Don’t cut out the middleman…


Consumers generally think that they benefit when they buy insurance direct but, is it true?
To find out, an auditing company asked people what matters to them when buying insurance, and in turn their panel used those criteria to evaluate the differences between buying insurance via a broker and buying direct online.

Why do consumers hate the middle man?

Primarily, customers perceive any middle man as an unnecessary third party, and conventional wisdom dictates that this means additional cost and possibly mistakes. Advertising by larger insurance companies has compounded this feeling.

What is important to consumers?
In order of importance, these are the things people said matter to them:
• Cost.
• Ease.
• Speed.
• Peace of mind that everything is covered.
• Security of personal data.
So let’s now analyse these items and let our panel judge how each performs when insurance is bought directly or when via a broker.

  1. Cost
    Contrary to popular consumer belief, they found that broker pricing was actually better than direct insurance pricing.
    The reason for this seems to be principally due to insurers providing different rates to brokers, so that premiums are lower. Why would insurers provide special broker pricing? Simple: because the risk is lower for the insurer. Brokers are professionally trained to choose the right policy for their customers, and not to under-insure, therefore avoiding unnecessary claims while maintaining the correct premium income. ‘Cutting out the middle man’ it seems, does not save money this time.
  2. Ease
    Many of the consumers in the test case were surprised here. At least half began the test with the impression that buying policies directly would be the easiest option for them. After trying both, almost all participants had changed their mind.
    Whilst the online experience usually proved more pleasant than the phone, most brokers offered an online service, and were far more pro-active after they received the initial quotation request from the consumer, often answering queries by personal email or call and helping to reassure customers with a human service. Brokers really shone through here.
  3. Speed
    The results here were quite evenly balanced. In the case of the time taken to generate initial quotation figures, direct services (online) were consistently very quick, while some brokers answered quotation requests by personal follow up.
    The difference was, however, somewhat reversed when it came to mid term changes, documentation requests and once-off queries. The direct services often fell back to large call centres whose staff had little or no real insurance knowledge. In these areas, brokers were more efficient, making suggestions that consumers found highly useful, saving them lots of time. On balance, the speed at which quotes were produced by the direct services was not significant to our consumers when compared to the speed and efficiency with which brokers generally managed their policies throughout the policy life cycle.
    “As long as my broker doesn’t take too long to come back to me, I don’t care. It’s his problem while the clock is ticking, not mine.”
  4. Peace of mind that everything is covered
    Brokers are largely far more efficient at cross-checking policies than consumers, and also very good at educating their customers, explaining what types of cover were available and answering queries.
    Direct processes are better than in the past, but put too much focus on the consumer to do this work himself/herself to be able to compete with the level of service provided by brokers. The really good Direct services centred around only covering the low-risk policies, and leaving any consumer with non-standard requirements unsatisfied.
  5. Security of personal data
    This was a difficult one to test, and fell largely to the technical team. They did, however, take into account how consumers felt about their data security after using the various services. In the case of Internet-based services, the direct services tended to follow security guidelines marginally better than broker services, mainly due to the size of the organisations involved and lack of good software on the part of some brokers.
    When on the phone, Brokers are far better equipped to deal with specific insurance questions and used to a human discussion, gave people a stronger feeling that they were in safe hands. The process of securing personal data was much the same as with direct, but the trust conveyed by brokers was better.

Summary of Results
So who won? Broker or Direct?
1. Cost. [Broker]
2. Ease. [Broker]
3. Speed. [Broker]
4. Peace of mind that everything is covered. [Broker]
5. Security of personal data. [Broker]

The general perception by consumers that ‘going direct is better’, for the benefit of consumers and brokers on the whole.
Whilst conventional wisdom dictates that the middle man offers little to the discussion and always has his price.

In the complex world of insurance, perhaps things are not so simple.


Trust your broker, let him shop for you, and you will likely reap dividend!


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