What is an insurance broker? All your questions answered

We examine the role of an insurance broker, how you can benefit from their expertise, and how to choose a broker that’s right for you.

What is an insurance broker?

An insurance broker is an intermediary between a client and one or multiple insurance companies.

A broker will look for a policy that meets your needs and advise you on what cover they consider most suitable at a price you can afford.

Often, they work from a wide panel of insurers but may have also developed policies with single insurers. Brokers work in both personal insurance and business insurance, so no matter what you need, you’ll be able to find expert guidance.

Brokers are usually paid a commission by the insurance company they place cover with, and will often also charge a small administration fee alongside the commission. On larger commercial cases, a flat fee instead of commission may be agreed.

Insurance brokers are regulated by the Financial Conduct Authority (FCA), and any fees charged must be clearly set out. Commission does not need to be disclosed unless asked for by the customer. 

Who does an insurance broker act for?

Generally, an insurance broker acts for the customer to find a product to suit their requirements at a competitive price.

In some circumstances, an insurance company may have given the broker delegated authority to act on their behalf and the customer’s.

Where this happens, for example, with handling claims or underwriting the policy, the broker should make you aware of any potential conflict of interest. 

Why do people use insurance brokers?

There are a number of reasons people use insurance brokers.

• Specialist advice: business insurance can be complex, with a wide range of cover available - some of which you may not even be aware of. A business insurance broker can guide you through the complexities of commercial insurance, assessing your principal risks and ensuring you have the right cover. Alongside this, using a professional means you can take legal action if their advice is incorrect (which you clearly cannot do if you arrange the cover yourself).

• Wide marketplace: insurance brokers provide access to a wide range of insurer providers rather than the products offered by just one insurance company. Additionally, some commercial insurers are only accessible through a broker.

• Saves time: in theory, you could approach multiple insurance companies yourself for quotes, but this would be time-consuming. An insurance broker will do the work for you.

• Save money: insurance brokers have the knowledge and relationships to negotiate special prices with insurance companies, sometimes with enhanced cover, and can hopefully save you money compared with going to a company directly. Brokers can’t guarantee to be the cheapest in the marketplace, and their role is to balance cost with quality of cover.

• Specialist insurance brokers: some insurance brokers provide specialist services to niche, high-risk, or complex industries.

• Claims handling: as well as providing advice on getting the right policy, many insurance brokers also provide claims handling service, helping you through the often stressful process to ensure everything runs smoothly.

What does an insurance broker do?

An insurance broker will speak to you about your specific circumstances, finding out as much as possible about your insurance needs. They should explore areas you may not have considered insuring to ensure you understand what protection is available.

They will then assess the market and approach a range of insurance companies to obtain quotes based on cover tailored to your needs.

You will then be provided with a recommendation of which insurance company to take out a policy with, the terms of the cover, and the price and payment methods. If they are providing a ‘non-advised’ service, instead of a recommendation, they will provide you with the information but leave you to decide on which policy to take out.

Once your policy has been arranged, the broker will be on hand to provide advice on an ongoing basis and carry out any adjustments needed during the year.

They will then negotiate renewal terms with your current insurer and, if appropriate, go back out to the market to see if any better options are available. 

Do insurance brokers give advice?

Not always, although many see giving advice as one of the key roles of an independent insurance broker. Some brokers will operate on a ‘non-advised’ basis (often for home and motor insurance) and some will offer a mixture of both.

Non-advised means that a broker will take your information, help you with the application process, and explain the cover, but they won’t provide any advice or recommendations.

Brokers operating on an ‘advised’ basis can offer bespoke advice tailored to your circumstances.

Whether advised or non-advised, you should be given enough information to make an informed decision. 

Do insurance brokers have a duty of care?

Yes, insurance brokers have a duty of care to their customers and must always work with your best interests in mind.

The FCA states brokers “must act to deliver good outcomes for customers”. This principle is elaborated in further rules and obligations, specifically:

• Brokers must act in good faith towards customers

• Brokers must avoid foreseeable harm to customers

• Brokers must enable and support customers to pursue their financial objectives

Can insurance brokers collect premiums?

Yes, insurance brokers often collect premiums on behalf of insurance companies, settling their account with the companies on a monthly basis.

Where customers pay their insurance by monthly direct debit, insurance brokers are usually responsible for arranging for the forms to be completed and submitted. 

Do insurance brokers handle claims?

Some insurance brokers handle claims on your behalf or at least act as an intermediary between you and the insurance provider. Other brokers may also have ‘delegated powers’, which means they can make decisions on behalf of some insurance firms, speeding up the claims process. This will vary depending on the broker and the policy itself. 

How do brokers deal with insurers?

Usually, insurance brokers will build good relationships with a panel of insurers they work with for certain insurance products, with the broker acting as the intermediary in linking the insurer with suitable customers.

For example, a broker may deal with a panel of half a dozen insurance companies who each offer a motor trade insurance policy, and they will assess which policy is right for each customer.

The broker may offer more than one product to the customer, giving them all the information they need to make an informed choice. 

What is a wholesale insurance broker?

A wholesale insurance broker will typically have developed specialist schemes with insurers that they can ‘wholesale’ to other insurance brokers.

Wholesale brokers do not deal with policyholders directly; instead, the policyholder will deal with their own broker. For example, we have a wholesale farm insurance scheme that we have developed, which is used by hundreds of independent brokers across the UK. 

Are there any regulations or governing bodies for insurance brokers?

The insurance industry is regulated, and any firm that advises, arranges, or sells insurance must be authorised by the FCA.

You can check your broker is authorised by checking the FCA’s Financial Services Register. The service is free to access and should mean that the broker you use works to the standards set out by the FCA.

You can also check whether your broker is registered with the Chartered Institute of Insurance Brokers (CII) for added peace of mind. The CII is a professional body, so firms don’t have to join, but those that do have made a public promise to uphold the highest standards and put consumer interests first. If you can’t find them on the register, they could be acting fraudulently, and you need to tread very carefully. 

Do insurance brokers need to be FCA registered?

Yes, anyone who advises on, arranges, or sells general insurance products must have authorisation from the FCA, even if this is only a small part of the business. 

Is an insurance broker right for me?

Whether an insurance broker is right for you will depend on your circumstances. Using a broker can be beneficial in most circumstances, for example, if you:

• need home insurance, a broker will be able to help you find ways of assessing the value of your home and contents to help you avoid being underinsured;

• operate a business. Some commercial insurance policies are only available through brokers, and a broker will help you to fully understand your risks and the cover that you need. They can also connect you with risk management firms to help mitigate risks and present your business as a more attractive prospect to insurers.

• specialist insurance for items like artwork, jewellery, classic cars, and non-standard commercial policies like agricultural insurance and renewable energy.

Don’t forget that independent brokers often have access to deals and policies not available on comparison sites or the open market. They can also use their network and experience to source cover that best meets your needs.

If you have complex insurance needs, a local insurance broker could be of benefit as you’ll be able to discuss cover face-to-face when arranging your policy. 

How much do insurance brokers cost?

Costs vary from broker to broker, so it’s important to check how they charge before you enter into any agreements.

Most brokers will be clear about what they charge – for example, there may be an initial consultation fee and fees for any changes you make to your policy mid-term.

Brokers will also earn a commission if you buy a policy they have sourced, and you can always ask how much this is. 

How do I choose a broker that's right for me?

There are a few things to look out for when choosing an insurance broker that is right for you.

Ideally, you should look for an independent, Chartered Insurance Broker that offers advised sales so you can get the full benefit of the broker’s expertise.

They will be able to answer all your questions and advise you on the type of cover you need but which you may not have thought of, such as cyber insurance or directors’ and officers’ insurance.

You may want to look for a specialist broker with particular expertise in your industry, such as the chemical industry, construction, or motor trade.

Equally, it may be important to you that the broker is on your doorstep and can provide a service in person.

A broker with an in-house, dedicated claims department can be a big help, while it may also pay to look for testimonials from existing customers - and always check that they are authorised with the FCA.

Finally, a broker with a dedicated risk management service shows they are committed to helping their customers minimise risks and continually improve. 

Why should you use an independent insurance broker?

You should use an independent insurance broker to get expert advice, access to a wider insurance market, and a policy tailored to your requirements within a budget you can afford.

Unlike off-the-shelf policies, which offer catch-all solutions, specialist insurance brokers like Alan Boswell Group help you find a policy that is specifically designed around you.

We have access to a wide network of contacts to ensure you get the best value for money, including access to policies that aren’t available in the general market. As well as offering advice and a bespoke service, we operate a claims department, risk management department, and a team of independent financial planners. For more information about how Alan Boswell Group can help you find value for money on a range of insurance products, contact a member of our team on 01603 218000.