Direct insurers, make way: the middle man is back

Becalmed by their cut-price rivals since the mid-Eighties, brokers are becoming more competitive.

Many people now take it for granted that Direct Line and other telephone-based insurers are the cheapest (and best) ways of getting insurance, rather than using an insurance broker. But brokers could now be due something of a renaissance.

No two insurance policies are identical and one tiny clause in the small print can make all the difference. A policy may, for example, appear attractively priced but have an unusually high excess (the amount the policyholder himself must pay in the event of a claim).

Having a professionally qualified person able to select from the entire market has obvious advantages. Good insurance brokers can explain exactly what is and is not insured and avoid you duplicating cover you already have under other policies. They can also provide valuable assistance in the event of a claim.

Nevertheless, since the mid-Eighties brokers have experienced increasing competition from direct insurers, the best-known being Direct Line which cuts out the middle man and works exclusively by phone. Their main impact has been in car and home insurance.

Last year, however, clear signs emerged that direct insurers were losing their competitive edge. As their numbers have increased, so have the sums they must spend on advertising to attract business. Some, previously highly selective in the cases they took on, are having to sell to a broader range of risks to hang on to their market share.

It is now common for brokers to outquote direct insurers on some risks: the British Insurance & Investment Brokers Association says some of its members outquote Direct Line on car insurance 70 per cent of the time.

Most direct insurers deny any fall-off in competitiveness. They say brokers are either failing to compare like with like or quoting for cases direct insurers do not particularly want, and are therefore not competitive on.

We asked Direct Line to volunteer a case it definitely would want to take on and to provide information detailed enough to avoid confusion. It cited a 45-year-old woman living in Kelso in Scotland, the sole driver of a Peugeot 306 1.4XL and with a maximum no-claims discount. A comprehensive motor policy with a pounds 100 excess would cost her pounds 102.50 a year.

It also quoted for home insurance for the same woman living in a detached three-bedroom house built between 1946 and 1980, occupied during the day, equipped with door and window locks, and with the owner in a Neighbourhood Watch scheme: pounds 90,000 of buildings insurance (pounds 50 excess) would cost pounds 120.95 a year and pounds 20,000 of contents cover (pounds 50 excess) pounds 47.15.

We asked Hanson & Robertson Insurance Brokers, of Aberdeen (without telling it Direct Line's prices), to quote for the same cases, providing cover at least as thorough. Its quote for the car was identical and for buildings and contents it was pounds 40 and pounds l5 cheaper respectively. It should be stressed that this does not mean Hanson & Robertson, or other brokers, will equal or better Direct Line in every case.

Hanson & Robertson may also be more competitive than many brokers because it sells large volumes. Furthermore, some of the low rates quoted by broker-oriented insurers may prove unsustainable and thus rise at renewal.

Nevertheless, those who normally shop around among several direct insurers should also consider asking a broker for a quote in the current market.

Direct insurers have more consistent service standards than brokers but the very best brokers are able to deal over the phone just as quickly. They can also offer the option of a face-to-face meeting. Many value this at the claims stage even if they prefer the convenience of dealing by phone at the outset.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Kanye West, performing in New York last week, has been the subject of controversy as rock's traditional headline slot at Glastonbury is lost once again
music
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Life and Style
Drinking - often heavily - is a running theme throughout HBO's Game of Thrones adaptation
food + drink
News
people
Finacial products from our partners
Property search

Will your credit card rewards be scrapped following new EU rules on charges?

Providers are unhappy with new EU rules - but ultimately it is customers who will have to foot the bill
There remain more than a million unclaimed Premium Bond prizes worth collectively around £48m

Have you won £1m in the May Premium Bonds draw?

More than £60m was paid out to more than 2 million prizewinners this month

The 0 per cent introductory deals that credit cards offer are one of the most odious tricks

Beware credit card firms’ odious tricks

Why can’t we just have open and honest charges, without all the cross-subsiding?

The pound’s recent strength against the euro could be hit by economic uncertainty under a new government

How planning can make your travel cash go further

With the pound at a high against the euro, it pays to buy now before uncertainty post-election

Put the phone down on the coldcallers who see pension liberation as an opportunity to liberate your pension from you

Pension freedoms: How to deal with cold calls from scammers

Sean O'Grady offers advice on keeping your money safe
Switching to a better bank account is much easier than it used to be

More people are switching current accounts – but what do the figures mean?

Experts disagree about the 7% increase over the past year

The chance of getting what appears to be free money can be hugely attractive, especially to first-time buyers who can be fooled into thinking it’s extra cash to buy the essential new items they need for their dream home.

Beware the boom in cashback mortgage deals

Too many mortgages are being sold with misleading gimmicks

The firm’s revenues slumped by a third to £217 million in a disastrous 2014

Wonga results could get even worse this year, chief admits

The firm’s revenues slumped by a third to £217 million in 2014

The cost of a buildings policy has dropped by 10.1 per cent over the year, with the cost of a contents policy falling by 8.2 per cent

Simon Read: Mild winter cuts the cost of home insurance

The average quote for a buildings and contents policy has fallen by 3.6 per cent

Don't count your retirement money yet: employers will stop receiving a pension rebate next year and their staff may lose out

Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket

Employees in defined-benefit schemes are held up as the lucky ones, but the state pension scheme will be overhauled in April 2016
Labour will raise the national minimum wage to more than £8 an hour by October 2019 (EPA)

Barclays new Blue Rewards hands cash to customers. What’s the catch?

Joining Barclays Blue Rewards costs £3 a month but then lets customers in for handouts of up to £15 a month

New research reveals that despite the recovering economy, four out of five low-income households have seen no sign of their financial situation improving

Hard-up families could be eligible for financial help

A charity is urging anyone struggling financially to see if they could get help from the state

When is the best time to buy foreign currency?

Video: With an election looming, a hung parliament could hit sterling

General Election 2015: Vote for the party that will boost your finances

Experts warn that the general election is unlikely to lead to stable markets. Simon Read talks to two investment managers who are advising caution

Make the most of your money in 2015-16: The end of the tax year is the beginning of the next...

The new tax year brings with it a raft of new rules and regulations
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

    Everyone is talking about The Trews

    Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living