on hand to help process any claim that may occur.
Summary
Buying directly from a company’s website or a cost comparison site obviously seems an attractive option. If so doing, is often a really good idea to do some research about what the policy covers, what it doesn’t cover, and who the insured can get to help them in the event of a claim.
Insurance brokers are still around, and there are many who will still do what are referred to as personal lines insurance, things like car / auto insurance, home insurance, travel insurance etc.
Insurance brokers in addition are still widely used for small businesses and commercial companies understand the importance of having an independent objective view about their needs, a principle that many consumers probably do well to take note of.
