Treading through the maze that is the Australian insurance market, customers can find themselves at a dead-end – either paying out of pocket for something they thought they were covered, or make it through quickly to the other side, with low premiums and full coverage. Choosing the right policy that is tailored to your insurance needs can certainly be difficult. There are two paths that you can go by – through insurance agencies represented by agents, and insurance brokers. Here, I’ll guide you through the differences between insurance agents and brokers and how they affect the decisions you make in choosing the right policy.
Agents vs Brokers – the Difference
Both insurance agents and insurance brokers are qualified insurance specialists. Both act as intermediaries between you – the customer in need of insurance policies, and companies offering those products – the insurance companies. The main difference between brokers and agents is who they represent, or basically who they work for. Brokers represent their clients and their best interests, while agents represent the insurance company or companies and the policies they sell. To find out whether you need an insurance broker, or an insurance agent to get the best coverage, read on to make an informed decision.
An insurance agent works for one or more insurance companies and sells their products – insurance policies. They act as intermediaries between the seller – the insurer, and the potential buyer – you. As qualified specialists, agents will have profound knowledge of the type of policies the insurer sells, and their cost. There are two types of insurance agents – captive agents, who represent one company, and independent agents, who represent two or more companies. The latter will have a broader understanding of different policies within a specific field. For example, an independent agent for medical insurance will be better qualified to explain the differences between policies, coverage and premiums between competing insurers. They will offer valuable advice, but in the end, they’re contracted by the company.
Insurance brokers work directly with their clients in determining their insurance needs. This can be individual persons or private companies. They will work to provide the best insurance plans to best meet their clients’ insurance coverage needs. A broker for insurance will ask you a series of questions regarding the type of policy you need, the amount of coverage, and the amount you’re willing to spend. This can be both for personal or company insurance, and it can cover a different range of policies. Since they are not obligated by an insurance company, brokers can compare differing policies by a range of different companies, and advise you which is best. Brokers also work with risk assessment, meaning they are better qualified in determining the risks that your company faces, like any possible interruptions to your business from unforeseeable events like floods or fires.
There are three types of insurance brokers. Retail brokers will work directly with customers in providing general policies, like vehicle or health insurance that they source from insurers or wholesale brokers. The latter provide specialised policies covering more complex risks, like cybersecurity, for instance, which they sell through retail brokers and have no contact with the insured party. Surplus lines brokers are retail or wholesale brokers that seek policies for clients deemed too risky to be insured because of frequent past claims or incurred losses.
Advantages of Insurance Brokers
There are several advantages of hiring an insurance broker:
• Brokers directly represent the client. They provide a personal service, ruling out the typical hassle when applying with insurers. All your queries will be answered promptly by an actual person. This ultimately saves you valuable time.
• They assess your insurance coverage needs impartially, since they are not contracted by insurance companies. They will not sell policies that you do not need. Meeting your insurance needs, and providing you with satisfactory service means you will want to seek their services again.
• They will scour policies from different insurance companies to find what best suits your budget. They will advise you on the differences in prices between different policies, and any coverage differences. This includes any fees or exceptions to coverage in certain circumstances.
• Brokers are not limited to one type of insurance. They will provide coverage for vehicle, property, and business insurance, or more specialized types like professional indemnity and product liability insurance. This can save you both time and money if you need policies for different coverage.
• They can negotiate lower premiums since they often work with competing insurers. This, in turn, saves you money compared to buying policies directly from insurance agents.
• Brokers will help with paperwork, clearly explaining any terminology you’re not familiar with.
• Insurance brokers assist you with insurance claims. They lodge the claim to companies on your behalf. The service is quick, efficient, and provides you with the best outcome. Hence, they assist you from the first to the last step. In choosing the policy that is tailored for your needs, and easing the procedure of making a claim.
• Brokers don’t charge a fee, so you don’t pay them directly. They are paid through commissions they receive from insurers.
So, when you next need an insurance policy, why not consider opting for a broker. They will provide you with a human, personal approach that will cater to all your insurance needs without the usual nuisance along the way.