Why Use an Insurance Broker?
Posted on 20 June, 2016
We live in an online world, where many of the 20th century’s ways of doing business have been disrupted – not least the way we buy insurance. These days, a thriving direct insurer market has developed including online marketers offering lots of incentives to buy from them and promising cheaper premiums. Yet some insurance brokers continue to thrive. I caught up with Mike Donnelly of Adelaide’s Donnelly Insurance Brokers, to find out more about what keeps his clients coming back.
TFP – Mike, every day in the media and online there’s an increasingly vigorous push by insurance marketers to promote their products to consumers – why shouldn’t we just use them because they seem to offer lower cost insurance?
MD – People also need to be aware that many special offers that are made to purchase direct only apply to the first year so many people get a rude shock when they receive their renewal bill with possibly up to a 50% increase in the premium above the first year’s.
Reading and understanding an insurance policy is a difficult task for most people so how do they know what cover has been deleted to keep the cost down without professional advice? Only brokers have the skill and legal capacity to provide policy comparisons about market options – others can only discuss their particular product.
TFP – Can you give some examples?
MD – The 4 highest profile insurance marketers have by far the worst coverage for the standard Home and Contents policy, e.g. no cover for Fusion of electric motors; jewellery limited to $1,000 or Nil; temporary accommodation at substitute residence limited to 12 months or Nil; extra costs cover for rebuilding regulations only 1 out of 4 include this benefit.
And for car insurance, 3 out of 4 don’t cover damage to the car if the wrong fuel is used by mistake; and 1 does not cover theft if the car left unattended with keys in it.
For business owners, not all insurers offer the full range of covers needed such as: Management Liability and Cyber Attack. Most importantly, the direct insurers do not have the resources to review and update their policyholders’ insurance coverage each year for renewal, which is the brokers’ core function along with re-marketing the policies from time to time to maintain their clients’ best value coverage.
And there are plenty of other wrinkles like fine print traps that a broker can avoid for their client as the broker represents the them and no the insurer.
TFP – So what about customers who do fit the direct / online majors’ template – should they just buy online?
MD – Good question. But of course insurance isn’t just about the premium, and the cover it buys.
TFP – How so?
MD – When a claim arises, it’s obviously in the insurer’s interests to minimise the payout. That’s often when an experienced broker comes to the fore. Recent research shows that negotiations on claimants’ behalf by registered brokers yield on average a 15-25% greater payout compared to settlements negotiated directly. So a good broker adds value at both ends of the process.
TFP – So even if it costs a little more, it’s worth it when it comes to the crunch?
MD – Actually, the idea that insurance costs more through a broker is a bit of a furphy. Sure, there are “headline” premiums that look very attractive. But when you look behind the headline, and particularly at the limits and exclusions, you quickly see that you’re comparing apples with pears. Compare apples with apples, and the premiums you pay a broker are certainly no higher, and quite often lower.
TFP – Plus, you know you have the right cover?
MD – Right.
TFP – So how do you manage it?
MD – One key weapon in our armoury is our membership of the AIMS Insurance Broking Network. It’s a network of about 120 independent brokers who have collaborated to create a range of personal and business insurance products that cover the staple categories of risk, but with the addition of cover enhancements not available directly from a direct insurer. The size of the network gives us the buying power to obtain the best value coverage for our clients and top claims service standards form the market leading insurers.
TFP – Anything more?
MD – Yes; an uncompromising attitude towards service. We make our customers feel valued, because we really do value them! And one more thing – 40 years’ experience in the business certainly helps and proves our value to clients.
TFP – Mike, thanks for your time.
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