Buying insurance direct vs through a broker: what’s the difference?

Buying insurance direct from an insurer and arranging it through a broker can look similar on the surface. The differences show up in how the risk is assessed, the advice you receive, the options considered and the support available when your circumstances change or you need to claim.

You can deal with an insurer directly, online or over the phone, or use an insurance broker to help arrange and manage your cover.

If you run a business, farm or other operation that doesn't fit neatly into a standard product, those differences are worth understanding before renewal.

Who are you dealing with?

When you buy direct, you're dealing with the insurer or its representative, and choosing from the products that insurer offers through that channel.

A broker sits between you and the insurance market. Depending on the service provided, that can mean getting to know your risks, approaching suitable insurers, explaining the options and arranging the cover you choose.

That matters because choosing insurance is about more than finding a policy. It's also about identifying what needs to be covered and the terms an insurer is prepared to offer.

How many options do you get?

Buying direct generally means choosing from one insurer's products.

A broker may have access to a broader range of insurers and underwriting markets, including specialist markets that aren't necessarily available through direct channels.

Where the insurer, the risk and market conditions allow, there may also be scope to seek different limits, endorsements or other policy terms.

This tends to matter most where a business has unusual activities, higher-value assets, contractual requirements or exposures that need more explanation than a standard proposal allows.

On a farm, one conversation might cover the sheds, machinery, livestock, public liability, business interruption and vehicles. For a Livestock and Property Agent, what your staff do day to day can also shape the insurance you need.

What matters most is whether the policy reflects what your business does.

“The useful comparison is not simply premium. It is what has been insured, on what terms, what advice sits behind the decision and what support is available when it is needed.”

What advice are you getting?

The type of information or advice you receive can also differ.

Direct channels vary. Some largely provide factual information or general advice about the insurer's own products, while the services available through a broker will depend on the broker's authorisations and the nature of the engagement.

Where advice is provided, it's worth knowing its scope, what information it's based on and what's been put in writing.

This counts most when your business changes. New activities, extra locations, higher asset values, different contracts or changes to how work is done can all be reasons to check whether your existing cover still fits.

What happens when there is a claim?

The difference often shows most at claim time.

If you buy direct, you'll generally deal with the insurer's claims process yourself. That may be straightforward for some claims. Where questions arise about the circumstances, evidence, policy wording or settlement, you may need to work through them with the insurer directly.

Where insurance has been arranged through a broker, the broker may assist with the claim and communicate with the insurer, loss adjuster or other parties involved.

This may include helping to prepare the notification, gathering relevant information, reviewing the insurer's position against the policy wording and seeking further explanation where an issue arises.

Broker involvement does not determine whether a claim will be accepted. The outcome depends on the circumstances of the loss and the applicable policy wording. The difference is that you may have someone familiar with your insurance involved in the process.

Comparing the cost

Premium is an important part of any insurance decision, but a direct premium and a broker-arranged premium aren't necessarily a like-for-like comparison.

Policy limits, sub-limits, excesses, exclusions, endorsements and breadth of cover can all affect what you're buying.

Brokers may receive commission from insurers and may also charge fees for their services. The applicable remuneration and fees should be considered as part of the overall arrangement.

Look at the whole package: what's insured, the limits and terms, the service and the total cost.

What to compare before choosing

Whether you buy direct or through a broker, a few questions are worth asking before renewal:

• What risks and activities have been taken into account?
• Are the sums insured and policy limits still appropriate?
• What significant exclusions, sub-limits or conditions apply?
• Have changes to the business since the last renewal been considered?
• What advice or assistance is being provided?
• Who will help manage the process if a claim becomes complicated?

For a straightforward risk, the differences between the two approaches may be small. As your business grows more complex, knowing how your insurance is structured and who can help becomes more valuable.

Renewal coming up? Contact RMA Insurance Brokers and we'll go through your current cover, look at what's changed in your business and talk through your options.