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For the best advice use a broker

A commercial insurance contract even for the smallest company is riddled with complexities. However, as Insurelink has found, many buyers could come unstuck by believing they are receiving advice when all they are getting is information, as Insurelink's underwritng director Simon Lines explains...

The direct market for commercial insurance is now well established and advertising for this would suggest it is a straightforward and cost-effective way of buying cover. However, recent research conducted by the British Insurance Brokers Association found that a third of micro, small and medium-sized enterprises (SMEs) not using a broker failed to realise they were not receiving advice and were probably only being offered the products of a single insurer or provider. This has to be of concern. These business owners could find they come unstuck if they have not had certain terms and exclusions pointed out to them or understood security requirements, for example. After all, SME owners are often far too time-pressed to read all of the conditions of an insurance policy. Clive Robinson, Insurelink’s Managing Director, says: "It is clear there is confusion among SME buyers on insurance and we have suspected this for some time. It is worrying to think these firms could end up with inadequate or even the wrong cover because they did not receive advice or a recommendation."

As with motor and household insurance, the SME market is cut-throat in its competitiveness with the hard sell from a variety of distribution channels. SMEs have plenty of choice when it comes to buying cover

Last November, RSA conducted research which found that one in 10 small business owners can no longer afford to operate due to the credit crunch and global financial upheaval, that 56 per cent had raised their prices to cover rising costs – and that seven per cent would cut back on cover to save money. This may seem a relatively low figure, but the economy is now in a worse state than in 2008 and without doubt more are looking at ways to stay afloat.

Insurelink believes it is vital that SMEs have the right insurance in place and that brokers do far more than just sell a product. Brokers can offer a full range of services including risk management, recommending insurers for their service levels and last but not least, provide assistance in the event of a claim. There are many occasions, where had it not been for the intervention of a broker, that a claim would have either been refuted or reduced payment made.

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