Is using a car insurance broker worth it?

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.

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

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How much does a car insurance broker cost?

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.

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

• What do car insurance brokers do?

  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.

• Does it cost more to use a car insurance broker?

  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.

• What questions should I ask my car insurance broker?

  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.

• Will a broker help me make a claim?

  Yes. A broker can help you with the claim process and negotiate a suitable settlement with the insurer on your behalf.