SMEs and insurance brokers

Insurance brokers can play a valuable role in helping small or medium-sized enterprises (SMEs) arrange cover for their businesses. Find out more about their services.

If you own a small or medium-sized enterprise (SME) you need access to insurance products to protect your business if things go wrong.

Many SMEs rely on the services of insurance brokers to help buy insurance. But our review of insurance brokers found that their service when arranging insurance for SMEs is not always consistent with customers’ expectations.

Guide to SME insurance brokers

There are four steps to checking the work your broker does:

1. Check whether your broker is providing you with advice and a recommendation

Some brokers will provide advice when arranging your insurance, while others may not. Brokers that do provide you with advice and a recommendation will have assessed whether the policy they are recommending is suitable for your specific business needs. Brokers that do not provide advice will have only considered whether you are eligible to claim under the policy, and this could mean you do not get the appropriate level of cover for your business.

2. Check the range of quotes your broker has given you

In some cases, brokers arrange policies with a single insurer without considering alternative insurers and getting other quotes. This could be because they have negotiated better coverage or other policy improvements with a single insurer. However, this increases the risk that you’ll pay more for your insurance than you would if other options had been considered. If you are concerned about the range of quotes, the price or the cover, check with your broker about any alternatives that may be available.

3. If you need to spread the cost of paying for your insurance, check the finance your broker has arranged

Make sure you know how much more it costs to spread the payments. Ask your broker whether they have considered other financing options which might be cheaper (eg from the insurer providing your cover) so you can compare these to the first option they provide. Consider whether other cheaper finance options are available (eg use of an existing overdraft or business finance).

4. Find out how much commission you are paying

Our rules give you (as a commercial customer) the right to receive information on the commission your broker makes, if you request it. This includes all income earned from arranging your insurance, including from premium finance and add-on policies. Most of the brokers we considered in a recent review earned average commissions of above 20%.

Further information

You can find out more about our review of insurance brokers, published in May 2014.