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Direct Insurer or Broker ?

Article by listed broker Mandy Weetman

Before deciding the "direct way", here are a few things to consider first: No broker or "middleman" means you are on your OWN!

There is no broker to:
  • schedule an appointment with in order to offer you face-to-face personal service and advice;
  • obtain comparative quotations from various insurance companies so as to put together a tailor made and cost effective package to best suit your unique domestic and/or business insurance needs;
  • represent and assist you when you have a claim and to ensure that you, as the client, receives a fair settlement. Insurers do not try and repudiate a claim by "pulling the wool" over the eyes of a broker as the broker knows their policy wording just as well as they do. Because brokers place large amounts of business with insurers and have a good business relationship with them, both parties are more interested in working together to assist their mutual client as far as possible in settling a claim. This also means that the business is retained by both broker and insurer.
  • ensure that your best interests are put first.

Operating from a large call centre, is a direct insurer operator:
  • who does not know you nor your business;
  • who can only offer their best level of cover and premium as they only work for one insurance company; Remember, cheaper premiums does not mean better cover!
  • who may repudiate your claim due to some or other reason or small print and you being none the wiser will accept the repudiation.
Direct insurers are saying:
  • cut-out-the-middleman and save 25% by going direct and avoiding broker fees. Not sure how they got to this percentage as the commission structure for brokers are set i.e. non-motor 20%; motor 12.5% and SASRIA (Riot and Strike) 7.5%. Brokers do not add these percentages to the premiums quoted by insurers e.g. an insurer quotes R1 000,00 per month for a motor vehicle. 12.5% of the R1 000,00 premium quoted is commission paid to the broker and the balance is paid to the insurer. Clients should not be fooled by this statement as direct insurers do pay commissions, not to brokers, but to their call centre sales advisers and sources who get paid a once-off introductory commission. Let us also not forget the large amounts of money being spent on advertising costs. Many of which, in all honesty, are in poor taste and quite misleading.
  • that they will pay out a "bonus " should you not claim for a certain period e.g. 3 years. Looking at today's world, the chances of you not claiming within this period is rather remote, meaning there goes your hard earned "bonus"! Back to square one in trying to obtain this small benefit.
  • that they provide "full theft" cover and traditional brokers only on a "first loss" basis for your business. Brokers can insure theft for the full value it remains the client's decision if he thinks it is necessary. We recently did a comparison quotation only to find out the following on the direct insurer's quotation: Contents and stock each have their own section and under each of these sections is a heading "Additional Cover Options". One of the options is "Loss - theft". The client can decide whether he requires theft cover under each of these sections. On this particular comparison the client had NO theft cover for his contents and only LIMITED cover for his stock. Broker-based insurers insure contents and stock under the same section and theft under a separate section. Should the client require theft cover, whether for the full value or limited cover, it will cover both contents and stock under the same section.
  • together with their broker-based insurers have been around for much longer than the direct insurers who have only been around since 1998.
  • have to, according to the FSB, disclose all information (excesses, premiums, commissions etc.) as well as inform the client correctly or be held accountable. Here, the client is protected.
  • are more interested in: building relationships with their clients; looking after their clients best interests; ensuring that their clients remain on their books.

Decision a Broker we would like to suggest that if you:
  • are a "first timer" on insurance and know nothing or very little about insurance, consulting an insurance broker may be your best bet.
  • prefer doing business on a face-to-face basis, an insurance broker is the one to offer just that.
  • are looking for an insurance comparison between your existing and various alternative insurers, an insurance broker is the one to do it for you.
  • are looking for a unique tailor made and cost effective package deal best suited for you or your business, then an insurance broker is the ONLY way.
At the end of the day it is your choice......let it be the correct one you make!