Perhaps you have almost completed the somewhat daunting, but definitely exciting process of buying your first home. Or, perhaps you have decided the time has finally arrived to be your own boss and you’re starting your own business. Or, maybe you’ve just received that annual letter in the mail informing you that your insurance is due for renewal. What do they all have in common? You are now faced with a decision – from whom should you buy your insurance? You have a number of options. An insurance policy can be purchased directly from an insurance company (direct sellers), from one of their agents, or from an independent insurance broker. Let’s take a closer look at your options.
Direct Sellers
Direct sellers are insurance companies that sell their products and services directly to the consumer, such as a bank who sells insurance on-line. Direct sellers do not use agents nor do they use independent brokers to sell their policies to consumers. Rather, their own staff will sell insurance products directly to you.
Direct sellers set the price of their policies, they decide who they want to cover (and who they don’t), they write their own policies, and they decide how much they will pay on your claim, if you have one.
Many people think it’s an advantage to deal direct—“cut out the middleman.” It’s true; this may offer some advantages from a pricing perspective. However, there are a number of other factors that must be taken into consideration in order to select the right fit for your personal insurance needs.
One of the limitations of direct sellers is that they give you very few choices. They only sell you their products or services. It’s like going to the paint store to buy paint for your dining room. The sales staff tells you that you can buy any colour you want, as long as it is a shade of white. If your insurance needs do not fit the profile of the direct seller’s product line, they will either sell you a generic product that they say is a “close fit,” or suggest you go elsewhere. However, when it comes to protecting your assets, a “close fit” is usually a poor choice when you have to make a claim. No two homes or family assets are alike and your best protection is getting the appropriate coverage that is tailored to your unique needs.
The way your claim is handled by a direct seller is also critical to consider. When you make a claim, the direct seller is both judge and jury. When you make your claim, you appeal to the company’s “jury.” If you disagree with their settlement decision, you cannot appeal to the “judge” because he is from the same company! What’s more, any money that they decide to pay you for your claim comes out of their pocket. You are not in a very good negotiating position. If you are unhappy with the terms of the settlement, who would you complain to? Who would advocate on your behalf? In some cases, you may need to hire a lawyer to resolve the matter to your satisfaction.
Insurance Agents
Insurance agents are authorized to sell only the products of the companies they represent. For example, if you became an insurance agent for “BigTime Insurance,” you would have to agree to only sell insurance products and services from “BigTime Insurance; much like buying a McDonald’s franchise—you can only sell McDonald hamburgers.
So, customers who buy insurance from agents are faced with many of the same limitations as with direct sellers.
Independent Brokers
An independent broker represents a number of different companies and their job is to connect you with the right one for your needs. It doesn’t really matter to them which company you buy from (since the commissions are pretty much the same); what they really want is for you to be satisfied enough to keep dealing with them year after year. Their goal is to access products from many different insurance companies to make sure you get the best deal, that is the best coverage at the best rates.
In addition, when you buy insurance through an independent broker, you also gain an advocate; someone who will speak on your behalf at claims time. Whatever monies are paid because of your claim doesn’t come out of the broker’s pocket, which means you get the broker’s full support when making a claim. Your broker can be more objective about the fairness of a claim, than say a direct seller might be, and he/she will speak up accordingly.
The independent broker will doubtless have many clients, maybe even a few thousand, with that insurance company. That means that you are part of a larger group of clients. When you insure through a direct seller, you are just a single customer to them. You have no particular importance or value to them beyond what you spend on your own policies. But when you buy through an independent broker, you are part of something much bigger, much more powerful. You take on the buying power and influence of hundreds, maybe thousands of fellow clients of the broker.
A broker’s services doesn’t end with the sale of the policy; their work starts prior to the sale and lasts until any of your claims are settled. For example, a broker will assist you to identify your risks and will recommend ways you can reduce or eliminate these risks. In turn, you may require less insurance than you thought.
As an independent insurance broker, Park Insurance takes a personal interest in you. We work to forge a working relationship with our clients. We offer enhanced coverage at competitive rates and we advocate for you when you have to make a claim. Talk to us today about your personal insurance needs. We’re here to help.
