Consumers generally think they benefit when they buy insurance direct but is it true?

Let's look at the differences between buying insurance via a broker and buying direct online.

Firstly, 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. 

What is important to consumers?

In order of importance, I believe that these are the things that people consider;

Cost.

Ease.

Speed.

Peace of mind that everything is covered.

Security of personal data.

So let’s now analyze these items individually and see which method comes out on top.

1. Cost

Contrary to popular consumer belief, broker pricing is actually better than direct insurance pricing.

The reason for this is principally due to insurers providing different rates to brokers, in order 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. On the contrary!

2. Ease

Many consumers are surprised here. Most people have the impression that buying policies directly would be the easiest option. After trying both, I am fairly certain you will change your mind.

Whilst the online experience usually proves more pleasant than the phone, most brokers offer an online service, and are far, far more pro-active after receiving the initial quote request from the consumer, often answering queries by personal email or call and helping to reassure customers with a human service. Furthermore, most direct services completely fall down when queries or changes need to be made mid-term. Brokers really shine through here.

3. Speed

Now, this particular area is quite evenly balanced. In the case of the time taken to generate initial quotation figures, direct services (online) are consistently very quick, whilst you must understand that a broker will spend a bit more time considering the best, most applicable cover.

The difference however is somewhat reversed when it comes to mid term changes, documentation requests and one off queries. The direct services often fall back to large call centres whose staff have little or no real insurance knowledge. In this area your local broker will be more efficient, making suggestions  consumers find highly useful, saving lots of time.

On balance, the speed at which quotes are produced by the direct services are not significant when compared to the speed and efficiency with which brokers generally manage 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 are available and answering queries.

Direct processes are better than in the past but put too much focus is placed on the consumer to do this work himself/herself to be able to compete with the level of service provided by brokers.

5. Security of personal data

Here we have to take into account how consumers feel about their data security after using the various services.

In the case of Internet based services, the direct services tend to follow security guidelines whereas your broker will have stringent rules to follow under the Financial Services Authority (FSA).

On the phone however, brokers are far better equipped to deal with specific insurance questions and used to a human discussion, they tend to give people a stronger feeling that they were in safe hands. The trust conveyed by your broker should leave you feeling satisfied that your data is secure.

Summary of Results

So who won?  Broker or Direct?

SHOCk HORROR!

Cost [Broker]

Ease [Broker]

Speed [Broker]

Peace of mind that everything is covered [Broker]

Security of personal data [Broker]

Conclusion

We set out in this article to test the general perception by consumers that ‘going direct is better’, for the benefit of consumers on the whole. We looked at our own internal processes and used them as a benchmark against which we pitted our own experiences (and family, friends and people who we chat to in the pub - so pretty comprehensive) of the online/direct services.

The results are conclusive, 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.

My, prejudiced, recommendation to all would be to trust your broker, let him shop for you, and you will likely reap dividend, whilst living an easy life!