Buying insurance can be a confusing time. You may not know where to start. Is it the insurance companies? Banks? Or, financial advisers, agents or brokers?
In this article we explore the differences between buying directly from an insurance company and using an intermediary such as a financial adviser, insurance broker or agent.
Skipping the middleman is usually a good thing. However, for insurance it may not be.
Buying insurance directly from insurers can be confusing for people that are not familiar with the industry. Probably, most of us. The number of different products and variations of them, the industry terms (e.g. premium, excess, exclusions), and the complex and time consuming processes to navigate.
How do we know if one insurance product is better than the next without reading the pages of the product features (usually in fine print)?
Bear in mind that insurance companies will only speak to you about the products they sell, not others. They do not offer comparisons. Going direct will limit our choice. Unless of course, we want to spend hours doing the run around.
To be fair, insurance companies have been stepping up their game and have come some way when it comes to making things simpler for customers. A number of general (e.g. car, home and content) insurance companies now allow us to go online and get a quote within minutes quite simply. But this is still limited to mainly general insurance, and only some products. The experience varies for people depending on their needs and ability to make sense of the differences in insurance covers.
Not all insurance companies deal directly with customers.
A number of insurance companies only distribute their products, or at least some of their products, through intermediaries like agents and brokers. This may restrict our ability to get the best products on the market if we go direct.
No one insurance company does it all.
Insurance companies in New Zealand commonly are focused on specific types of insurance e.g. life (including income, disability, etc.) or general (car, home, contents) or travel or medical.
For us customers, if we wanted to get all our insurance sorted in one place, we are out of luck. We will have to deal with multiple insurance companies. For most, this means that we will hold three, four or more insurance covers spread across a number of insurance companies. Instead of getting one mail, or email if we're lucky, we end up getting three, four or five. To make it worst, at different times. The paperwork and the amount of time we need to stay on top of all of them becomes a nightmare.
It is no surprise then, many of us adopt the "buy and forget" mentality when it comes to insurance. Over time, many of us forget the covers we have in place and how much we are actually spending on insurance. Don't forget, most insurance policies are adjusted upwards when it comes to the premium (read: money) yearly. If we are not keeping across them, it is easy to lost sight and we may end up paying a lot more over time.
One point of contact, maybe two.
Instead of having to manage and navigate multiple relationships with a handful of insurance companies, going through an intermediary such as a broker allows us to have one point of contact. Well, sort of.
Not all insurance middleman cover the suite of insurance products we need. Many choose to focus on either general insurance or life. This should make it slightly easier for you to manage and deal with your insurance; if your middleman is good at what they do.
Compare and find the best insurance across the market.
As mentioned above, going direct to an insurance company means that we will only be able to find out about that particular insurer's products. Unless of course, we spend the time and effort to do the rounds with the different companies to compare and find the best insurance on the market.
Every insurer will tell us that they have got the best product. It may be true, given it is the best one that they have. However, this does not consider other insurance companies and products in the market. Using a broker or financial adviser should give us access to more products across the market and hopefully they can find one that is better and help us make sense of it.
Independent or conflicted?
Brokers usually tout themselves to be independent. That is one of their main draw cards. But what does independence mean, and how independent really?
Independence usually means they are able to recommend more than one insurance company and their products. The alternative is an agent which represents one company and their products.
Sounds good? Yes, it is certainly helpful to have someone that is familiar with the industry look across it and recommend what they think is the best.
However, there are drawbacks. For example, intermediaries typically get paid more commission from one insurance company instead of another. This introduces bias or conflict into the equation. When using an intermediary, it is wise to check how they are paid and decide if they are genuinely acting in your interest. Always question if you unsure.
Check that they are giving you a number of options and they understand the difference between the different insurance covers and providers.
An intermediary should work for you and have your best interest. Intermediaries should have good knowledge of the industry. They should be observing which insurers have better terms and policies in the market based on your needs. If there are issues, they should also go to battle for you with the insurer.
Someone in your corner.
Going direct to an insurance company will mean that in the event you need help, you will need to deal with them directly. When they reject your claims, you may not have someone to help advocate for you, especially if it is a case in the grey. With an intermediary, there is usually some support from them
Where can you find them?
There are many insurance broker companies and groups out there. Alternatively, you can ask for one to be recommended to you from the insurer. However, it is still mostly a case of hit and miss when it comes to finding one that can be trusted and that you are comfortable with.
Many of us will have experienced being sold insurance when at the bank. Whether it is when we take out a home loan, a credit card or when setting up an account. It is usually left to the end of the conversation - "Oh, and what about insurance?"
Most banks do not underwrite their own insurance. They distribute insurance. There are exceptions of course. For example, Kiwibank’s life insurance and SBS life insurance. For the most part, banks are reseller of insurance products.
Banks will pick and partner with an insurer for each product they decide to sell. The idea is that it makes it easy for customers to deal with their finances and insurance together.
However, bankers are not necessarily focused or experts in insurance.
They are unlikely to know what other products exist on the markets outside of the ones they sell. They are not allowed to compare insurance policies across the industry for you. Most customers looking for convenience will pick up insurance through their banks but may be trading off for one that is more suited or offers more in value.
It is not necessarily more convenient when it comes to issues.
When customers need help with their insurance, they are usually directed to the insurers themselves with the banks stepping away from support.
So there it is, the differences we have observed when it comes to the different ways one can buy insurances and the pros and cons of it.
At Quashed, our platform is designed to solve the hassle of having to stay on top of multiple insurance covers across different insurance companies. We believe in protecting ourselves, our loved ones and valuables and we believe simplicity and transparency is key.
With Quashed, you can bring all your insurance together in one place. See it all in one place, not all over the place. Know exactly what you have in place is a great first step to taking control.
Try Quashed and help create a better insurance experience for all of us.