There are two types of insurance brokers, direct, and traditional. We will take a look at the two to aid you in making a comparison that will help you determine which will be best for you.
Direct Insurers are car insurance companies that have realized they can save money by cutting out the 'middle man.' By dealing directly with the client, instead of paying a broker or intermediary, they are able to cut back on costs and therefore offer lower premiums.
Because these companies do not have brokers accessing the public for them, and bringing in new clients, they use marketing tools to entice the customer. By advertising their services via billboards, television, radio, print media and the like, the publics' interest is piqued. The Direct Insurer will then have a call centre where a potential client can phone in and query their services.
The caller will give all their details to the company directly, and there will normally be less paperwork involved than with an insurance broker. The common myth is that no commissions are paid at all within these Direct Insurer companies, but this is not true. Commission is paid to the call centre agent upon your signup, but that is a once off thing. With the Traditional Insurance Brokers the commission will get paid to your broker on an ongoing basis based on your monthly premiums.
Traditional Broker based Insurers
These car insurance brokerages have existed for a very long time, as opposed to the fairly new idea of Direct Insurers. Traditional Insurance Brokers have developed a very clear separation between customer services and dealing with risks. The theory of this is that if you have separate specialized entities, then each broker can develop closer relationships to their clients and offer them better service. The risks will then be understood better.
So which is better?
It is hard to debate which type of insurer will save you more money. At face value it may seem like Direct Insurers will be cheaper, especially when considering that they have cut out the middle man and therefore broker fees. It is wise to take into consideration that these companies also have much huger advertising budgets than Traditional Insurance Brokers. Sometimes, the money that they have saved on brokers' commissions has been used for advertising, in order for them to entice their customers. This will make your premiums more expensive. This is normally the exception to the rule though, and only by doing research and comparisons will you find the Direct Insurer that is best for you.
Traditional Insurers can sometimes offer you a better deal than Direct Insurers. This is especially so if you include your household contents in your insurance request. You will receive a discount when you decide to insure more than just your vehicle with one of these companies. Unfortunately, if you do not need to insure your household contents when acquiring car insurance, you may find that a Traditional Insurer is a more expensive option.
Generally speaking, in some cases it is cheaper for the client to use a Traditional Insurer as opposed to a Direct Insurer, and vice versa. It is mostly based on your specific needs and insurance requirements.