Consumers generally think they benefit when they buy insurance direct but is it true?
To find out, we've asked people what matters to them when buying insurance, and in turn our panel used those criteria to evaluate the differences between buying insurance via a broker and buying direct online.
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. Advertising by insurers, for example Norwich Union Direct (now Aviva), to 'go direct' has compounded this feeling.
What is important to consumers?
In order of importance, these are the things people said matter to them:
Peace of mind that everything is covered.
Security of personal data.
So let's now analyze these items and let our panel judge how each performs when insurance is bought directly or when via a broker.
Contrary to popular consumer belief we found that broker pricing was 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!
Many of the consumers in our test case were surprised here. At least half began our test with the impression that buying policies directly would be the easiest option for them. After trying both, almost all had changed their mind.
Whilst the online experience usually proved more pleasant than the phone, most brokers offered an online service, and were far, far more pro-active after they received the initial quote request from the consumer, often answering queries by personal email or call and helping to reassure customers with a human service. Furthermore, most direct services completely fell down when queries or changes were required that were less common, particularly later in the policy life cycle. Brokers really shone through here.
The results here were quite evenly balanced. In the case of the time taken to generate initial quotation figures, direct services (online) were consistently very quick, while some brokers answered quote requests by personal follow up.
The difference however was somewhat reversed when it came to mid term changes, documentation requests and one off queries. The direct services often fell back to large call centres whose staff had little or no real insurance knowledge. In this areas brokers were more efficient, making suggestions our consumers found highly useful, saving them lots of time.
On balance, the speed at which quotes were produced by the direct services was not significant to our consumers when compared to the speed and efficiency with which brokers generally managed their policies throughout the policy life cycle.
"As long as my broker doesn't take too long to come back to me, I don't care. It's his problem while the clock is ticking, not mine."
4. Peace of mind that everything is covered
We saw few surprises here. Brokers were largely far more efficient at cross checking policies than consumers, and also very good at educating their customers, explaining what types of cover were available and answering queries.
Direct processes were 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 centred around only covering the low risk policies, and leaving any consumer with non-standard requirements high and dry.
5. Security of personal data
This was a difficult one to test, and fell largely to our technical team. We did however take into account how consumers felt about their data security after using the various services.
In the case of Internet based services, the direct services tended to follow security guidelines marginally better than broker services, mainly due to the size of the organisations involved and lack of good software on the part of some brokers.
On the phone however, we saw a different story. Brokers, being far better equipped to deal with specific insurance questions and used to a human discussion, gave people a stronger feeling that they were in safe hands. The process of securing personal data was much the same as with direct, but the trust conveyed by brokers was better.
Summary of Results
So who won? Broker or Direct?
Speed. [Broker, though people admitted they were heavily biased due to point 2.]
Peace of mind that everything is covered. [Broker]
Security of personal data. [Broker]
We set out in this article to test the general perception by consumers that 'going direct is better', for the benefit of consumers and brokers on the whole.
Whilst we didn't test every website and every class of insurance, the results with our test users were conclusive.
Whilst conventional wisdom dictates that the middle man offers little to the discussion and always has his price, in the complex world of insurance, perhaps things are not so simple, and after doing some research at RiskHeads we are now more certain than ever that the Insurance Broker's day is far from over.
Our recommendation to all would be to trust your broker, let him shop for you, and you will likely reap dividend, whilst living an easy life