Is your broker being transparent with you? In this blog I share a few things to check out that could save you money.
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Treating customers fairly is the central plank of the Financial Conduct Authority (FCA) rule book. One could argue it is this plank that caused the FCA to take action against insurance companies who weren’t paying for Covid, even though they’d failed to exclude it in its policy wording. It could be one of the other parts of the FCA regulations, namely, ‘Fit For Purpose’ which means that insurance policies must benefit the buyer. If they don’t pay out, they cannot be fit for purpose.
There are a couple of things we do that are all about treating customers fairly and are embedded in our Terms and Conditions. We’re not sure how many of our customers read our Terms and Conditions, all of them are supposed to, yet how many will actually read them?
What we do is unusual
So, the first thing we do that is unusual for businesses like ours; we don’t charge people any extra if they need to pay their premium by instalments. Yes, we do use a third party premium loan provider, and they charge a percentage to advance that money to the insurance company on the customer’s behalf and allow the customer to pay back over time. They charge that percentage and those charges and fees are always made abundantly clear to each and every client that requests the ability to spread their payments.
However, what we don’t do is add any extra to these interest rates or fees to keep for ourself. It has become clear that we are the only broker we know that have this stance. All other brokers think that it is fine, yet we do not, because we do not think it is transparent. Brokers that do this, even though they are supposed to tell their clients, typically do not make it very clear. So, there are probably hundreds and thousands of businesses and individuals relying on a broker to arrange insurance at competitive rates, spreading their premiums because it suits their cash flow and being charged more by their broker than they realise because they’re spreading their payments.
Where is your Brokers Allegiance?
The other thing that we have noticed an awful lot recently is insurance brokers sending documents to their clients and their clients not realising the broker is actually an agent of the insurer. When you open their terms and conditions it becomes clear that they are solely working on behalf of the insurer and making as much money out of their clients as they possibly can. We are keen to point out that the only time we work on behalf of the insurer is to collect (or refund) the premium that they charge for the insurance. At every other stage we are working entirely on our client’s side.
It doesn’t matter what we are doing, we could be answering the phone to deal with a query, adding something new to someone’s insurance, all the way through to making sure that the insurance company has paid out the right amount when a claim is made. These are all services provided as agent of the policy holder. None of them are services provided as agent of the insurer.
If you want to know whether your insurance broker cares about you, or (as a lot of them are), is too closely linked to the insurance companies, check their Terms of Business, search for the phrase “agent”, see what it says.
When are they working for you? When are they working for the insurance company? Is the balance right? Is it in your favour? Or are the people that you rely on for advice, giving you advice that benefits them and the insurance company?
The worst culprits for hiding fees are Property Managing Agents. They keep up to 50% of the “premium” yet will not admit it even though they are supposed to. They simply ignore the regulations that Royal Institute of Chartered Surveyors lay down for them, and say things like “we take an amount that is relevant to the services that we provide”. Which is not transparent at all.