When taking out public liability insurance there are two main options – you can use an insurance broker or you can go direct to the insurer.
Which option is best? That’s what we’ll attempt to answer in today’s article.
What Are Your Options?
There is no question that taking out business insurance, especially public liability, it important for any small business owner or operator.
In the past most businesses used a broker to assist with their insurance needs, however many small business owners, especially sole traders, are now going direct to the insurance companies in the belief that they can save a few dollars.
So is it a good idea to cut out the middle man and go straight to the insurance company rather than using a broker?
Insurance Broker
This is the traditional method that most business owners have used to seek advice and services on business insurance, and ultimately to take out the insurance policy.
An insurance broker will generally assess you and your business’s needs, and will then provide you with advice and recommendations on what types of cover you need and how much cover you need.
Additionally, the broker will help you to choose the specific insurance company and policy that is going to provide you with the best value for money.
Advantages
- They can provide personal advice and recommendations on your needs
- They can compare the coverage and quotes from numerous insurers at once
- You can rely on their experience and expertise in the insurance industry
- You can deal with a single broker who will get to know you and your business
- They will be there to assist you with any future claims or issues
Disadvantages
- Some brokers charge an additional broker fee on top of the premium
- Some people don’t like the ‘salesman’ aspect associated with some brokers
- It can be difficult to tell a good insurance broker from a salesman
Direct Insurance
A number of Australian insurance companies are increasingly targeting small businesses directly instead of going via insurance brokers.
The benefit to the insurance company is that they can avoid paying a commission to the broker and they can manage the client relationship themselves instead of leaving it to the broker.
As most insurance companies do not have branches or offices which are open to the public, they generally rely on the internet and their call centres to manage all client interactions.
This model is generally cheaper for them, and as a result they can sometimes offer insurance more cheaply than an insurer who uses insurance broker to distribute their products.
Advantages
- Cuts out another person involved in the process
- Can seem like a more simple process when dealing directly
- Some people have more trust in a brand name insurance company
- Avoids potential broker fees that some brokers charge
Disadvantages
- Call centre staff are generally not authorised to provide advice or make recommendations, they can only provide facts
- If comparing quotes, you need to contact each insurer separately
- You will generally deal with a different person every time you contact the insurer
Which Is Best?
It is difficult to give a single answer, as each person and business is different and will have different needs.
Ultimately an insurance broker will be able to look after you better due to the fact that they are licensed to give you personal advice, whereas an insurance company employee will generally only be authorised to provide you with factual information rather than advice or recommendations.
If you run a micro business as a sole trader, and your business operations are quite straightforward, then you may well be better off dealing with an insurance company directly due to the probable lower cost.
But if you are going to look after you own insurance by going direct to the insurer, make sure you have a very good understanding of exactly what it is you need. If you get it wrong, you will be left with no one to blame or seek damages from.
But if you manage a business that has staff members or faces higher risks, then most people would agree that a broker will be better positioned to look after your needs and ensure that you and your business are properly protected.