At its simplest definition, the difference between a car insurance broker and a direct writer is that a broker represents several insurance companies while direct writer affiliates with just one. On the surface it’s simple, but for the car insurance consumer, the difference may be significant.
For the motorist who is well-informed about how auto insurance works and who does the legwork to stay on top of rates, discounts and current market conditions, choosing a direct writer may be a logical decision, since that motorist makes an informed choice. Similarly, brand loyalty may motivate other drivers. What was good enough for grandpa is good enough for them.
In most cases, however, an insurance broker provides a better option for many drivers. These are the people who worry about car insurance only when it’s time to renew. Rather than devoting time each year to re-learning the auto insurance market, they simply let their policy roll over. For those who don’t review the status of their policy or those who don’t want the hassle of comparing quotes, a broker may be the best bet since the driver can make plain language requests of an insurance expert – their broker – and receive valuable insider insight.
The Cost Benefits of Using a Broker
Perhaps the most obvious and most important benefit for most motorists is the fact that a broker provides access to a number of insurance quotes. In provinces with private insurance programs, companies have the comparative freedom to set rates and coverage features. Brokers are knowledgeable about the prices and features from the companies they represent. A direct writer, on the other hand, can only provide the prices and features offered by the company they represent. While they may be competitive on all points, the consumer must do comparisons on their own to assure this.
Limitations of a Car Insurance Broker
While using a broker does open a wider market to the driver seeking a policy, there are also limits. Brokers don’t represent all insurers in each market and nowhere near a majority. It’s possible that a driver’s best match on features and price may be a company that isn’t represented by the broker. They can only hope for the best match from the insurers whose products the broker carries.
Personal Relationships in the Auto Insurance Market
British Columbia, Saskatchewan, Manitoba, and Quebec each have public insurance aspects to the car insurance markets. While in some cases, such as Quebec’s, aspects of coverage are also offered by private companies, the choice of a broker makes no difference over the cost of basic coverage.
In provinces with fully private insurance markets, brokerages can often put a face to car insurance, while direct writers offer only who answers the phone any given day. The value of each response varies with each consumer, but most tend to opt for the familiarity of a contact who knows their situation or at least has access to the brokerage’s files and the client’s history.
With comparison shopping so important in privately-supplied insurance markets, the differences between brokers and direct writers come down to the preferences of the auto insurance consumer.