Beware of car insurance brokers
Many analysts have taken note of the fact that insurance consumers in South Africa have, in recent years, gradually begun to turn away from car insurance brokers and toward more direct interaction with the insurance companies. While much of that movement can be attributed to the new medium of the internet and the ease with which the average consumer can now obtain quotes directly from the car insurers, there are also sound financial reasons for many consumers to be wary of car insurance brokers and the services they provide.
Secret deals
It should be noted right up front that there is good reason to believe that the majority of car insurance brokers are honest individuals performing a useful service as “finders” for the consumers and companies they serve. But, as the saying goes, one bad apple can indeed spoil a barrel. There are brokers who have been found to have made secret agreements with the insurance companies to which they direct their clients, and these agreements have often resulted in higher premium payments for those clients. Some of those monies have been used to fuel payments (most would call them “kickbacks”) to the brokers.
The problem with this arrangement is twofold. First, because the customers themselves are rarely made aware of the existence of the hidden costs of paying these brokers, the payments suffer from a lack of transparency that undermines the integrity of the insurance process. Second, the very fact that the brokers are receiving these kickbacks constitutes a very real conflict of interest in that these same brokers have an undisclosed additional incentive to steer customers to kickback-paying companies – regardless of whether the policies provided are in the best interest of the consumers.
Protecting yourself
As disheartening as the thought of unscrupulous brokers can be, there are very good reasons why you may want to use one. The majority of brokers are, indeed, just fulfilling an important role in the car insurance process. Still, being wary of potentially unscrupulous brokers is always a sound strategy – and there are ways that you can protect yourself. The number one way is to ask questions. Don’t be shy about asking the broker directly about how he or she receives compensation for any policy sale. If you have any questions whatsoever about the answers that are provided, press for more details. You do have a reasonable right to know how your money is going to be spent and you should know if there are going to be hidden costs that raise your premiums unreasonably.
In addition, one of the easiest ways to ensure that you
are not taken advantage of by dishonest brokers is to
simply compare a wide variety of car insurance quotes.
Not only will this allow you to have a better idea of
the range of rates available to you – providing
insight into the best offers out there, but it will also
allow you to better recognize when a quote provided by
your broker seems excessively high.
