Why do consumers hate brokers?
Primarily, customers perceive any brokers 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, these are the things consumer said matter to them:
- Convenience and Ease.
- Peace of mind that everything is covered.
- Security of personal data.
So let’s now analyze these items and evaluate how each performs when insurance is bought directly or when via a broker.
Contrary to popular consumer belief, broker pricing was actually better than direct insurance pricing. The reason for this seems to be 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 to ensure the risk is properly place with the right coverage.
The reason for this seems to be 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. On top of that, they regularly purchase from the insurer in bulk.
2. Convenience and Ease
Many of the consumers had the impression that buying policies directly would be the easiest and convenient option for them. After trying both, almost all had changed their mind.
Whilst the online experience usually proved more pleasant than the phone, most brokers offered an online service, and were far, far more pro-active after they received 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 fell down when queries or changes were required that were less common, particularly later in the policy life cycle. Brokers really shone through here.
In the case of the time taken to generate initial quotation figures, direct services (online) were consistently very quick, while some brokers answered quote requests by personal follow up.
The difference however was somewhat reversed when it came to mid term changes, documentation requests and one off queries. The direct services often fell back to large call centres whose staff had little or no real insurance knowledge. In this areas brokers were more efficient, making suggestions that consumers found highly useful, saving them lots of time.
On balance, the speed at which quotes were produced by the direct services was not significant to our consumers when compared to the speed and efficiency with which brokers generally managed their policies throughout the policy life cycle.
4. Peace of mind that everything is covered
Brokers were largely far more efficient at cross checking policies than consumers, and also very good at educating their customers, explaining what types of cover were available and answering queries.
Direct processes were better than in the past but put too much focus on the consumer to do this work himself/herself to be able to compete with the level of service provided by brokers.
The really good Direct services centred around only covering the low risk policies, and leaving any consumer with non-standard requirements high and dry.
5. Security of personal data
In the case of Internet based services, the direct services tended to follow security guidelines marginally better than broker services, mainly due to the size of the organisations involved and lack of good software on the part of some brokers.
On the phone however, we saw a different story. Brokers, being far better equipped to deal with specific insurance questions and used to a human discussion, gave people a stronger feeling that they were in safe hands. The process of securing personal data was much the same as with direct, but the trust conveyed by brokers was better.
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. Our 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!