Quote for Home Insurance – Insurance Brokers vs. Comparison Websites
Over one third of UK home owners now use price comparison websites to obtain an online quote for home insurance. Back in the 1990s approximately half of all requests for home insurance quotes were directed through local high street insurance brokers. Today many homeowners prefer to check for alternative quotations for buildings and contents insurance by visiting a price comparison website or ‘aggregator’.
As the power of the Internet and high street banks and building societies has boomed, so the old-fashioned high-street insurance broker has radically dwindled in number. Yet many in the insurance industry point out that going online to obtain the ‘cheapest quote’, is not necessarily the most appropriate solution for every policy holders’ needs. Conversely insurance comparison websites have argued that the range and choice of insurance products from brokers is sometimes patchy and limited, depending upon their status. So, before you consider switching insurance providers when your policy is due for renewal, think carefully about which type of provider is best suited to give you the right type of quote, with the right levels of cover.
Comparing home insurance online is becoming increasingly popular amongst younger homeowners, who are comfortable with entering personal details into online quote forms, considering alternative pricing options, then buying online with their credit card or debit card. Comparison websites provide a wide range of alternative policies and can save consumers huge amounts of time shopping around for the best deal. With high profile advertising on TV, the Internet and radio, most homeowners are already aware of the major price comparison brands. The single, focused sales message, repeated again and again, is ‘use our service to compare hundreds of home insurance policies in order to get the cheapest quote’. It is certainly true in times of economic hardship the primary buying criteria for most people is price.
Comparison websites can instantly provide quotes for home insurance by prompting users to enter details about the property and their individual circumstances. The online quote capture forms prompt users to enter a range of generic variables such as; the building sum insured, the value of contents, the age of the property, it’s postcode, primary usage as well as many individual factors about the applicant. This data is fed into an online quote engine which instantly compares prices of home insurance policies from a variety of providers. The results are primarily sorted by premium. Although the opportunity exists to examine the small print of each individual policy (by clicking on links within the results), many experts complain that the instant nature of a web environment makes this exercise tedious and rare. Consumers simply assume they are getting a ‘like-for-like’ comparison of the individual home insurance policies presented to them. Most don’t want to spend all day wading through 50 or 60 sets of small print key facts and policy documents.
Official concerns have been raised by the British Insurance Brokers Association (BIBA) and the Financial Services Authority (FSA) in 2008 which reviews the comparison channel. It aimed to ensure that any home insurance quotes provided by comparison websites were clear, accurate, fair and not misleading (when compared to information available direct from an insurance broker or insurance company’s website). The review listed a number of conclusions;
Firstly the review concluded that the ‘panel’ of provider’s quotes’ were provided by a range of Fully Authorised companies to Introducer Appointed Representatives. Second it praised the aggregators for the high level of granular detail regarding policy features. Thirdly it found in a minority of cases, that consumers could not access the ‘assumptions’ upon which the quote was automatically created. In other words consumers would struggle to make a balanced judgement on whether the price quoted is acceptable (taking into account other factors).
Fourthly the review noted that the level of excesses strongly influenced price elasticity. It was not was clear whether or not ‘total excess” included ‘compulsory excesses’ in all quotes displayed. This is significant because most price comparison sites allow consumers to manually adjust the level of excess for their home buildings policy quote, according to their own requirements. So a key issue for debate is whether consumers are simply adjusting the excess levels to bring down the price, without fully understanding the additional risk in the event of a claim.
Lastly, it accepted that price was the primary basis for using a comparison website – yet a like-for-like quotation may be influenced by many risk factors which are not always easily comparable in an online arena. The review also pointed out that traditional brokers (like their online rivals) were obliged to provide appropriate policy information in a timely fashion and in the comprehensive format.
A local insurance broker provides a friendly face and trusted face for confused and uninspired home owners. Customers can walk in to discuss insurance requirements by asking questions. Most brokers will have offices or a shop front where potential customers can discuss the details face to face. A typical fully authorised insurance broker will have access to 20 or 30 home insurance products via agency agreements. This will provide customers with alternative price comparisons, depending upon a range of factors such as the levels of cover, excess levels, claims history, property type, building age, building usage and a whole host of other price related criteria.
Brokers are great at getting a quote for non-standard ‘difficult to obtain cover for’ type risks. Many homeowners with properties (that are generally classified by the insurance industry as ‘non-standard’), can sometimes struggle to get a comprehensive home insurance quote that suits them. In particular people with homes that have subsided or are located in the floodplain may even find it difficult to find cover at all. The main types of ‘difficult to find’ home insurance quotes include listed home insurance, empty property insurance, flats insurance and second homes that are rented out part of the time. Brokers are also understanding and sympathetic to residential homeowners with non-standard risks or where the usage is changing. For example Brokers can sometimes provide insurance cover for change of use scenarios (such as a long drawn-out house sale, property inheritance situation, auction sale or property refurbishment prior to house being rented out to tenants). Conversely online quote engines rely on a tick boxes approach that pigeonhole’s customer requirements, to initiate to a mathematical algorithmic process. If a persons situation doesn’t fit into the tick box – too bad.
All brokers are subject to strict compliance regarding their business process and how they deal with a client. Consequently when producing a quotation they will also be obliged to make it clear to divulge certain facts about their legal status as an approved organisation and their Terms of Business. In particular they will split out the total quote according to it’s administration fee, commission, insurance premium tax, credit card processing charge if applicable, and any other charges the customer would be liable for. Most quotations are confirmed in writing following a face-to-face meeting or telephone call and quotes would normally expire after a standard 30 day period. At that point of quote expiry the broker may need to re-quote if any of the clients’ circumstances changed. Likewise comparison websites will often automatically e-mail reminders prior to the expiry of a valid quote previously generated.
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