Pros and Cons of Using an Insurance Broker/Agent

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An insurance broker is a specialist in insurance and risk management. Brokers act on behalf of their clients and provide advice in the interests of their clients.

Sometimes an insurance broker will act as agent of an insurer , but where this occurs the situation should be fully explained to you. An insurance broker might specialise in one specific type of insurance or industry, or they might deal with many different types.

Insurance brokers can give you technical advice that can be very useful if you need to make a claim. Brokers are aware of the terms and conditions, benefits and exclusions and costs of a wide range of competing insurance policies, so they can help you find the most appropriate cover for your own circumstances. Brokers can help arrange and place the cover with the chosen insurer and can often provide advice on how to make the most of your insurance budget.

Insurance brokers have access to many different insurance policies and, because they deal with a range of insurance companies directly, sometimes brokers have access to policies that are not available to most consumers. Because the general insurance industry in Australia offers so many options, it can be quite difficult to choose the right policy.

Some insurance policies can be complicated, and an insurance broker can help you understand the details of a policy and also work out what level of cover you need, so that you can make sure you are properly protected. Depending on the type of advice a broker may provide, they may be required to provide that advice, in addition to other information, in a document called a Statement of Advice SoA.

Brokers can often find you a good deal on insurance because they have a thorough understanding of the insurance market and can negotiate premiums on your behalf. A broker will explain your policy to you and advise you if there are any special situations you need to know about. Brokers can prepare a customised insurance and risk management program for you or your business, where they design the policies, negotiate the terms with insurance companies and place the cover with the insurer.

By including a risk management program, which puts some of the responsibility for risk prevention and loss minimisation on you or your business, you can reduce premium costs. If you need to make a claim on your policy, your broker will assist you through the process and will liaise with the insurer on your behalf.

Insurance brokers might charge you a fee for their services, or they might receive a commission from the insurance company. They are required to advise you of the fees that they charge or the commission they receive.

This may be set out in the Financial Services Guide, Product Disclosure Statement or where a broker has provided you with personal financial advice, the fees and costs associated with their advice will be set out in your Statement of Advice. Just as you would spend some time trying to make sure that the insurance policy you choose is the right one for you, if you decide to use an insurance broker you should make sure that the person you appoint is going to help you in your particular situation.

To find a broker visit www. There are general conduct obligations that apply to all financial services licensees and authorised representatives and specific conduct obligations that apply to an adviser who provides personal financial product advice. Where a broker provides you with personal financial advice then in accordance with the Corporations Act they must:. Brokers are required to be members of an authorised external dispute resolution scheme as a condition of their AFS licence.

Brokers are bound by the decisions of FOS. If you do have a complaint about the services being provided by your insurance broker, in the first instance you should raise it with them. All insurance brokers should have an internal complaints and disputes handling process designed to help resolve any complaint. If it is not possible to resolve the complaint to your satisfaction through this process, you can refer the unresolved complaint called a dispute to the free and independent external dispute resolution process administered by the Financial Ombudsman Service FOS.

FOS will examine your dispute and if it is within its jurisdiction, seek to resolve it by liaising with you and the insurance broker. If the dispute cannot be resolved, FOS can make a determination imposing binding sanctions on an insurance broker after considering the available evidence.

While the above process is designed to make things easier for you, you still have your normal legal rights regarding any dispute. Reassuringly, there are very few disputes involving insurance brokers each year. In the financial year, disputes against brokers made up only 2. If you have a complaint about the products or services being provided by your insurance company, please refer to the section resolving disputes.

Insurance brokers work with their clients to understand their risks, and to discuss how to use insurance to protect their assets and businesses. Brokers offer expert advice on the management and reduction of risk, and on the range of insurance products that are available. The same skills and networks are also used to help their clients resolve claims when they arise. An insurance broker can save you time, money and worry. A broker can help you understand the cover you need, and can purchase that cover for you from the insurance market.

The advice is tailored to your needs. The most common types of insurance brokers arrange are business packages, commercial motor and professional indemnity. However, nearly all brokerages also provide assistance for everyday types of insurance, such as home insurance and private motor insurance, for clients.

Many insurance brokers get paid a commission by the insurance companies when the policies are purchased. Other insurance brokers act on a fee-for-service basis, and negotiate the fees they charge with their clients. Ask your broker to explain the situation to you. It can cost less because brokers have knowledge of the insurance market and can negotiate competitive premiums on your behalf.

A broker is obliged to advise you of the fees charged for the services provided to you, so there are no hidden costs. Fees should be set out in the Financial Services Guide, Product Disclosure Statement PDS or where a broker has provided you with personal financial advice, the fees and costs associated with their advice will be set out in your Statement of Advice.

Remember, not all insurance policies are the same. You might be able to get a cheaper policy elsewhere, but it may not provide the cover you need if something goes wrong. Because brokers are usually not aligned to any one company, they can usually explore a range of products and services available on the market and offer you tailored advice.

Some brokers do work on behalf of insurers but they are obliged to inform you if this is the case. If you run a business, you might then ask the broker to make a presentation. At the presentation you should look for:. Yes, particularly with regard to business insurance. Many brokers are skilled risk managers who can advise you on the risks you face, and how to manage them. Insurance is just a part of the overall risk management strategy, in that it transfers risk to another party the insurer at an agreed premium.

Having effective risk prevention and loss minimisation strategies may help reduce premium costs. Yes, and straight away. New circumstances can have a great bearing on the risks you face, and these will need to be factored into your insurance requirements. Not doing so could result in your insurer reducing or refusing your claim. You should also ask your broker to provide written confirmation that any changes have been passed on to your insurer.

In many cases a broker can negotiate a settlement with the insurer on your behalf to swiftly get the best result for you, and to ensure your life gets back to normal as soon as possible.

If in doubt, ask. Brokers will be happy to let you know of their qualifications and explain what it takes to attain them. Brokers are required to show evidence of continued professional development each year to maintain their qualifications. There are mechanisms in place to protect consumers in the unlikely event that premiums are not passed on by a broker. In almost all cases, the customer will not be adversely affected should a claim arise under such circumstances. Toggle navigation Understand Insurance.