How To Choose An Insurance Broker Or Agent
Any insurance policy that is bought “off the shelf” is unlikely to provide you with full coverage against risks which are specific to you, because we all have different risks that we are exposed to.
To ensure that you receive complete protection from your insurance policy, it is therefore vital that you spend some time customizing your policy so that you can tailor it to meet your exact needs and requirements.
However, properly customizing a coverage policy takes time and expertise, and unless you have both, it is strongly recommended that you seek the advice of an insurance broker or agent to help you construct the right policy agreement that will protect you against all the major financial risks that you are exposed to.
Broker or Agent?
As to whether you should use a broker or an agent, that really depends on your individual needs.
Brokers are generally recommended over agents, as you are more likely to get independent advice that has come from a wider variety of sources. What this means for you, is that you will be getting the best insurance policy from what there is available to choose from.
However, it should be noted that brokers do tend to be more expensive than agents, so if cost is a limiting factor for you, then you may wish to consider going with an agent instead.
The main difference between and insurance agent and an insurance broker, is that agents represent and work on behalf of an insurance company, the insurer, whereas the broker, once hired, works with and represents you, the insuree. Most of the time you will be dealing with agents.
The following videos explains the difference between brokers and agents in more detail.
How Insurance Agents Get Paid
The large majority of personal insurance agents get paid on a flat commission basis ranging from 10-15%. This is paid regardless of the agent’s skill level, age and the quality of the insurance plan that they are offering.
For you as a consumer, the disadvantage of paying a flat commission rate is that insurance agents are rewarded for the quantity of sales they make rather than the quality of the service they provide. The flip side of this is that you can buy the best agents for the same price as you can the worst agents.
When you take the insurance agents commission into consideration, up to 15% of what you pay for your insurance premiums go directly to the agent. So you really want to try to choose the best agent if you are going to be giving this money away in commission regardless of what agent you go with.
The difficulty however in choosing a good insurance agent, is that the best agents tend to get drawn towards large business insurance where they can earn greater commission and away from the personal insurance policies that you are seeking.
This can make finding a good insurance agent very difficult, unless you are able to get a word of mouth recommendation about a particular individual who is known to provide a high level of service.
What Do You Want In An Agent/Broker?
Before you set off and start looking for an agent or a broker, you should first have a rough idea of what you would like from them.
Some of the questions you should be asking yourself are:
• Do I want life insurance, health insurance, disability insurance and other forms of insurance with the same agent? Generally, this is the best option to go for.
• Do I want regular review of my policy? This is advisable in case any changes need to be made later on.
• Do I have a home business? If you do, you need to find an agent or broker with small business insurance expertise.
• Are top claim skills important to you? Required if you need an agent to help you with claims in the future.
The more specifically you are able to identify what you want in agent or broker, the more likely you will be to find someone who will be able to help you to take out the coverage policy that you need and at the right level of coverage.
As the following video explains, you should at least be looking for an independent insurance agent especially if you want to use the same person for a prolonged period of time.
The trouble with agents who are not independent, such as captive agents or direct company agents, is that every time you need to make an amendment to your policy, or take out a new policy, you will most of the time be dealing with a completely different agent.
This means that they won’t know you or your policy very well, and you won’t be able to build up any sort of relationship with them.
How To Get Good Advice
A good insurance broker/agent will provide you with a service and a level of protection that will cater to your exact needs and requirements.
In other words, you are looking for someone who knows what they are doing and can make life easier for you.
Some of the possible ways to find such an agent or broker are listed below. Usually, using a combination of these approaches is likely to be your best.
- Asking friends.
- Looking at qualifications.
- Speaking with insurance companies.
You should not for example, just go with an agent or broker because they have been recommended to you by a friend or family member without first checking if they have the right level of experience in the area of insurance you are interested in and the right professional qualifications to deal with your requirements.
It is also worth remembering, that if you are paying for insurance advice then you generally get what you pay for. So don’t be shy about paying top dollar if you want to get the best advice possible.
Lets now have a look at each of the three methods for finding a good insurance agent or broker in more detail.
1) Referrals From Friends
One of the best ways to find a good insurance broker or agent is if they are referred to you by another person. This way you will be able to get first hand knowledge of the services offered, and also of the quality of the service that person received.
However, be careful not to fall into the trap of being referred to an agent or broker based purely on price alone, as you may end up receiving a coverage policy that does not adequately meet your unique needs and requirements. This largely applies to independents and brokers.
2) Professional Qualifications
A professional who has completed a series of courses and passed certain exams can earn a number of advanced insurance designations. Some of these include:
• Chartered Property Casualty Underwriter.
• Certified Insurance Counselor.
• Certified Life Underwriter.
• Accredited Advisor in Insurance.
Although these designations should not be used solely to decide who you should or shouldn’t go with, they should be factored into your decision-making process as they indicate that your agent or broker has additional expertise and has made a commitment to professionalism and ethical behavior.
3) Insurance Companies
If you find a good insurance company that you want to be insured with, you can go directly to that company and ask for agent referrals.
Ideally, you should ask for the agents who are most knowledge in the area of insurance that you are interested in. To ensure that you are given the best names, check the advanced designations held by each of these agents.
Although this can be an effective method to use when approaching companies directly, be aware that your referrals will generally always be limited to agents within that company. So if there are better choices outside of the company that you call, you are unlikely to hear about them for obvious reasons.
Getting Insured Successfully
After doing some research, you should have come up with a short list of possible insurance brokers or agents who you would like to work with.
It is recommended at this point to request a face to face meeting with each name on your list with the purpose of doing a review of the policies that you would like to take out.
Seeing more than one person will enable you to make comparisons between them, after which, you will very often be able to tell who is the right person for you.
At this point it is important not to discuss insurance quotes, as you want your initial decision to be based on the experience and skill of the broker/agent rather than the price they are offering you. This is what matters in the long run, as if you end up having coverage gaps in your policy then you could be exposing yourself to unnecessary financial risk.
Only after an insurance plan has been designed for you with all the coverages that you are looking for, should you then start to discuss cost.
It is also worth enquiring at this point about the agents/brokers background. Some things you may be interested in are their educational background, what practical experience they have had and what level of ongoing help they can offer you.
As a general rule, you should choose an insurance broker/agent who can offer you:
• The expertise to create a protection plan that adequately caters to your needs.
• Ongoing reviews and contact about new developments so that your insurance plan will stay current over time and will adapt to change.
• Help during claim time.
Take your time when finding an agent or broker and don’t just go with the first person that you meet. Remember, the person who you do eventually choose to do business with will be very important in helping you to construct your policy, close coverage gaps and receive adequate compensation for any losses that you are covered for.
So you want to be sure that you get the right person from the start, as this will make things a lot easier for you both now and in the future.
