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Business Insurance Agents Versus Online Business Insurance Purchases

Are Agents Better Than Online Business Insurance Sources?

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Online insurance quotes and buying insurance online is no longer a novelty. Many business insurers are online and, while buying insurance for a business on the internet is not as prevalent as buying personal auto insurance online, growing numbers of small business owners are going to online sources for their insurance. If one follows some guidelines when using online quote sites to purchase insurance, business internet insurance sites can offer premium savings.

What is missing is the insurance agent or broker. Insurance professionals will tell you that they offer significant value to the insured. They will contend that the absence of an insurance professional will cost a business in the long run. Contrary to that argument is the claim that online sites offer insurance for less and can offer more quotes from more sources. Let's look at the website versus the insurance professional.

Service to the Insured

If you choose the right insurance agent or broker, having a real human being with an office and staff in your community is undoubtedly the best choice in the category of service.

Insurance professionals can:

  1. Visit your place of business.
  2. Review leases, sub-leases, mortgages, and other business documents do determine what insurance is required for your business.
  3. Understand state and local laws.
  4. Fight for you if there are claims.
  5. Suggest safe practices and claim avoidance.

Websites offering insurance quotes may refer you to a local agent. But, where the site takes the application online and sends the policy in return for a premium payment, the owner must ask, "who do I call when I need help?"

Price of Insurance Policies

Here the edge goes to the website. As auto insurers found out in the late 90's and early 00's, insurance clients are driven by lower premiums. Offerings of business insurance online have not reached the same availability as car insurance. But, specialty business and professional insurers that focus primarily on online sales without a local presence are growing. The reason: price. Online purchases can be cheaper because:
  1. There is no agent/broker commission.
  2. Overhead for the insurer is lower.
  3. Automatic payment or withdrawal is very efficient.
  4. The insurer can sell direct or through alliances with professional organizations.

Agent and broker commissions can be sizable. Our Guide to personal insurance has a good example of the cost of a commission on a life insurance policy. And, just as another example, a directors and officers policy, depending on the company can have a 6-15% commission for the selling agent or broker. In many cases, and for certain types of insurance and depending on the size of the business, the owner will want a well-paid, commissioned professional working for the business. However, the U.S. is driven by small businesses and a 10-15% savings is significant.

Selection of Insurers

Here the decision is split. Independent insurance agents and insurance brokers have access to many companies and work on the business's behalf to find insurance policies tailored to the business. Insurance agents are often captive agents of one company and their selection of policies will be limited to what is offered by that company.

Insurance quote sites offer the ability to get many different quotes from the same entered information without the expertise of the insurance professional. Websites offer more selection than an agent. Insurance brokers and independent agents can offer the same selection with greater service.

Safety, Security and Quality

Try an experiment. Open a new tab and Google "business insurance online." I come up with over 62 million hits. Names like "insure2you" or "bestquote" are mixed in with the online presence of insurance giants like Allstate or Hartford. The point is, there are many quality online sites for insurance, including the insurers' websites, but it is becoming increasingly harder to figure out what sites are legitimate.

Insurance professionals offer greater safety, security and quality because:

  1. Insurance agents and brokers are licensed by the states and regulated.
  2. Insurance professionals must meet the guidelines of the insurer and are accountable to the insurer.
  3. Insurance professionals are insured.
  4. Insurance brokers will review financial stability and the rating of the insurer before offering a policy.
  5. Insurance professionals have educational and accreditation standards.

Online quotes and agent finders on the large insurers' websites are safer than any fly-by-night quote site. Of course, the insurer's site is only going to offer that insurer's product so the benefit of online selection convenience is lost.

Conclusion: Website or Insurance Professional?

Your Guide has an admission. My business purchased its primary insurance policies online or substantially online. We work direct with a health insurer and professional liability insurer.

Why? Because we are a small specialized professional business. Online quotes and online comparisons make sense for our firm in terms of cost savings. The website is an excellent tool and an excellent way to secure insurance direct from insurers for small or clearly defined businesses.

The insurance professional is the better choice for larger businesses, businesses with employees, vehicles, or specialized needs such as higher than average liability. The insurance professional is the better choice for businesses that do not want to spend time comparing premiums, deductibles, ratings, and a number of other comparison factors.

Ultimately, neither is a clear winner. Used correctly, both the website and insurance professional can be used by the business owner to secure the best trade off between cost and risk management. Use the website as a shopping or educational tool to determine what is available and to learn more about what your business needs. Then, consider seeing a local agent or broker to intelligently discuss your insurance needs. Make an assessment of whether the online savings is worth the loss of the agent or broker's value to your business.

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