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How much is your broker charging?

Has your car insurance premium recently gone up? If so, you might want to check what you’re paying for – Herbert Goldberg discovered that the AA had added a huge ‘brokerage charge’ to his premium…

When Which? member Herbert Goldberg noticed last year that his premium had unexpectedly climbed from around £500 to £619, he phoned the AA to query the increase. After a series of calls, the AA told him that a ‘brokerage charge’ (around £45 the previous year) had since risen to £200. In short, the AA offers a broker service working with insurers to arrange suitable cover for you.

In the end the AA offered to knock £155 off his car insurance premium. But, after doing a bit of shopping around, Herbert decided to switch to John Lewis and ended up saving a total of £351 on the AA’s initial offer.

Saving hundreds through haggling

It’s no big news that insurance providers will often offer big discounts for new customers, and often at a loss. This is why haggling at renewal time can literally save you hundreds of pounds. And, as the AA explained to us, the broker charge isn’t simply profit: ‘It pays for development and marketing of [our]…policy, sales and online activity, running the call centres, handling claims and administration.’

However, should there be more transparency about how brokers – such as the AA, Swinton and John Lewis – are remunerated?

Transparency with brokers

A good broker fulfils a role that shouldn’t be underestimated. While it’s now quick and easy to obtain quotes from dozens of insurers in minutes through comparison sites, a broker can offer the expertise to help match affordable premiums with quality cover. Services from the AA and John Lewis – with their own branded policies underwritten by the insurers they work with – also play a key role in shaping this cover.

While these services can prove invaluable, what’s less clear cut is how much you’re paying for that value. There’s no legal obligation for brokers to tell you how much premium they’ll get in commission. This can make it difficult for you to understand why your total premiums are going up at renewal.

We decided to contact 11 prominent brokers to find out their charges. Only four would tell us, with only one of those saying they routinely inform their customers of their commission.

So, do you think the total cost of your car insurance premium is the be all and end all? Or would you prefer to see more information from brokers on their charges?

Comments
Member

My car is insured through a broker who checks the market each year after assessing my requirements. This year they changed insurer and the premiun was reduced by about 10%. For this they charge a £12.50 fee and will handle any claim I make. I am not at all unhappy to pay this.

Member

For years, many of us used insurance brokers, but then we were lured with offers if we dealt directly with individual companies, price comparison websites, discounts on breakdown recovery and companies offering insurance to the over-50s. I’m fed-up with the carry on, and might look for a broker next year.

Member

I forgot to mention the premium is competitive with one I’d get going direct to a company.

Member

Using the words: “not at all unhappy” suggests that you are not entirely happy.

Member

xopher, I’d rather pay nothing at all! But I get good service for what I pay – I am happy. Sorry for the confusion.

Member
Phil says:
27 April 2015

Does this suggest malcolm is unhappy? I should have thought it to be an example of litotes: a figure of speech in rhetoric – a form of understatement where a negative is used to further affirm a positive. If you’re old enough you may remember John Major who was addicted to litotes and always said things like “not inconsiderable” for “big”.

Member

If someone thanks you for doing something for them and you respond “it’s the least I could do”, taken literally you might infer that you did as little as you could. Not so. Strange the way we use language.

Member

I was recently made redundant. I lost my Company car perk. I purchased a new car but when applying for Insurance I was informed that my no claims discount would not be available for the 4 years during which I had the Company car but only from the date in which I was involved in an accident in which I was hit from behind and was the fault of the other driver 2 years ago. Is this correct? Should I be penalized for something which was not my fault?

Member

Hi

The answer here will depend on the specifics of how your company car was insured and the insurance of the other driver. However, speaking generally, if your insurer has had to pay out (even if the other driver was clearly at fault), then they will regard this as a claim and it may affect your no claims record.

However, insurers will generally disregard it as a claim (insofar as it affects your NCD), if they’ve been able to recoup their losses from the driver at fault.

Member

I have read that it is essential to check that your insurance company has recovered its costs, even if you were not at fault for an accident. This is an example of what can happen if you don’t.