Using a broker or buying direct from an insurer

Buying insurance comes down to a choice between two routes. You can go direct to an insurer, which sells its own products, or you can use a broker, which acts as an intermediary between you and insurance providers and can approach a range of them on your behalf¹. A broker is a regulated financial adviser who specialises in general insurance, helps you work out what type and level of cover you need, and recommends a suitable policy¹.

The two routes differ in who does the work, how the seller is paid and how much of the market you see. Brokers are usually paid by commission from the insurer, and sometimes by a fee from you as well, so shopping around through a broker does not normally cost you a fee¹. Buying direct means you deal with one company and see only its own products. Insurers do not always offer every type of cover when you go to them directly¹.

Neither route is automatically cheaper. Insurers set premiums using a range of factors, including your individual circumstances and the particular risk being covered, so the price depends on the policy rather than the channel⁴. What follows sets out how each route works, what it costs, how claims and complaints are handled, and how to check a firm before you buy.

What a broker does and what an insurer does directly

An insurance broker acts as an intermediary between customers and insurance providers, and brokers have permissions and legal authority to act on behalf of their customers². In practice that means a broker can speak to insurers, loss adjusters and claims departments for you, and do as much of the administration as possible¹. Brokers describe their role as being the agent of their client, putting the customer's interests first, and working for you rather than the insurance company⁶.

The service a broker offers starts before you buy. Brokers are experts who help you decide what type of insurance and level of cover you need and recommend a suitable policy at a price you can afford¹. They help personal and business customers manage the risks they face through access to suitable insurance, and can provide advice and access a wide range of insurance providers⁶. That breadth matters where your circumstances are unusual: a broker can approach providers that a single insurer's own sales channel would not put you in front of.

Going direct is simpler in structure. You deal with one insurer, which sells its own products and prices them itself. The trade-off is range: insurers will not always offer you every type of cover when you go directly to them¹. If your needs are straightforward, that may not matter. If they are not, the difference between one insurer's appetite and a broker's panel of providers is the whole point of the choice.

There is a middle route. Comparison sites are paid commission by the insurance provider for selling their products, in the same way brokers are, but the policies you are offered on a comparison website will be fairly generic, so they suit people who want cover that meets a standard need rather than something tailored¹. The main comparison sites for insurance are Compare the Market, Confused.com, GoCompare and MoneySuperMarket⁸. Not every insurer appears on them: Direct Line and NFU Mutual are both examples of insurers that do not appear on price comparison websites⁹.

Cost: commission, broker fees and direct prices

Brokers make their money from commission charged to the insurer, from fees charged to you, or from both³. Where a broker is paid by commission, the cost of that commission sits inside the premium the insurer sets, rather than arriving as a separate bill. That is why a broker can shop around for you without charging you a fee for the search itself¹.

Where a fee does apply, brokers are expected to provide clear documents and information including details on the costs of the insurance and any fees charged⁶. The questions that establish the position are what the fee is, when it is payable and whether it is refundable on cancellation.

Two taxes and charges sit on top of whatever the insurer prices. Insurance Premium Tax is usually included in the price you pay for insurance, and it is charged on insurance premiums covering most general insurance, such as motor and household¹⁰. The tax is payable by the person who is the insurer in relation to the contract under which the premium is received, so it is the insurer's liability rather than a separate bill to you¹². For fees charged by a taxable intermediary in connection with a higher rate contract, a payment in respect of the fee is treated as a premium received under a taxable insurance contract and chargeable to tax at the higher rate¹².

How you pay can also change the total. Premiums can be paid as a one-off payment, or in monthly or annual instalments, depending on the type of insurance and the term of the policy¹³. Paying monthly often means premium finance, and analysis by the regulator has found customers paying more for their car insurance where they pay in monthly instalments through premium finance, as well as where risks outside their control push the price up¹⁴.

Choice: one insurer's products or a range of them

The clearest difference between the routes is how much of the market you see. A broker can access a wide range of insurance providers⁶. An insurer selling direct shows you its own products only, and insurers will not always offer you every type of cover when you go directly to them¹.

That range matters most in three situations. The first is a non-standard risk, where a mainstream insurer's appetite may not stretch to your circumstances. The second is a health condition or a history that needs explaining: specialist brokers exist for particular products, such as a specialist life insurance broker that focuses exclusively on that product and has direct contact with underwriters¹⁵. The third is a declined application. A broker can approach providers that a direct route cannot, and presenting your circumstances properly through a broker can also reduce the chances of your claim being rejected later¹.

Where a policy is required as a condition of something else, the rules can protect your choice of provider. Under the mortgage credit rules, the consumer should have the opportunity to choose his own insurance provider, provided that his insurance policy has an equivalent level of guarantee as the insurance policy proposed or offered by the creditor¹³.

It is worth knowing what underwriting can do to an application, whichever route you use. An insurer may offer your policy at the premium originally quoted, in some cases with an increased premium, make exclusions to your policy, or not offer you insurance at all¹⁶. A broker's value in that process is in knowing which providers are likely to respond well to your particular facts.

Making a claim through a broker or the insurer

The claim is where the two routes feel most different. If you need to make a claim, your broker might speak to loss adjusters and claims departments and do as much as possible for you¹. Brokers list support at the time of a claim as one of the things they provide⁶.

The practical step is the same either way: tell the right firm quickly. On home insurance, the notification rule is to tell your broker if you have one as soon as is practically possible if you believe you need to make a claim; if you deal directly with the insurer, the insurer is the contact instead⁷. On motor theft claims, the guidance is to tell your insurance broker as quickly as possible¹⁷. Delays in notification are a common reason claims run into difficulty, so the first call matters more than which route the policy was bought through.

If your broker is handling the claim, keep your own record of what you reported and when. Where a broker was acting as the insurer's agent in connection with the sale of the policy, that affects how a later complaint is handled¹⁸. Knowing which hat the broker was wearing at the point of sale is not something most people think about at the time, but it becomes relevant if something goes wrong.

Where a mistake has been made by someone other than the insurer, the ombudsman has powers to put things right in a specific way. If someone else such as a broker made the mistake, the ombudsman cannot restructure the account, but it can tell them to pay the money to the mortgage account instead¹⁹. That illustrates how the ombudsman approaches third-party errors: it looks for a remedy that puts the customer back where they should have been.

Checking a firm on the FCA register before you buy

Insurance brokers are regulated by the Financial Conduct Authority⁶. Before you buy, use the FCA Firm Checker, which is designed for use before you buy a financial product or service such as a mortgage, insurance or a funeral plan⁵. You can check whether a provider or adviser is authorised by the PRA or FCA on the FCA register²⁰.

Search using the firm's reference number for the most accurate results²¹. The online FCA register and the FCA consumer helpline are both routes to the same check²³. If there is doubt about a financial services company, the FCA register of regulated companies is the place to look, and a firm that is not on it is one to have nothing to do with²⁴. The same check applies to online-only brokers: whether the broker is online or a human one, the check is whether they are FCA-registered²⁵.

The check is not a formality. Fraudsters impersonate authorised firms and individuals, and a firm that is not on the register has no business selling you insurance. If a firm claiming you owe it money is not registered on the FCA register, steer clear²⁶. Where a broker turns out to be unregulated, the protections that come with dealing with an authorised firm do not apply: one ombudsman case involved a consumer transferring money to an unregulated broker²⁷.

Complaints and where to get help

Complaints go to the firm that sold the policy first. On insurance complaints generally, the insurer is the first port of call, with the complaint explaining clearly what went wrong from the customer's perspective and how they would like it resolved; a formal complaint is headed "Complaint" and includes dates and the names of people spoken to²⁹. Where the policy was sold through a broker, the first port of call may be the broker or the insurer: on endowment policy complaints, for example, the complaint goes first to the company or adviser that sold the policy, which could be the endowment company itself or an intermediary broker³⁰.

If you are unhappy with the response, the Financial Ombudsman Service is free to use⁶. Before it will look at a complaint, the firm needs the chance to put things right: talk to your insurance provider first³¹. Firms must tell customers about the arrangements for handling complaints, including the existence of a complaints body, usually the Financial Ombudsman Service, before a general insurance contract is concluded³².

The ombudsman can look at a range of insurance disputes, including complaints about premium increases, where it expects an insurer to be able to explain why there has been an increase and that it has been applied consistently with their customers³³. It also handles complaints about underinsurance on home buildings policies¹⁸ and about mis-sold travel insurance, where in one type of case it said the insurer should pay the claim with interest, minus the additional premium³⁴.

Where a broker receives a complaint about something covered by the credit broking scheme, it must forward the complaint to the lender and inform the consumer that it has done so³⁵. That rule shows the pattern to expect: the firm that receives the complaint passes it to the right party and tells you it has done so, rather than leaving you to work out who is responsible.

Free and impartial help is available. MoneyHelper explains when to use an insurance broker and how the routes compare¹. If a complaint is about a firm that has failed, the Financial Services Compensation Scheme sets out what is covered and how claims work². For debt or money problems alongside an insurance dispute, debt advice charities offer free guidance.