Insurance Brokers: What Are They, Do You Need Their Services
28th December 2023
Why you need an insurance broker and how they can help your business?
Working with a broker has many different benefits and offers piece of mind that a specialist has reviewed your policy coverage. Below we identify why businesses should consider an insurance broker, and what the advantages and perceived disadvantages can be.
What is an insurance broker?
An insurance broker is an intermediary that is authorised by the Financial Conduct Authority to offer their services, knowledge and support in the arranging and purchase of insurance contracts. Insurance brokers are experts that can navigate the insurance market, help you decide what type of insurance and level of cover you need, and recommend a suitable policy that meets your needs.
Only a handful of insurance companies deal directly with businesses (B2C), whereas brokers or agents (B2B) can provide access +100 providers for property and casualty insurance in the UK
Why should a small business use an insurance broker?
Using an insurance broker can be highly beneficial for a small business for several reasons:
Expertise and Advice: Insurance brokers are knowledgeable about various types of insurance policies and market conditions. They can provide valuable advice tailored to the specific needs and risks of a small business.
Access to The Market: Brokers often have access to a wider range of products and insurers than the average consumer, including some options that are not directly available to the public. This wider selection can lead to better coverage and pricing.
Customised Coverage: Every business is unique, and a one-size-fits-all approach to insurance doesn't work. Brokers can help identify specific risks your business faces and find policies that cover those risks without paying for unnecessary extras.
Time and Cost Efficiency: Brokers can save a business time and potentially money. They handle the legwork of comparing policies and negotiating with insurance companies, often securing more favorable terms or premiums than a business could obtain on its own.
Claims Assistance: In the event of a claim, having a broker can be invaluable. They can guide the business through the claims process, advocate on its behalf, and help ensure a fair and prompt resolution from the insurance company
Ongoing Support and Review: Insurance needs can change as a business evolves. Brokers can provide ongoing support, reviewing the business's coverage periodically and making adjustments as necessary to keep up with changes in the business.
Risk Management: Beyond just purchasing insurance, brokers can offer guidance on risk management practices to help reduce the likelihood or impact of potential losses, which can be particularly beneficial for small businesses that may not have dedicated risk management resources.
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What are benefits of working with insurance brokers?
Companies of all sizes should consider the services of an insurance broker because they can provide cost effective access to risk transfer solutions. A broker can assist you with finding the right insurance cover to meet your business needs.
Find the Right Cover: Your insurance broker should regularly undertake re-marketing exercises, given there continues to be significant movements in price and cover available. We recommend you benchmark your existing insurance against competing quotes to ensure you continue to purchase the most appropriate cover at the most affordable premium.
Independent Advice: Brokers that work independently of any insurance companies will not have any conflicts of interest that may prejudice the service or advice offered. They should always put their customer's interests first, above that of any insurance carrier they work with.
Cost-Effective: Working on either an advised or non-advised basis means insurance brokers can offer their servcies and market access on a cost-effective basis to small businesses. Providing plenty of value added in the purchase of insurance.
Understand The Options: Unfortunately, insurance contracts are complicated and it takes considerable time to fully appreciate all the terms and conditions. Speak with an expert agent to ensure your policy coverage is suitable to meet your business needs.
Specialist Broker: As a specialists, insurance brokers can identify or develop tailored insurance solutions to meet your business needs. Expert brokers have the experience and relationships to identify insurance capacity for any transferable risk.
Claims Assistance: Brokers can provide support and advice when making a claim under your insurance policy. It is important you notify them promptly when an incident, which may give rise to a claim, occurs. Please note that delays may prejudice claims and entitle the insurer to repudiate the claim. In the event of uncertainty, the incident should always be reported.
Insurance brokers vs automated platforms
Assessment of Needs: An insurance broker will assess your small business insurance needs. This involves understanding your business risk profile and your requirements to determine what kind of coverage is necessary.
Market Research: Brokers have extensive knowledge of the insurance market. They research and compare different insurance policies from various insurers to find the best match for your small business needs.
Independent Advice: Unlike insurance managing agents who represent specific insurance companies, brokers are independent and can provide unbiased advice. They act as an agent of your business, not to any particular insurance provider.
Customisation of Policies: Brokers work to customise insurance policies to fit the unique needs of their clients. They can often negotiate with insurer carriers to tailor coverage terms, conditions, and premiums.
Explanation of Terms and Conditions: Insurance documents can be complex. Brokers help small businesses understand the fine print, including coverage limits, exclusions, and the claims process.
Problems arises when you find out your policy was not arranged correctly, or you don't fall within the business description, or you make a claim and find out there were onerous exclusions on the coverage, which means will be unable to make a claim.
Managing general agents vs insurance brokers
Managing general agents or MGA's act on behalf of the insurance company. They are unable to provide you with independent advice, typically work with one or a limit selection of insurance carriers and will earn a profit commission if the level of claims does not exceed an agreed threshold. Managing general agents can deal directly with businesses, however most will transact through a broker.
Insurance brokers act on behalf of their clients and are duty bound to look after their interests. A full-service brokerage will undertake a fair market analysis and provide a personal recommendation, whereas many policies will be arranged where no recommendation is provided to provide a cost-effective service.
Where to find an insurance broker?
The British Insurance Brokers Association is the best resource for finding a local broker. You can search by product to identify brokers located near to your business premises.
BIBA brokers an can provide access to a wide choice of products, give advice on suitable insurance cover, represent their clients in claims settlements, and give risk management advice.
Professional Indemnity Insurance
Public Liability Insurance
Employers Liability Insurance
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What are the disadvantages of using insurance brokers?
Whilst there are many advantages to using an insurance broker, there are also disadvantages you should be aware of. The best advice is reach out to your broker and talk to them about your needs to ensure the best service.
Time: Unfortunately when using an insurance broker, the time it takes to obtain quotes from insurers can be longer than you had hoped. If your business has a challenging risk exposure, finding an appropriate insurer to meet your needs can prove difficult.
Complexity: Insurance products are complex financial instruments whether you buy through a broker or not. The perception can be that you are provided with a lot of documentation, however your broker is there to help you understand what it all means.
Commissions: Insurance brokers will usually earn commissions from insurers, however in the vast majority of circumstances they are working on your behalf. Brokers should clearly identify how they working and if you want to know how much they earn, all you have to do is ask.
About the author
Simon Taylor is a respected senior industry professional and a Chartered Insurance Broker with over 20 years’ of experience in the commercial insurance sector as an underwriter, broker and director.