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General Car Insurance

Where to Purchase Insurance

Insurance Broker vs. Direct Insurer – Which Should I Use?

 

It’s not something we wake up in the morning thinking ‘fantastic, I’m going to really enjoy sorting my insurance out today!’ when in reality we’re more likely to wake up screaming. Really, we just want to get it done and dusted, vaguely confident that we’ve got the best premium possible.

 

But there are so many insurance companies out there, all claiming to offer cheapest insurance, or the best policy, how on earth do you know where to go? Let me explain - basically have two options available to you

 

The Insurance Broker

The insurance broker is a middleman between you, the customer, and the insurance company who underwrites the risk. They usually have access to most insurance companies and will act on your behalf to arrange an insurance policy to specifically meet your needs.

This does not necessarily mean that it will be the cheapest; your broker should evaluate your specific insurance needs and then find the best policy to meet those requirements.

The insurance broker earns their income by receiving a percentage commission of the premium for the policy they have arranged for you. Usually this will be around 10% and currently, they do not have to disclose this commission and amount to you. Some brokers also generate additional revenue by charging a small fee for arranging the insurance, often around £15. They must disclose this amount to you.

Do not be put off by these fees. Brokers will take the time and effort to develop a personal relationship with you and can often advise you in area’s you may not have considered. Because they have access to many insurance products, brokers often have access to insurance schemes unavailable to the public, that provide much better protection for the same if not cheaper than you could have arranged yourself.

In specialist area’s such as classic car insurance, brokers may have direct access to the insurance company and may have unique schemes not available to the public. Often they can negotiate directly with the insurer on your behalf.

When your policy is due for renewal, you can also request that your broker search the market to see if another insurer now offers a cheaper policy.

 

The Direct Insurer

An insurance company will calculate a premium based on the individuals rating factors and ultimately take the risk of insuring that person.

With the increasingly competitive insurance market we are now in, insurance companies decided to cut out the broker and sell their products directly the public. This has generally been done on mass-market products, namely private car insurance, home insurance, travel and pet insurance, primarily to reduce their costs, as they no longer have to pay any commission to the broker.

On the surface this is great news to the consumer – cheaper insurance – and we are constantly bombarded by advertising pertaining to support this.

However, the reality of this can be different. The direct insurer will only offer their rates. So after spending 15 minutes on the phone or clicking away on-line, you will get the princely sum of one quote. Then you will have to go through the same process to get another quote. Obtaining 4 quotes can be a time consuming and harrowing experience.

To add to this, customer service can often be poor with foreign call centres and never speaking to the same person. You have a name and are not just a number!

Another tactic all insurance companies use is to offer insurance to new customers at heavily discounted rates. This is great for the first year, but you may notice that your premium has increased at renewal.

 

The important differentiator here is the level of customer service offered. You should consider whether hopefully saving a few pounds from your insurance premium is worth the time and effort of contacting multiple insurers, or if its better to get to know your local broker and see what they can do for you.

 

Why don’t you now look at The Insurance Boffin’s Top Tips, or things to check before you buy insurance.

The Insurance Boffin  E-mail: info@insuranceboffin.com

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The Insurance Boffin

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