Insurance Brokers vs Direct Insurance: What’s Better For Electrical Contractors?

Insurance is a weird purchase when you think about it. It’s quite rare, in that it’s something you buy and you hope you never need to use.

But, as we all know only too well, it’s an essential – and it gives you some peace of mind, too, knowing you’re covered should something untoward happen.

There are a few big insurance questions for contractors though, and one of them is whether you should go direct, or go through a broker.

Here’s the lowdown on both options, to help you make as informed a decision as possible.

Key takeaways for electrical contractors

• Insurance brokers provide risk advice as well as helping arrange suitable insurance cover.
• Buying insurance directly may offer lower upfront costs and greater convenience.
• Policy exclusions, limits, excesses and waiting periods should always be compared carefully.
• Brokers can assist throughout the claims process, while direct policyholders generally manage claims themselves.
• As your electrical contracting business grows and changes, your insurance requirements should be reviewed regularly.

Should electrical contractors buy insurance through a broker?

First things first – what really is a broker? Literally – and historically – they are the middle people, connecting insurers with customers and getting some commission in the process.

Pre-internet, that in itself was a valuable service. But today, let’s face it, we can all search prices ourselves.

Good brokers are much more than an intermediary, however. A good broker is less, well, broker and more risk adviser.

What should you expect from an insurance broker?

If you’ve never worked with a broker before – or if you’re in a long-term relationship with a complacent broker – then it’s worthwhile understanding what good looks like. So here goes.

A good broker will have a chat with you over the phone, via video call or in person to understand your business, the types of clients you work with and the risks your business faces.

Then, they’ll offer two things – firstly, risk mitigation strategies to minimise the risks your business does face, and insurance options that provide the protection your business needs.

Their role here is twofold – they are firstly helping you better manage your business’s risk, and secondly, fixing you up with the most suitable insurance options, noting here that most suitable doesn’t always mean cheapest…

What are the benefits of working with an insurance broker?

Firstly, it’s that reassurance of having an expert assess your business and recommend what you need cover for – and where risks might lie. It’s one thing giving it the once over yourself, and figuring out where you believe there are risks. It’s another completely for an independent expert reviewing it and identifying potential weak spots.

As well as this, they can work with you to put into place better processes and procedures to help you manage risk more effectively – therefore helping you build a better business.

When it comes to assessing insurance policies, they will understand what exclusions and limitations each policy has, and advise you accordingly.

A major benefit, however, comes if and when you have to make a claim.  A broker will help you every step of the way – working with the insurer to reach a positive outcome.

Think of an insurance broker the same way you do an accountant. You *could* do your taxes and analyse the numbers by yourself in isolation, but the money a business pays their accountant is usually viewed as money well spent. You *could* do your contracts yourself, but a legal eagle is usually a better bet.

What are the benefits of buying insurance directly from an insurer?

Typically, the benefit is price – you may well find a cheaper policy online. The broker is usually remunerated by the insurer, so there’s going to be some money built in there – although some brokers today do operate on a fee-for-service model.

It’s important to ensure you’re comparing like for like – exclusions, sublimits, premiums, excesses are all important to take into account, as well as any waiting periods.

For some smaller businesses, work may be straightforward and relatively low risk, and you’re comfortable assessing policies against each other to ensure your business is covered appropriately then going direct to the insurer could well be worth considering.

Again, a big benefit of working with an insurer is if and when a claim comes, so be prepared to manage claims yourself, if you do go direct.

How an electrical contractor’s insurance needs change over time

Your business rarely stands still. From introducing new services to employing more staff, working interstate or buying more vehicles, it’s unlikely your business stays exactly the same for too long.

As your business changes, so too does your insurance needs. A broker will understand this and assess appropriately – and if you’re managing your own insurance, it’s something you’ll need to be aware of, too.

The pros and cons of insurance brokers versus going direct

Going direct: the pros

• Speed and convenience

You can jump online after a long day on the tools, fill out a form in ten minutes, and have a certificate of currency sitting in your inbox ready for tomorrow.

• Lower initial cost

For straightforward, sole-trader setups, direct policies can sometimes carry lower upfront premium costs because there are no broker fees involved.

• Self-service portals
  Most direct insurers offer easy-to-use apps and web portals where you can update details or pay bills whenever it suits you.

 

Going direct: the cons

• The ‘one-size-fits-all’ trap
  Direct policies are designed for the majority, meaning they might not automatically account for risks that are specific to your sector – such as high-risk commercial work, subbies on site, or working at height.

• The fine print
  Let’s be honest – insurance companies don’t always have the best rep, and can make headlines when a buried clause means you’re not covered. If you go direct, you need to read every line of the product disclosure statement (PDS) – otherwise you might discover too late that certain high-risk activities aren’t covered.
  
• You’re on your own with claims
  If your ute gets broken into, your tools go missing or a customer alleges property damage, you have to lodge the claim, chase up paperwork, and negotiate directly with the insurer yourself – which can take hours and hours, and add significantly to the stress.

Insurance broker: The pros

• Tailored cover
  As we all know only too well, electrical work varies wildly. A sparkie doing high-end domestic fit-outs has a very different risk profile than someone doing industrial mining maintenance or commercial solar installations. A broker makes sure your policies – whether it’s Public Liability, Professional Indemnity, Tool Theft, or Cyber Insurance – are suitable for what you actually do on a daily basis.

• Advocacy at claim time
   If the worst happens and you do need to make a claim, your broker goes into bat for you. They negotiate with the insurer on your behalf to get the claim and payout sorted quickly – meaning you can focus on running your business.
  
• Risk management advice
  Good brokers don’t just sell policies; they can help you spot potential risks in your subbie agreements, WHS frameworks, or contract terms before they become expensive problems. This can help make your business a more attractive proposition to insurers, and actually reduce premiums. In addition, brokers will also assess your business to ensure you’re not overinsured or underinsured – meaning you’re not paying for cover you don’t need, and there won’t be any nasty surprises come claims time.

 

The cons

• Broker fees
  Just like you wouldn’t work for free, brokers don’t either. Some will charge a fee up front, while others will earn a commission for their services, which they should disclose to you. While this can make upfront costs slightly higher, a good broker often saves you money in the long run by avoiding underinsurance or unnecessary policy add-ons.
  
  
• More onboarding
  You will need to sit down (or get on a call) with the broker to explain how your business operates, how many staff you employ, what sort of work you do, and what contracts you take on.

 

Frequently asked questions about insurance brokers vs direct insurance

Finding a broker to work with

If you’re looking for an insurance broker, ask around – your friends and acquaintances will have experience and will be able to give  you the lowdown. Meet with the broker first –  ask them about the service they offer, and share what you’re looking for, too – and make sure they’re a member of NIBA, the National Insurance Brokers Association. NIBA members have to adhere to the NIBA Code of Practice.

If you can’t get a good recommendation from someone you trust, visit NIBA’s Need A Broker website.

Reduce your risk by using products you can trust. Buying from a Gemcell wholesaler means you can have confidence in the products you’re installing for your customers. Find your nearest Gemcell branch here.

Supplier Spotlight