Trust comes with transparency. In business insurance, the level of transparency is low and the level of trust seems to have declined over the years. Many small business owners wonder what value they get from their business insurance broker or adviser in Auckland, Wellington, Christchurch and across New Zealand. Let’s look at three areas for explanations and to see what small business owners can do to overcome these.
Where Are My Quotes From Three Insurers?
It’s sensible business practice to get three quotes when buying important goods and services. Busines insurance for property damage or legal liability should be no different. But when was the last time your business insurance broker gave you quotes from three different insurers? Why don't they?
Most insurance brokers have a preferred insurer arrangement in place for small business insurance. It means they will place almost all of their small business insurance with that preferred insurance company in return for higher commission.
Getting quotes for business insurance, public liability, product liability, statutory liability and employer liability cover from additional insurers will threaten the volume of insurance business they can place with their preferred insurer and will require additional effort, eating into their income and profit margin. That's not in the best interests of your business insurance broker.
When your insurance broker has a preferred insurer arrangement in place, they act as agent for the insurer and not for you. You may be better off getting your own quotes and buying your own insurance.
Why Is My Broker Not Giving Insurance Advice?
Small business owners say they engage a business insurance broker in order to receive insurance advice about managing risk and finding the right small business insurance product for them. Insurance brokers say that small business owners should engage them in order to get advice about risk and insurance. The reality is that few small business owners receive insurance services advice. Why?
As we have seen above, most business insurance brokers have a preferred insurer arrangement in place with an insurance company. Any advice they give that leads them to recommend a different insurance company will conflict with their preferred insurer arrangement. Besides, advice takes time and costs money, eating into your insurance broker’s profit margin.
When reviewing or choosing an insurance broker, ask if they have a preferred insurer arrangement in place. If they have, you may be better off getting your own quotes and buying your own insurance.
How Much Commission Do They Keep?
Insurance brokers are paid commission. The commission they are paid is deducted from the insurance premiums paid by customers. The higher the commission, the higher the premium.
The law and regulations do not require insurance brokers to voluntarily disclose how much commission they are paid. However, insurance customers do have the right to ask and when they ask, insurance brokers are required to disclose their commission.
For small business insurance, you will find that insurance brokers and agents are paid between 20% and 30% of the premium. Most insurance brokers add their own fee on top.
Find great commercial insurance products for your business and at a competitive price. Read more about what an insurance broker should do for you.