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What is an Insurance Broker?
If you have been looking at taking out any kind of insurance, whether it be car, travel, home or pet insurance, you've probably come across the term 'insurance broker' more than once.
But what exactly does an insurance broker do? And when might you need to consider using one? We’ll answer these questions and more.
Table of Contents
- What is an insurance broker?
- Why might you need to use an insurance broker?
- What are the benefits of using an insurance broker?
- What are the downsides to using an Insurance Broker?
- What are the downsides to using an Insurance Broker?
- How do I find an Insurance Broker?
What is an insurance broker?
Simply put, an insurance broker acts as the 'middleman' between a client (in this case, you!) and insurance companies. It is their job to get to know you and understand your specific needs so they can go away and find the insurances policy that is right for you.
Importantly, insurance brokers aren't just your everyday person who likes insurance. They are regulated financial advisors who specialize in this area, so their professional advice and opinions can be trusted. Ultimately, an insurance broker can help you decide what type of insurance is best for you and advise you on the level of cover that will offer you the right amount of protection — and at a price you can afford, too.
Why might you need to use an insurance broker?
For most people, comparison sites offer a quick and easy way to gain a good understanding of the market and compare a range of policies at the touch of a button. Whilst they are certainly a useful tool, the types of policies you'll be shown tend to be more basic and less curated to address your specific needs.
Now, many people are content with purchasing their insurance this way. However, if your circumstances are complex or you simply find the world of insurance a bit confusing then using an insurance broker might be a sensible option. This way you'll have a dedicated advisor who can answer any questions or concerns you may have and can help search the market for a policy that is right for you.
What are the benefits of using an Insurance Broker?
We've already touched on a couple of the advantages of using an insurance broker, but there are plenty more. Let's take a closer look…
- Get expert advice: as we've stated previously, one of the main advantages of using an insurance broker is that you get access to specialist advice straight from the experts. Whether you are completely new to a certain type of insurance, or your circumstances are unique, an insurance broker is there to help guide you through the process and ensure that whatever policy you opt for is the right choice for you
- You may be limited by going direct or using comparison sites: we touched on this earlier, but the downside of using comparison sites is that the policies they compare are often quite generic in nature. Also, they may not show you every type of cover available to you. You can encounter the same problem by going direct to an insurers website and they may offer just a fraction of what is actually out there. Insurance brokers are experts in the business, so can talk you through all the different types of cover available and what might be best for you
- Insurance brokers are free to use: yes, you heard us right! A lot of people mistakenly assume that insurance brokers charge high fees for their service. In fact, every time they sell a product (i.e., a policy) the insurance provider pays them commission. So, you get expert advice and guidance without the fee (note: there is a caveat to this, which we explain later)
- You might get a better deal: insurance brokers may have good relationships with certain providers, so it's possible you may be offered better rates on your insurance
- They can help you with the claims process: making a claim on any type of insurance can be a lot of hassle, and the great thing about insurance brokers is they are often willing to speak to claims departments on your behalf, saving you a lot of stress. As they are experts they know your rights and this means the chances of your claim being rejected is reduced
What are the downsides to using an Insurance Broker?
Whilst there are many benefits to using an insurance broker, as with most things, there are some things you should keep in mind:
- You might not always get the best deal: insurance brokers earn commission every time they sell an insurance product, which is paid by the insurer themselves. Because of this, their commissions may be added to your costs making your overall premiums more expensive than they might otherwise be if you had used a comparison site or by going direct
- Your broker may not use the whole market: some insurance brokers work with a panel of providers, meaning they might not search the whole market for the policy that's best for you. Similarly, some insurance providers only sell direct to consumers so you will miss out on these policies too if you use a broker
It's important to weigh up the pros and cons before you decide whether to use an insurance broker. Whilst you will gain access to expert advice and guidance you might end up paying more overall once their commission is taken into account, as insurers will typically factor these costs into your premium.
How do I find an insurance broker?
The best way to find an insurance broker is by using the British Insurance Brokers’ Association (BIBA) Find a Broker service. This way you can rest easy knowing your broker is regulated and authorized. By using a regulated broker you are protected by the Financial Services Compensation Scheme should you have a bad experience or need to make a complaint. You can do this through the Financial Ombudsman Service.
- Contact BIBA by telephone on 0370 950 1790 (Mon – Fri, 9am – 5.30pm)
- Find out more on the BIBA website
FAQs
It doesn't cost anything to use an insurance broker. However, every time they sell a policy they are paid commission by this insurer. These commissions are usually factored into your premium, meaning your costs might be higher than if you had used a comparison website or purchased direct through the insurer.
It depends. Your insurance broker might have a good relationship with some providers, meaning they are able to negotiate a better price than you might get elsewhere. However, as we mentioned above the commission brokers earn is often added onto your premiums, so you might end up paying slightly more. We recommend using comparison sites alongside insurance brokers so you can compare.
Insurance brokers provide a range of services ranging from giving advice, gathering quotes and assisting on claims. Their ultimate goal is to find the best policy for you.
In the UK, insurance brokers are regulated by the Financial Conduct Authority (FCA). It is their job to ensure customers are protected and that markets are regulated and operate in the best interests of its consumers.
BIBA stands for the British Insurance Brokers’ Association. They are the UK's leading general insurance intermediary organization, and represent the interests of brokers, intermediaries and customers.