A car insurance broker is an agent who acts on your behalf to arrange and assist with car insurance. Most car insurance brokers are independent and do not work for any insurance company. Instead, they use their knowledge to shop around for car insurance deals and negotiate with insurers on your behalf.
What do car insurance brokers do?
A car insurance broker usually provides services such as:
Advising you on the policy that suits your circumstances
Explaining the details such as coverage, premiums, limitations and exclusions
Reviewing car insurance policies with you annually and offering advice on the latest products and add-ons available
Assisting with any claims by representing you in dealings with the insurance company
What’s the difference between an independent agent and a captive agent?
There are two different types of insurance brokers, and they are required to explain which category they fall into if you ask.
Independent agent. The first type is an independent broker who helps clients out with a broad range of insurance issues, and compares options from all available providers. They usually get paid directly by their clients for services rendered, but may also earn commissions for signing clients up. They will often have a portfolio, or list, of all the different insurance companies they work with and look at options from.
Captive agent. The second is an agent for a particular insurance company. Their services are sometimes free, but they will only find you deals and offer assistance for that one particular company. They usually get paid a commission for helping customers sign up.
What’s the benefit of using a car insurance broker?
Regardless of which category an insurance broker falls into, they can provide the following benefits:
They use extensive knowledge of the marketplace to find deals and savings
They do all the legwork for you in comparing policies
They warn of insurance traps, pitfalls and legal requirements
They can represent you expertly when dealing with insurers
They often have access to policies that the average person does not know about
They are often able to negotiate better deals than you could alone. Due to a broker’s position in the industry, many companies extend them special offers to pass onto their clients
They know and can advise you of any discounts or exemptions you may be entitled to
They remain impartial and committed to the best outcome. Insurance brokers are strictly governed by industry regulations which require them to act in your best interests and disclose any conflicts of interest they may have
The cost of using an insurance broker depends on which kind of broker you use, and how expensive your insurance policy is. It might cost you nothing, or it might run into thousands of dollars all up.
The bulk of a car insurance broker’s income will typically come from commissions paid by insurers. This can range from 0-25% of your premium paid. It does not directly cost you anything, as this sum is paid by the insurance company, but it might mean your broker has an incentive to direct you to more expensive policies or certain insurers that pay bigger commissions.
Some brokers may directly charge you a fee of a certain proportion of your premium. For example, they might charge you 10% of premiums paid, so if you are paying $500 annually in car insurance premiums then the broker is costing you $50 per year.
You may have to pay additional flat fees when you sign up for a new insurance policy, an hourly rate or flat fee for time they have spent working on your behalf such as when making a claim, an annual management fee if you are maintaining policies through them and more. They can charge fees at their own discretion, but are required to be clear and up-front about them.
How do I find a cheap car insurance broker?
A broker with more fees but no commission may be more motivated to find you a good deal in the hope that you decide the fees are worth it, while a broker with no fees but higher commission might cost you a lot less or nothing at all directly, but might steer you towards unnecessarily expensive policies.
Fortunately, car insurance brokers are required to disclose their fees and incentives if you ask. In other words, you have the freedom to pay as much or as little for a car insurance broker as you want, but should be aware of the pros and cons of each. If you already have an insurance broker, find out how much it’s costing you by looking at their Statement of Advice or the Financial Services Product Disclosure Statement (PDS) that they have sent you.
When assessing the cost of a car insurance broker, you need to decide whether the time and money they will save you is worth the fee for their services. Just like comparing insurance policies, getting value for money rather than finding the lowest possible price should be your main goal. If you are using a broker to organize and manage all of your policies, including car insurance, then paying for their time could be money well spent.
How do I choose a broker?
A good car insurance broker should be:
Transparent. They should disclose all fees upfront and any affiliations or conflicts of interest they might have. They are required to inform you of these when asked, but should do so unprompted.
Proactive. They should be in touch with you regularly and actively working on your behalf to secure and manage your policies.
Empathetic. They should be open to your concerns or queries, patient while you consider your options and should never try to force a policy on you that you don’t want or aren’t sure about.
Knowledgeable. They should have extensive knowledge and industry experience, and have a wide range of insurers in their portfolio.
Recommended. Trusted recommendations from people you know who have had experience with a car insurance broker can provide a good insight into how they operate. If you want to hear from a broker’s former customers, the broker should be happy to offer references.
Accessible. Some brokers advertise online, and visiting their website or social media can give you an indication of their experience, professionalism and level of customer service. There are also online car insurance broker comparison sites where you can compare the options side by side.
How can I find a cheap car insurance broker online?
If you want a local agent, you can do a local search online to find brokers near you. Look for brokers who aren’t captive agents, which means they can offer insurance from any insurer and aren’t tied to one company. You’ll get the best variety of quotes that way.
For online-only car insurance brokers, use car insurance comparison websites that offer quotes from multiple providers. You can get transparent quotes and sometimes even customize your quote to exactly what you need without ever picking up the phone.
When should I use a car insurance broker?
As with everything, there are both pros and cons to using a broker.
Pros
A car insurance broker has access to a lot more insurers and options than you do. They will generally find a better policy and/or better price than you would get without using one.
An insurance broker can save you a lot of time and effort.
A broker can negotiate a better deal for you.
A car insurance broker is better able to represent your interests.
Car insurance brokers are a valuable source of information and advice.
Brokers can negotiate claims with the insurance company on your behalf, which can be particularly useful in tricky areas like third party liability claims.
Car insurance brokers are recommended when insuring business vehicles, trucks and vehicle fleets, rather than private cars.
Cons
A car insurance broker may charge you a fee for their services, and may cost more than you save.
An insurance broker who is not truly independent may steer you towards insurers they are affiliated with, although they are required to disclose this when asked.
If you are only buying car insurance, particularly more simple third party-only options, a car insurance broker who charges a fee may not be worth your while.
How are brokers regulated?
Most every state requires car insurance brokers to be licensed, but because the auto insurance industry is regulated on a state level and not federal, the regulation requirements may vary by state.
There’s also the National Association of Insurance Commissioners (NAIC) that overlooks the industry and provides regulatory support on a state level.
Due to regulation, brokers must adhere to good practices which include:
Act in your best interests
Provide appropriate advice
Warn you if their advice is incomplete or inaccurate
Put your interests ahead of theirs when there is a conflict of interest
Documenting the advice they have given you about the insurance policy
Frequently asked questions about brokers
They work with their clients to help them understand their risks and how to protect their assets. They use their knowledge of the market and extensive contacts to find and negotiate the most suitable car insurance. They typically work with businesses to insure fleets, delivery vehicles, limousines and other special assets, but are also popular for everyday car insurance.
Not necessarily. It can cost you less if a broker is able to locate and negotiate a better deal on your behalf, but might also cost you more. Remember that you’re also paying for their experience and information, so take full advantage by asking a lot of questions.
To verify the quality of your broker, ask about their qualifications, their range of services, their experience with your type of insurance needs, how they bill for their services and whether they have references they can show you from satisfied clients. Ask for more information on any insurance details you’re not sure about.
Yes. A broker can help you with the claim process and negotiate a suitable settlement with the insurer on your behalf.
Roslyn McKenna Ayers is insurance manager at ValuePenguin and a former publisher at Finder, specializing in home and auto coverage. Her expertise and analysis has been featured on Bankrate, MSN and Reader's Digest. She holds a BA in writing and communications from Maryville College.
My insurance policy got canceled last December 21,2019 and I didn’t know until my broker emailed me last March 13 about it, the company sent me a registered mail saying I had to pay less than 50$ amount right away no December 2, I forgot about the notice but I paid my insurance on December 14, the company still canceled my policy without 15 days notice and my broker didn’t even know it till before she told me, I continued paying my January and February payment online last Jan I received a cheque costing 600$ (over payment) I again paid my insurance on Feb and they sent me back another 600 cheque, I freaked out upon knowing that me and my family been driving all over the place for 3 months without insurance, what can I do about this? can I fight for this? Now no insurance company want to accept me because I’m high risk, is this right?
First thing we need to do is to get in touch with the insurance company to know what happened and to get their side of the story. That way we would know if we could fight for it. Second, we need to check and fix as to why you are placed as high risk if ever this is the case. Reach out to the insurance company and ask assistance from your broker to have a discussion set up so you could fix the issue. Hope this helps!
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My insurance policy got canceled last December 21,2019 and I didn’t know until my broker emailed me last March 13 about it, the company sent me a registered mail saying I had to pay less than 50$ amount right away no December 2, I forgot about the notice but I paid my insurance on December 14, the company still canceled my policy without 15 days notice and my broker didn’t even know it till before she told me, I continued paying my January and February payment online last Jan I received a cheque costing 600$ (over payment) I again paid my insurance on Feb and they sent me back another 600 cheque, I freaked out upon knowing that me and my family been driving all over the place for 3 months without insurance, what can I do about this? can I fight for this? Now no insurance company want to accept me because I’m high risk, is this right?
Hi Arlene,
Thank you for reaching out to Finder.
First thing we need to do is to get in touch with the insurance company to know what happened and to get their side of the story. That way we would know if we could fight for it. Second, we need to check and fix as to why you are placed as high risk if ever this is the case. Reach out to the insurance company and ask assistance from your broker to have a discussion set up so you could fix the issue. Hope this helps!
Cheers,
Reggie