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?