Why do consumers hate the middle man?
Primarily, customers perceive any middle man 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 people say matter to them in choosing a channel for procuring their insurance cover:
- Peace of mind that everything is covered.
So let’s now analyze these items and judge how each performs when insurance is bought directly or when via a broker.
Contrary to popular consumer belief we have found that broker pricing is 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 not to under insure, therefore avoiding unnecessary claims while maintaining the correct premium income.
‘Cutting out the middle man’ it seems, does not save money this time. On the contrary!
Whilst the online experience usually proves more pleasant than the phone, most brokers offer an online service, and are more pro-active after they receive the initial quote request from the consumer, often answering queries by personal email or calling and helping to reassure customers with a human service. Furthermore, most direct services have shortcomings when queries or changes are required that are less common, particularly later in the policy life cycle. Brokers really shine through here.
The results here are quite evenly balanced. In the case of the time taken to generate initial quotation figures, direct services are consistently very quick, while some brokers answer quote requests by personal follow up.
The difference however is somewhat reversed when it comes to mid term changes, documentation requests and one off queries. The direct services often fall back to large call centres whose staff have limited real insurance knowledge. In this area brokers are more efficient, making suggestions our customers find highly useful, saving them lots of time.
On balance, the speed at which quotes are produced by the direct services is not significant to customers when compared to the speed and efficiency with which brokers generally manage their policies throughout the policy life cycle.
- Peace of mind that everything is covered
Brokers are largely far more efficient at cross checking policies than customers and also very good at educating their customers, explaining what types of cover are available and answering queries.
Direct processes are 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 centre around only covering the low risk policies, and leaving any consumer with non-standard requirements high and dry.