Insurance brokers are a vital component of the insurance industry. The rise of direct insurance has reduced the number of insurance brokers, but they still offer vital financial services and will continue to do so in the foreseeable future. Unfortunately the majority of consumers do not fully understand the services a broker offers and are unaware of the differences between their insurance company and their insurance broker.

What is an Insurance Broker?

An insurance broker is a financial advice and product provider who works for you. A broker gives you advice on what your risks are and how to cover them with insurance policies. They typically establish relationships with a number of insurance companies and provide insurance products from these companies to their clients. Direct insurers and some traditional insurers use insurance agents to interact with clients. They work solely for their respective insurance company and only provide those products to clients. They can be seen as your ‘insurance company’ as they are employees. People tend to confuse brokers with agents, which is why they think of their broker as their insurance company.

Where can I find a broker?

Brokers get most of their new clients from referrals. If you need an insurance broker, ask your family and friends which broker they use and whether they would recommend using that broker. Another option is to look around in newspapers and on the internet. Typically brokers who have enough money to place quality advertisements in newspapers and have spent money on developing a good website are quite successful and most likely provide a good service. No matter whether a friend referred a broker or you found one yourself, check on your country’s insurance regulator’s website whether that broker is in fact a registered professional.

Is there a way to tell whether a broker is going to be good?

There is no 100% accurate way of determining whether an unknown insurance broker is going to provide a good service. Even a broker that a friend refers could be great for them, but could end up providing you with a horrible service. Just like with dating, you need to ask questions in order to gauge your compatibility with an insurance broker. To do this you need to ask questions. Here are some useful questions to ask:

What are your qualifications?

Besides being registered with your country’s financial services board, your broker should provide you with details on his or her qualifications. A university degree from a respected university should be a good indication of competency. Do not assume that all insurance brokers have degrees as this is not the case. Quite a few brokers worked their way up from assistant and sales positions instead of getting a degree.

What services do you offer?

If you need life insurance and car insurance then you need a broker who is capable of providing both services. If the broker does not provide both then think of looking elsewhere.

How many clients do you have?

The size of a broker’s client base matters for two reasons. Firstly having a large number of clients indicates that the broker has a lot of satisfied clients. Secondly, brokers are able to negotiate lower premiums with insurance companies if they have a large client base. On the other hand if you are looking for insurance for your company it might be a good idea to find a business insurance broker with a small client base so that you are guaranteed a more personal service.

How much experience do you have?

Age matters! Check how many years the broker has been in the insurance industry and also check how much experience the broker has in the type of insurance in which you are interested. If you need life insurance and you use a broker who has twenty years of experience in auto insurance, but only a couple of months in life insurance then you could be making a mistake.

Evaluate the answers to these questions and hopefully you will have a fairly good idea of which broker will suit your needs the best.