KMI Brokers Inc.

Insurance Brokers versus Buying Direct

Created on: Friday Jul 08, 2016

When buying insurance nowadays, you have the choice between using an insurance broker and buying from an insurance company directly. Many people perceive an insurance broker to be middle man, an unnecessary third-party which increases the costs of insurance. This article aims to dispel this myth, and highlight the many advantages of using an insurance broker. Here are the top reasons for you to use a broker for your personal insurance needs:

1. Your insurance broker works for you, not the insurance company.
An insurance broker is not employed by a specific insurance company, and is not tied to a specific company’s products. Your insurance broker can work with numerous insurance companies to find the best deal for you, and ensure you are getting the best rate at renewal. Insurance brokers are also registered with the Insurance Broker’s Association of Ontario (IBAO) and are bound by the organization’s Code of Ethics to find the best coverage available for their clients. When buying insurance directly, you are doing your own shopping and are responsible for ensuring you have the right coverage. Additionally, you are limited to only one company’s products, which may not be suitable to your needs. When the time comes to make a claim, a broker will be your advocate and advise you throughout the process. With a direct insurance company, you are on your own and must handle any disputes personally.

2. Insurance Premiums are actually lower with a broker than buying directly.
Contrary to popular belief, broker pricing is often better than direct insurance pricing. This is mainly due to two factors: 1) Brokers have many companies they work with to shop your policy around, and 2) An insurance broker is compensated by the insurance company, not the client.

The savings using a broker can be best seen over the long term. A broker will ensure that you are getting a competitive rate each year by shopping your polices around. With a direct insurer, the client is at the mercy of a single company’s rates, and is stuck in the event of an increase in premium.

Although a broker is paid commission by the insurance company, this does not equate to higher rates. In fact, insurance companies such as Intact and Aviva own their own direct insurance divisions which offer the same rates. The rates are not higher with a broker because insurance companies prefer working with brokers. Since brokers are professionally trained to choose the right policy for their clients, claims are handled quicker and with lower administrative costs to the insurance company.

3. It is quicker and easier to make changes to a policy through a broker.
Your broker is your personal insurance professional who is trained and has a solid understanding of how insurance policies should be administered. When changes need to be made to your policy, your broker will be familiar with your situation and will make the changes for you and make suggestions if needed. When making changes with a direct insurer, you will be calling a large call centre whose staff has little or no real insurance knowledge and cannot offer advice specific to your situation. The difference in service is even more evident when your policy changes are done midterm and are less common. Essentially, a broker is trained to handle all aspects of servicing a client’s insurance policy, and call centre employees are trained to sell the products of the company they work for.