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Sarah runs a catering company with three vans and a hired kitchen unit. Two years ago a compressor failed overnight and took $11,000 of stock with it. Her insurer declined the claim. The policy schedule described the premises as “food preparation” but not “cold storage,” and the loss fell into a gap she never knew existed. She had bought the cover online in about nine minutes, on a Tuesday, between deliveries.
That gap is the reason insurance brokers still exist. Not because comparison sites are useless — they’re fine for a lot of things — but because a website can’t ask you the one question that matters when it has never seen how you actually work.
What an insurance broker actually does
A broker is an intermediary who places your risk with insurers on your behalf. In most markets that means they’re legally acting for you, not the insurer — a distinction that sounds like lawyerly nitpicking until there’s a dispute and you discover whose side your contact is on.
The day-to-day job looks less glamorous than the word “broker” suggests. It’s reading schedules against leases. It’s asking whether your sub-contractors carry their own cover. It’s knowing that one insurer will write a fleet of refrigerated vans without blinking while another will decline anything that touches food.
Good brokers spend most of their time on three things: understanding your exposure, choosing among a handful of markets that actually want your business, and fighting your corner when a claim gets awkward.
Broker or agent? The difference shows up at claim time
An agent typically represents one insurer, or a panel of them, and is paid to place business with those insurers. A broker is supposed to scan a wider market and recommend what fits.
In practice the line blurs. Plenty of “brokers” are tied to a small panel of three or four insurers and will never tell you that a better option exists outside it. Ask directly: how many insurers did you approach for this quote, and can I see the declined ones?
A broker who answers that question easily is worth keeping. One who gets defensive isn’t.
How brokers get paid — and why “free” is a loaded word
Most brokers earn commission from the insurer, typically somewhere between 10% and 20% of the premium for commercial lines. Some charge you a flat fee instead. Many do both.
Commission isn’t automatically a conflict of interest, but it’s a nudge. A broker paid on a percentage has a mild incentive to recommend the $9,000 policy over the $7,000 one if the cover difference is marginal. Ask whether they’ll work on a fee basis, and ask them to disclose commission in writing — in most regulated markets they’re obliged to anyway.
Watch for contingent commissions too. These are bonuses insurers pay brokers for hitting volume or retention targets across their whole book. They’re legal, they’re disclosed in the small print, and they’re the reason some renewals get pushed through without a proper market review.
Where a broker genuinely earns their money
There are situations where going direct is a false economy. A broker tends to pay for themselves when:
- You have multiple lines to place. Property, liability, fleet, cyber and workers’ comp bought separately rarely fit together. Claims fall into the seams between them.
- Your risk is unusual. Mobile catering, listed buildings, anything involving height, heat or hazardous goods. Standard online forms handle these badly.
- You’re growing fast. A business that doubled its turnover last year is probably underinsured on at least one line, and it’s usually the one nobody thought about.
- You’ve had a claim. Claims advocacy is the single most valuable thing a broker does, and it’s the part nobody prices in when they compare quotes.
- You’re operating across borders. If you’re driving hired vehicles abroad, the cover you need before you rent is often not what the rental desk sells you — see car insurance for international drivers for how that gap typically looks.
Small businesses in particular get sold commercial packages that sound comprehensive and turn out to be thin in specific places. It’s worth understanding what a packaged commercial policy actually includes before you assume the broker has it covered.
When you can probably skip the broker
Not every policy needs a human in the loop. If you want a single car covered, a standard renters policy, or basic travel cover, a direct insurer will do the job at a competitive price and you’ll get the documents instantly.
Personal lines get more interesting once the numbers rise. A straightforward term policy is a commodity — but if you’re looking at cash-value products, the structures are genuinely different and worth reading about properly. Permanent life insurance and when the cash value actually pays off is a decent starting point, and so is the comparison between universal life’s flexibility and its less obvious costs. Neither product rewards a ten-minute online purchase.
Health cover sits in the same awkward middle. If you’re self-employed with a family, the difference between two policies with the same headline premium can be thousands of dollars a year in real out-of-pocket costs. Individual health insurance and where the money actually goes covers the mechanics; a broker can then tell you which of your shortlisted plans the local hospital actually accepts.
For plain vanilla life cover on a fixed budget, though, you may not need the intermediary layer at all. Affordable life insurance and what it genuinely costs will give you a realistic benchmark to hold quotes against.
The renewal trap nobody warns you about
Here’s the pattern. Year one, the broker shops it properly and you get a sharp price. Year two, a renewal notice arrives four days before expiry with a 9% increase. Year three, another one, another increase, and nobody has gone back to market since the original placement.
It’s not usually malice. It’s workload. Renewals are less profitable than new business, and a broker with 400 accounts has to triage.
The fix is a diary note. Six to eight weeks before renewal, send one email asking which insurers were approached this year and whether any declined. That single question resets the dynamic, because now the broker knows you’re watching. Ask it every year.
Questions worth asking before you appoint anyone
The first conversation tells you a lot. Anyone worth appointing will welcome these; anyone who dodges them is telling you something useful.
- Are you independent, or tied to a specific panel? How many insurers can you actually access?
- How are you remunerated — commission, fee, or both — and will you put the numbers in writing?
- Who handles my claim, and is that person in-house or outsourced to a call centre?
- What’s your typical response time on a mid-term change? (A small alteration to a fleet policy shouldn’t take a week.)
- Can I see the summary of cover, not just the certificate? The gaps live in the summary.
One last thing worth doing: ask for two client references in a similar trade or situation, and actually call them. Ask the referee how the broker behaved when something went wrong, not when everything was fine. That’s the only review that predicts what you’ll get on the day a compressor fails overnight and $11,000 of stock is sitting in a warm room.
