The sale of insurance products has undergone enormous change in the past 10 years. Before 1990, the only way to buy property and casualty insurance was through the insurance company's agent or an independent insurance broker. Gradually, over the last decade, states have allowed banks to enter the arena and sell insurance.
What are your options?
Insurance companies sell their products through many venues. You can go directly to the insurance company that provides the coverage through the mail, telephone, Internet, or one of the company's agents. It is important to remember that these agents represent the insurance company, not the insurance buyer. If you choose, you can let an independent insurance broker (i.e. an independent contractor who represents one or more insurance companies) find a company for you. Or, you can shop for insurance at a bank that owns or has partnered with an insurance company and hires agents or brokers who will sell insurance from the bank lobby.
If you prefer to have someone represent you who does not sell insurance but only gives advice, you can hire an insurance broker. An advisor is an independent contractor whose job is to determine your insurance needs and find an insurance company that is willing to provide the appropriate coverage at a good price. Advisors typically charge you a fee for this service.
Here are some criteria to consider when you are deciding whether to go directly to a company or work through a company's agent, an independent broker, or a bank:
What is an insurance company's rating?
To learn about a company's financial strength and claims-paying ability, you need to check out the company's rating. Five major rating services make a business of grading insurance companies. They are A. M. Best, Standard & Poor's, Moody's, Fitch, and Weiss. Though each organization has its own system for determining the grades, they all use similar criteria, such as the company's management stability, recent performance, and financial strength. To find out what an insurance company's rating is, go to one of the rating service's websites, or ask the agent or broker to provide you with the ratings. You may also want to call your state's insurance department for a history of customer complaints.
What level of service do you want?
Make sure your insurance company, agent, or broker
can give you the kind of service you value. Here are some service-related questions you can ask:
- Does the agent or broker offer counsel about what kind of insurance you need?
- Will the agent or broker review your policies with you annually to make sure your coverage is up-to-date?
- When is someone available who can answer your insurance coverage questions?
- If you have a problem with a claim or a bill, is someone available who can resolve the issue for you quickly?
- Is it important that the provider's office be close to your home or workplace?
How much experience does your agent or broker have?
Because insurance is a complicated subject, individuals who sell it should be qualified and knowledgeable, and not just licensed to sell. Be sure your insurance agent or broker has enough experience to give you the proper guidance in choosing your coverage. Otherwise, you could wind up buying inappropriate coverage or overpaying for coverage. Before buying insurance, find out how long the person you're dealing with has been in the business and in what capacity. Also, inquire if he or she has received any professional insurance designations, such as the Chartered Property and Casualty Underwriter designation. Ask if he or she has attended any recent courses and whether he or she keeps up with the constant changes in the insurance industry.
Are you getting the lowest-cost insurance?
If you are getting quotes from more than one insurance company, be sure you compare apples to apples. Is the coverage the same for each company? Are the limits of coverage the same? Are there any exclusions in the policies?
Do your insurance needs require specialists?
Many companies specialize in certain types of insurance. Many brokers specialize in the needs of certain professions or businesses. For example, an agency may specialize in writing insurance for general contractors, truckers, or small-business owners. Many insurance companies have specific niches in which they excel, such as homeowners policies for houses over 100 years old. Others specialize in providing contractors' bonds, directors' bonds, and officers' liability. To find out which companies' agents and brokers specialize in what types of insurance, contact your local insurance agents' and brokers' associations, look in the yellow pages, or check out the websites of different companies.