Insurance Fees: Brokers clearer, direct lines still murky

Since the introduction of FAIS which requires brokers to disclose their commissions and fees on insurance policies, broker transparency has become much clearer, but policies bought through direct insurers remain murky when it comes to a breakdown of the fee structure and understanding exactly what you are paying for.

Steffen Gilbert, Chief Executive of Santam says, Since FAIS introduced compulsory disclosure and commissions of fees, it is clearer what people are paying for and it is easier to see what value brokers truly add.

Now buyers of policies can actually distinguish what goes into the brokers pocket and what goes to the underwriter the insurance company and people can better understand exactly what value a broker adds because they can compare the fees to the advice, availability, administration and insight obtained and make an informed decision as to whether they are getting value for money or not.

So by going direct you do save broker fees, but you have to foot the bill for other costs and you lose the value add provided by the independent intermediary.

It is up to each individual what distribution channel they choose, but they should make sure they are getting value for their money.

Gilbert says that the majority of brokers add enormous value to clients especially those who have long standing relationships and can understand the nature of the insurance requirements and help clients evaluate their exposure and design an appropriate insurance cover.

In fact one of the major causes for clients unhappiness is a claim that is not covered or where insufficient cover was provided. A broker gets paid to analyse clients needs and recommend an insurance company that provides the right product and price for the clients specific needs.