Posted on: November 25, 2020
Purchasing insurance directly or through a broker/advisor? Here are the differences you need to know
Half of the $19 billion Australians spend on general insurance each year is purchased through insurance brokers/advisors – the rest is bought directly from insurance companies.
Curious about that even split?
This article explains the differences between buying your policies through a broker/advisor or directly from an insurer. Your end goal is the same – ensuring your business is protected from risks.
As insurance brokers/advisors, we’re professionals with expertise in insurance and risk management, often specialising in insurance for particular industries or professions. We work for our clients, not insurance companies. The National Insurance Brokers’ Association has a code of practice that sets out high standards for NIBA members and other brokers who subscribe to the code.
Let’s look at the pros and cons of off-the-shelf insurance policies direct from an insurer and engaging with an insurance expert, a dedicated broker or Advisor.
Buying insurance directly
Here are some of the reasons you might consider buying your insurance directly:
- Expertise: You already have in-house expertise about risk management.
- Standard needs: You just need standardised insurance without extra or customised protection.
- Price-sensitive: You’re only focusing on the premium price as your top criteria and are willing to skimp on business-saving inclusions.
- Capacity: You’ve got plenty of time on your hands to navigate the huge insurance choice set.
- Online solution: You’re comfortable using insurance comparison websites and relying solely on their recommendations. You’ve also done your background research and are happy with the independence of those websites.
- Happy to (not) discuss: Insurers generally only provide factual information or advice based solely on the products that they offer, not what is available across the market, so you’ll be open to doing the leg work and contacting a few different insurers before you make your choice.
So, if you take the above approach, chances are you’ll have gaps in your risk coverage. And, it’s often in more complicated areas such as property insurance and professional liability. Not getting these right could break a business, though.
Tapping into expertise
Consider that you may engage an expert for financial, marketing, business development and/or recruitment advice for your company, so why not for your risk management?
And, yes, for this service there is a cost. We are paid for our service and our expertise, and we disclose this to you in a transparent manner, and it’s how we’re able to keep offering our clients value.
Here’s why businesses opt to use a dedicated broker or advisor:
- Risk aware: Offering tailored risk management advice to your business needs and risks.
- Customised: It is a broker’s/advisor’s business to keep updated about insurance policies, packages, markets, prices, benefits and pitfalls.
- Support when you need it: We can advise you to help reduce your possible future losses.
- Convenient: Saving you time otherwise spent navigating the hundreds of policies available to find which suits (and then starting that process again for every single type of insurance cover you need). As well, policies vary by deductibles, services, coverage, excess and premiums. We help you interpret, arrange and complete your insurance documentation.
- Savvy about the fine print and changes: Saving you more time because it’s our business to be aware of the finer details of your insurance policies including the terms and conditions, benefits and inclusions, exclusions and sub-limits.
- Open to a better offer: you’re not locked into policies with just one insurance company – if their policy changes mean their product is no longer a good fit for your business, as your broker/advisor, we’ll let you know and suggest other options. It’s our job to help you review your policies regularly.
- Supportive: we’re there for you including when it comes time to make a claim. We will advocate on your behalf to prepare and monitor the claim, so you can get on with running your business. Our role is to be proactive in supporting your business, so you don’t waste money, time and energy chasing up your insurer.
Using an insurance broker or advisor means your business taps into expertise in insurance and risk management, which gives you peace of mind. Their professional advice is tailored to your needs because we work for you not insurance companies, and we’re at your side for the long term.