Insurance broker vs online insurance… Which one is right for your business?

Insurance broker vs online insurance… Which one is right for your business?

New players in the insurance space may appear to give business owners more choice, but how can you be sure that your business is adequately protected?

The insurance industry has evolved significantly over the last decade. Now, business owners can choose whether they want to meet a broker face to face to discuss their needs, order an insurance policy online or even pick up a policy while going through the supermarket check-out.

Aggregator sites have also commoditised business insurance, allowing customers to think they can conveniently compare prices on insurance products and buy cover online. The temptation to purchase an insurance product without meeting with an insurance broker is driven by increasing demand from consumers for simple and affordable insurance cover. And while we all want convenience, just how effective are these off-the-shelf insurance packages, and will they really protect your small business when you need it most?

While the rationale is saving money, it can be a false economy if the insurance cover turns out to be too generic and fails to adequately cover you in an emergency. The fact is that business owners often require tailored insurance policies written specifically for their business to provide the protection they require, when they need it most.

This is where using an insurance broker can pay for itself.

“We think there are four clear areas where an insurance broker demonstrates its value proposition,” says Dallas Booth, chief executive of the National Insurance Brokers Association (NIBA).

“First, they sit down with the business owner to get to know the business and its quirks. Second, they identify the business’ risks, what could go wrong, in some cases, these risks are those which that the business didn’t even know it had. They also take those risks to the market and source the most appropriate cover. And if the business has to make a claim, the broker becomes their advocate in the claims process,” says Booth.

For instance, one of the biggest gaps in the insurance of Australia’s one-million-plus small business owners is business interruption insurance, which is designed to protect the business’ revenue from damage to the property that generates it. “Business interruption insurance is like income protection for a business, yet only one in four Australian small businesses have it – meaning many small businesses are leaving themselves exposed.

“If your shop burns down, you’re going to lose customers and income, but you will still need to pay wages. Business interruption insurance is designed to cover the loss of revenue while you’re unable to trade. That’s certainly one of the things that an insurance broker is going to suggest,” says Booth.

Overlooking the importance of adequate insurance cover until it’s too late is all too common. In fact, 26% of small business owners don’t have any form of general insurance, according to the Insurance Council of Australia. The national survey from a few years ago also found that of the SMEs that purchase general insurance, 94% indicated they considered that they were adequately insured. Taken together with the rate of non-insurance, this means that under two thirds of all SMEs have adequate insurance.

Trusting your broker

Booth advocates for the importance of forging a relationship with a broker you can trust. They can suggest adequate cover you might not have even considered, such as management liability insurance and cover against cyber crime risk and data loss – cover that protects against cyber events such as identity fraud and security hacks.

The cyber risks are something that not many businesses think about, but that sort of event is a lot more frequent these days, so businesses need to ensure this is considered,” says Booth.

“Similarly, in the management liability sphere, there’s a need to broaden the directors’ and officers’ insurance, which protects company directors and officers against personal financial risks. This is because claims by employees for things like wrongful dismissal and discrimination are on the rise, says Booth.

“You’ve also got to protect against consequences of poor or inappropriate behaviour by employees. It’s a given that society is becoming more litigious about things of this nature, but still, most small businesses don’t think about it when putting their insurance cover in place. An insurance broker will think about it,” he says.

So make sure you commit some time to understanding business insurance policies that are right for you. After all, insurance is not an expense that you can afford to cut corners, but rather it’s one of those areas where you need to take the time to assess and seek advice a broker you can trust.

Stay Informed – Connect with us on LinkedIn
Important Notice

This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.

Information is current as at the date the article is written as specified within it but is subject to change. CRM Brokers make no representation as to the accuracy or completeness of the information. Various third parties have contributed to the production of this content. All information is subject to copyright and may not be reproduced without the prior written consent of CRM Brokers.