Why use an insurance broker?
The obvious answer here is ‘cost’ – and although that’s not untrue, I think you have to pair the traditionally high cost of insurance broking with a corresponding lack of clear and demonstrable value. Something is only considered high cost if its value is not immediately clear and obvious. For example, £10,000 is a lot of money – but you wouldn’t consider it expensive for a house.
June 23rd, 2022
It’s often unclear what, if anything, the insurance broker is actually bringing to the transaction – relative to the price they demand, at least. Combine this with the pushy, ‘salesy’ approach adopted by many brokers, and you’ve got a potent recipe for avoiding insurance brokers altogether.
This lack of transparency and pushy attitude brings about its own set of problems, of course, since a lack of value leads to a lack of trust in insurance broking as a process and as a profession.
In very broad terms, can you begin by explaining what an insurance broker is?
An insurance broker can mean different things to different people – businesses of different kinds, sizes, and (crucially) risk profiles will all have a different broking experience.
Fundamentally, though, an insurance broker is there to help you identify and understand the risks within your business. Insurance brokers have the knowledge and market experience to help you source insurance that adequately protects you in the event of a loss.
That’s only a foretaste of what insurance brokers can do, of course, but these principles should unite most business’ interactions with insurance broking services.
What are the main advantages of buying through an insurance broker?
Well, first and foremost, insurance brokers can ensure you have the right levels of cover – and with underinsurance rife at the moment among those who go it alone, this is more valuable than it may seem.
Brokers can also play a more preventative role, assessing your risks to determine how you can prevent losses in the first instance.
Not only will a broker get you the right level of cover, but they’ll also make sure you’ve received a full market view of the potential policies at your disposal – helping you to get a good deal, in essence, including via markets and products you wouldn’t otherwise be able to get your hands on.
Perhaps most importantly, an insurance broker can assist when it comes to managing claims – a difficult, stressful process which, again, many businesses will struggle to deal with off their own bats.
Some businesses will be tempted to try and ‘cut out the middleman‘ and find their own insurance deals – why should they avoid that approach?
For the same reason that they wouldn’t fight their own legal case rather than hiring a solicitor. Yes, it can be done, but without the right expertise and skills, it’s an uphill struggle.
Even a diligent business owner who knows their insurance onions will still be unable to access certain products – often some of the best deals are only available to the insurance broking community.
Besides, it’s so easy to lack the appropriate levels of cover even if you feel you’ve done everything correctly – and, in that scenario, a lack of coverage means that the money you saved on refusing an insurance broker is a false economy.
What are the tell-tale signs that your broker is securing a good deal?
There are a few questions I recommend asking yourself (and, potentially, your insurance broker):
Are they transparent in explaining what they’re doing and why? Are they withholding any quotes from you, and can they explain why they went to the markets they’ve chosen? In other words: can they ‘show their working’?
A similar set of questions needs to be asked when it comes to their earnings. Did they, for example, proactively disclose their earnings to you, and do they differ from one insurer to the next? In other words: can they prove their impartiality?
Finally, it’s worth establishing whether their earnings are aligned to your premium. That’s the question that really matters because this can determine whether or not your insurance broker is incentivised to actually get you the best deal possible.
Conversely, how can businesses get a sense of an insurance broker’s trustworthiness?
Ask them to disclose their earnings and see if they stutter!
In all seriousness, though, I recommend following your gut.
It doesn’t hurt to look for factors that inform your gut’s intuition, of course – for example by looking for a sincere desire to earn and rebuild that much-needed trust through initiatives like full transparency.
I think of transparent broking along much the same lines as restaurants that have open kitchens – if there’s nothing to hide, why not allow a peek behind the curtain?
Why do businesses in particular benefit from the advice of an insurance broker?
Put simply: because insurance is complex.
Business leaders already have enough on their plates without attempting to add highly specialised insurance expertise into the mix – especially given that, if they make a bad decision or judgment around coverage, everyone and everything connected to their business will be at risk, from board members and investors to employees and family. Insurance policy wordings are akin to complex legal documents and benefit from the expertise that an insurance broker has in explaining and interpreting them.
Finally: what advances in the world of broking do you think will tempt more businesses to engage an insurance broker?
Again, I think any advances that promote a sense of trustworthiness are going to shine in this context – and especially any kind of advance that demonstrates you’re putting the customer first.
Customer-centric claims processes and tools represent precisely that kind of respect for customers, who deserve to be kept always informed about the status of their claim – as opposed to peering through the murky mist that currently surrounds claims.
Beyond that, I think we have to return – once again – to transparent, usage-aligned pricing models. Customers need to know that they’re getting what they pay for – and that they’re paying for something worth getting.