Price conscious direct buyers baulk at using brokers: Vero SME Index

Direct insurance buyers that are reluctant to use brokers are increasingly citing price as the reason, as firms face cost increases and economic pressures, the latest Vero SME insurance Index shows.

The annual survey shows that more insurance buyers are using a mix of channels to acquire insurance, and there’s an increase in businesses thinking about using a broker in future, but price perceptions loom as a hurdle amongst those relying entirely on the direct market.

Some 36% of direct buyers in the latest survey say they don’t use a broker because it would be more expensive, compared to 25% in 2019.

The price barrier is particularly evident among firms that nominate impacts from supply cost increases, inflation, interest rate hikes and rising labour and wage costs.

Once firms do start using a broker, the survey shows that they are largely satisfied and at claims times there are significant satisfaction level differences between those who have received advice and those that bought direct.

Vero Head of Distribution Anthony Pagano says brokers have maintained high levels of trust and often firms will start using a broker as their businesses expand or change, and they realise a suitable online solution may not exist.

“When they are starting to see that there are things that are a little more complex than what they would do themselves, that’s when the value of a broker really comes into fruition,” he told insuranceNEWS.com.au.

The index shows that a quarter of businesses don’t use a broker for any of their insurance, 61% are mixed users who buy between 1-90% of their insurance through a broker and 14% are heavy broker users.

The mixed channel percentage has risen from 54% in the previous year, with the shift coming from a reduction in the percentage of non-users.

Mixed usage takes place across all business sizes, but is particularly high amongst medium businesses with 20 to 199 employees, the report shows.

This year, 81% of medium businesses said they bought insurance through a mix of channels compared to 76% of large sized businesses, while 26% of small and micro-sized business reported buying no policies through a broker.

Mr Pagano says there will typically be some simple insurances where people will buy direct and where brokers may not wish to take on providing that cover and advice.

“Sometimes brokers say ‘I’m not comfortable I can provide the level of service, so therefore it would probably be best, if you think this is a price-sort of purchase, that you go down the direct route,” he said.

But he says the report reinforces the value of broker expertise, and those that engage more actively with their clients are better placed to be seen as trusted insurance and risk advisors and not another cost to be managed.

“The report clearly shows that Australian businesses are looking for ways to manage the pressure of the economic conditions,” he said. “But making uninformed decisions about their insurance, or even making changes to their business without thinking about the insurance implications, may put themselves at risk.”