I chose the title of this blog in order to keep things as broad as possible. However, I did consider other titles such as:
What Does an Insurance Broker Do, and Why should You Use One…Or Not
What Should You Expect From Your Insurance Broker?
You will notice how I have now cleverly incorporated all the titles I couldn’t decide between! The truth is, they are all good questions and I will try to do them all justice.
In short, a broker acts on your behalf in order to find the best policy to meet your needs.
Lets break that down a bit…
“Acts on your behalf”
This is true. By using a broker, you are effectively appointing them as your representative in all matters to do with the product you are buying or researching. The broker will also act on behalf of the Insurer in certain regards. These are in the main administrative, such as the authority to issue documents or administer the payment process.
There is also an obligation on the part of the broker to make the insurer aware of anything that may affect the insurers decision to hold cover. This means passing on as much information as possible to the insurer, and it is this element that sometimes I have been questioned about over the years.
The situation is actually quite simple. If all relevant information is given to an insurer, and after consideration they proceed with the policy, then everyone can comfortably go ahead with their lives knowing that in the event of a claim the insurance company has been in receipt of the full facts and the claim should be handled quickly and efficiently.
If, on the other hand, not all the relevant information has been passed on, then you can expect the claim to be subject to further scrutiny which, at best will slow things down. I should make it clear that is is now normal practice for insurance companies to distinguish between those cases where information has genuinely been omitted due to human oversight, and those where information has been deliberately concealed in order to obtain cover that otherwise would not have been granted.
Where a genuine oversight has occurred, I have always known things to be sorted out amicably. Unfortunately, there are people out there who don’t do things properly and with bad intent. In those cases the insurance company can cancel the policy as if it had never existed, and ultimately, in certain circumstances prosecute for attempted fraud.
A good broker should take the time to get all the information they need from you, and then present it in such a way that the insurer can make a quick decision.
“Find the best policy”
A broker will always try to find the best policy to match your circumstances. Wherever I have worked, I have never experienced anything other that the overwhelming desire to “do what’s best for the client”. However, the plain truth is that brokers do not have access to every product and I cannot see how anyone can categorically say that the policy being recommended is the best one.
It may well be the best one from those that broker has access to, but the current marketplace means that no one can actually choose from all the available products and providers. A lot of products are now only available online, or through specific high street channels such as banks and supermarkets, none of these will be available through a broker.
Typically, a broker will have agencies with a number of insurers. Not all insurers will grant a broker an agency. That’s not to say there is anything wrong with that broker, it may be that the insurer wants to insist on receiving a minimum amount of business that cannot be provided. It may be that the insurer feels it has enough brokers promoting their products in that area. It may be a number of reasons which in honesty do not matter. The point is that a broker can search the market for you, but the market being searched does not, and never will, include all the options.
With the rise in popularity of online brokers or “comparison sites” as they are more often called, it is becoming very difficult to justify using a traditional broker for the more straightforward car, home and travel insurances. A good broker will offer advice in these areas, however, given the rewards to the broker being offered for selling these products, especially the low levels of commission being offered for car insurance, it is just not cost effective to be active in that marketplace.
“Meet your needs”
I guess you wouldn’t like to be called “demanding” or “needy”. Yet, as far as insurance is concerned, you are, and here’s why; in order for you to be given a policy, you will, at the very beginning, be asked a number of questions, this can be verbally or online, even on paper and this can be in person with a broker who is able to advise you, or completely automated. The initial purpose of this questioning is the establishment of a “Demands and Needs” statement.
This is a document in which you state what it is you actually want. It will include sums assured, particular items to be included, in fact everything that you want a policy to cover. The broker or insurer then uses that as the basis of the product you will be shown. If there is anything on your “demands and needs” list that cannot be met, then this has to be pointed out to you. A copy of the “Demands and Needs” statement should always be included in the brokers paperwork that is sent to you. Read it. Make sure it is what you want, because if it is missing something there is a chance it may not be included in your policy.
Should I use a Broker?
It is very difficult to say that a broker is the best route for straightforward Home, Car and Travel insurance any more. Even in my final years in the business, I was using comparison sites and tellingly, so were my colleagues. Even some of the small business insurance is becoming more appropriate to find online. as long as you read everything that you are being asked to, then the non-traditional-broker option is both keenly priced and nowadays almost always supported by a 24/7 service.
Where a broker is at their best is with situations that require a degree of advice, this will include some Home, Car and Travel insurance which do not fall within the definition of “Standard”, but more often it will mean the more complex categories of business insurance which will benefit from a qualified and experienced practitioner.