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Financial Advisers
Friday, December 1, 2006
Adding value

It is, of course, up to clients to decide whether they wish to use a broker or instead go direct to an insurance company to buy their policy. However, the decision should not be based on the erroneous belief that it is cheaper to buy direct.

Steffen Gilbert, Chief Executive of Santam says that, “By going direct you do save on broker fees, but you have to foot the bill for other costs and you lose the value add provided by the independent intermediary.
“One of the major causes of 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 client’s specific needs.”
Since the introduction of FAIS insurance brokers have to disclose their commissions and fees on insurance policies. However, policies bought through direct insurers do not carry the same level of disclosure, so it is difficult for the client to know what he is paying for.
  On the other hand, when buying through a broker, because 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.
“Buyers of policies can actually distinguish what goes into the brokers’ pocket and what goes to the underwriter – the insurance company. Clients 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.”
Mr 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.

Copyright © Insurance Times and Investments® Vol:19.6 1st December, 2006
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