When buying business insurance in Toronto, would you rather buy directly from the insurance company or through a broker? If you prefer to deal directly with the insurer, what is your reason? In your view, is it really worth it to use an insurance broker?

Supposing there are genuine benefits to using a broker, between the insured and the insurance company, who pays the broker?

If you are buying insurance for the first time, you are likely asking yourself all these questions. The assumption is that an insurance broker is a middleman who will add to the price you pay for the coverage you are shopping for.

There are many misconceptions about how insurance brokers get paid. This article offers clarity on the matter.

Insurance Brokers Earn A Percentage Of the Premiums The Insured Pays

The insurance broker earns a commission from the insurance cover they recommend to you. This commission is a percentage of the premiums the insurance carrier collects from you. So, in essence, the insurance company rewards the broker for the business they refer to them. 

In Toronto, as in much of Canada, commissions vary with the type of insurance coverage. Some insurers also pay a higher commission for new policies than they pay for renewals.

That said, it is important to note that using a broker does not necessarily mean you are paying more than you should. The commission the broker pockets is already priced into the premium. So it is the insurance company that pays the broker. As the insured, you don’t pay the insurance broker any fee.

Opting against using a broker is unlikely to make any difference. More than likely, an insurance broker will save you money. 

In practice, an insurance broker is an expert in risk analysis. They use their specialized expertise to protect the interests of the insured, search the market for the best insurance quotes, and help submit claims. Brokers provide guidance on such matters as: 

• The types of insurance cover you need 
• Whether you need to change or update your policy
• What compliance issues you need to aware of.

Using your judgment, choosing the best insurance policy for your budget is not as easy as it may seem. So, rather than looking at brokers as some middlemen planted into the transaction to inflate premiums, see them as an advocate without whom you will likely under-insure or even pay for coverage you are already getting on another policy.

As the insured, you are the one who appoints the broker and controls the relationship. Your insurance broker has the responsibility to connect you with the right policy. Not just that, they have to match the policy to your budget. If they fail to do this, you can change them.  

Speaking of budget:

Can Insurance Brokers Get Better Rates?

You have a much better chance of getting a good quote working through a broker than directly with the insurer. Insurers prefer to work with brokers and, as a result, offer them much better quotes than they will offer you.

For the insurer, an insurance broker minimizes their risk exposure as the guidance they offer their clients on policy selection means policyholders are unlikely to under-insure and make unnecessary claims as a result.

How do insurance brokers get cheap quotes?

For starters, insurance brokers work with multiple carriers and have up-to-date intelligence on which carriers offer the best quotes for each coverage. Without even negotiating for any discounts, they can get you the best insurance quotes in Toronto at any given time because they have data at hand.

And because brokers typically have many clients on their books and can bring a lot of business, insurers are more incentivized to offer them discounted quotes. On your own, the insurance company will never offer you such deals.

Are you shopping for commercial insurance?

The Able Elite Team is a leading insurance brokerage in Toronto. We have a team of highly experienced insurance brokers who will connect you with the best policy for your budget. Contact us here to get started.