Buying from Insurance Brokers vs. Going Direct: What’s the Difference?

Posted on September 24, 2020 | by Jullian | Posted in Insurance

In this day and age of DIY culture, more and more consumers are buying insurance policies directly from an insurance company. And why not? It’s convenient, it saves money, and it’s less time-consuming compared to other options out there. If you know exactly what your needs are, then going direct is the way to go. But not everyone is keen on direct-buy insurance, especially those who are new to dealing with these sorts of arrangements.

This is where an insurance broker comes in. Everyone’s insurance needs will vary, and the job of insurance brokers is to secure the best policies for their clients. They offer professional and unbiased advice to help their clients make an informed insurance purchase. If you find yourself choosing between these two options, then don’t worry.

In this article, we’ll be taking a look at the benefits of using an insurance broker in Perth vs. buying directly from an insurance company to see which option is most suited for you.

Why use an insurance broker?

An insurance broker acts as a middle-man between their clients and insurance companies. Basically, they do the cross-comparison shopping to secure ample coverage for their clients based on their needs. Insurance brokers may specialise on a specific type of insurance (.e.g. life insurance or health insurance) or have extensive knowledge about insurance products across various industries. Brokers are licensed and governed by state regulations.

Insurance brokers earn money through sales commissions by selling a policy from the insurance carrier (which amounts to a percentage of their client’s premium). This costs the insurance company more to sell you insurance through a broker, which can affect the price they charge.

Benefits of using an insurance broker

Insurance brokers work for you by carefully analysing your options and help you acquire the most optimal insurance in a timely and stress-free manner. Their expertise ensures you are matched with the ideal policy to meet your specific needs. Most brokers are familiar with the policies of more than one company and they bring this expertise to use to filter out the right terms, coverage, and conditions.

Insurance can be pretty complex, especially to those who are unfamiliar with the jargon used in the industry. Most consumers end up buying policies they don’t need simply because they don’t have enough knowledge about insurance (which leads to more expensive premiums). There’ no substitute for genuine expertise and years of experience in the insurance field and brokers are well-versed in that regard.

What to consider before using an insurance broker

Insurance brokers get paid by the insurance company for selling you a policy. This means the final cost of an insurance policy can be much higher than a direct-buy policy. If the insurance is the same rate year after year, your policy requires payment of the commission repeatedly — and if the price goes up, the commission may go up, as well. Some brokers don’t handle claims. For that, you’d still need to go through the insurance company’s claims team. Make sure to discuss this with your broker for full disclosure.

What Is Direct-buy Insurance?

As the name suggests, direct-buy insurance is the act of buying a policy directly from an insurance company.o directly to the company’s website to buy a policy. There’s no middle-man to negotiate the purchase as it’s just between you and the insurance company itself. You’ll form a relationship with the insurance company which is a big deal to people who care about brands and reputation. This relationship starts when you apply for the policy and can continue throughout the policy’s lifespan and beyond.

Some direct-buy insurance companies are aiming for a more tech-savvy approach to cater to the new generations. Along with the standard live customer service teams and claims groups, you might encounter features like live chat, instant (same-day) downloadable policies, custom dashboards, and more. Insurance brokers might also have online platforms for you to buy insurance, but they are not the insurance company paying your claims.

Benefits of direct-buy insurance

One of the main benefits of going direct is that you’ll find lower prices on your premiums. This can be attributed to the insurance company not having to pay an insurance broker a sales commission. You also avoid some of the fees that brokers charge when they represent you. Since you’re the one buying the policy, you won’t have to deal with sales pressure and you can comfortably make choices all on your own.

Buying directly from an insurance company is usually fast and easy. Depending on the company, you may even be able to get last-minute coverage.

What to Consider About Direct-Buy Insurance

Direct-buy insurance is recommended for those who understand their needs and know which policies to purchase. When shopping around, try to obtain quotes from various insurance companies to compare prices. Buyers who have more complex insurance requirements may need to have a policy customized, and it may take time and experience to explore those options on your own.