Risk is part of our everyday lives.
We make decisions involving risk frequently, often without even thinking about it. Many things we do create risk, including:
- Crossing a road
- Going on holiday
- Driving a car
- Mowing lawns
- Working with power tools
- Lighting fires
- Moving house
It is typically accepted that there are four ways to manage the risks we face:
- Minimise - putting on a seat belt in a car or attending a driver safety course.
- Eliminate – choosing not to holiday in a country that is on travel advisory notice or arranging recommended vaccinations when traveling overseas to ensure you don’t get ill.
- Accept – participating in adrenaline activities such as sky diving, canyoning, ice climbing or base jumping.
- Transfer – entering into a contract to transfer risk to another party.
Insurance is a form of risk transfer. When you insure you hand the risk of certain things happening over to the insurer. For example, accidental damage to your car, house, or business premises, or damage or loss that you cause to another party.
Purchasing insurance cover is a way to manage the risk of something happening to the things you own so that if damage or loss occurs, you receive a payment from the insurer which will then help you to fix or replace it.
If you take out a loan or mortgage over an asset, often the lender will require that you have insurance in place to provide cover if something happens to that asset like a fire at a business or an earthquake or flood that damages a house. In these instances, your agreement with the lender will likely require that the insurer pays them directly when damage occurs.
Insurers typically either sell their policies and products directly to their customer or through intermediaries such as brokers. Banks, travel agents and car dealers can also be insurance intermediaries.
If the insurer sells directly to their customers, you can contact them for a quote and place cover with them yourself.
You are unable to place cover directly with insurers that sell only through intermediaries. For you to access those insurers you need to appoint an intermediary to act on your behalf.
Some cover is considered complex and therefore only available through certain intermediaries who possess the expertise to help you navigate these complexities and match you with the product best suited to your needs.
Whilst much has been done to simplify the wordings over the years, including the use of plain language, insurance policies are legal documents and as such continue to be confusing to those outside of the insurance industry.
Considering the above there are many reasons why people choose to appoint a broker. From helping them understand the risks that they face, to gaining access to covers and insurers that they would not otherwise have access to. Appointing a broker can also help people have greater confidence in their decisions about the choices they need to make.
A broker will help you review your risks and recommend ways to protect against them. They typically provide advice tailored to your needs and offer solutions from a range of insurers. They have an in-depth knowledge of the insurance industry and are able to advise you why a particular insurer, policy or product is right for you.
Following are some frequently asked questions.