Direct car insurance is exactly what it describes, you make all the cover arrangements yourself and purchase the policy directly from the Insurer who underwrites the cover.
The advantages of buying ‘direct’ are that in some cases the premiums offered will be less than if you bought through a middleman, though this is by far the case for the majority in reality.
Most direct motor insurance companies are able to make savings in commission and data handling, which many do pass onto their customers in discounted premiums or advertising ‘tempters’ such as offering twelve months cover for the price of ten, or throwing in some additional cover for free, such as car breakdown insurance.
These marketing sweeteners should always be looked upon sceptically by a prospective purchaser of insurance, as it may well be the case that the costs of the ‘sweetener’ are absorbed elsewhere in the quote offered.
With so many different types of motor insurance distribution points available these days it is sometimes difficult to determine whether you are purchasing your cover from a direct company, or not.
You can purchase car insurance by either picking up the phone and dialling a company that you found in the telephone book, visiting a high street outlet, or by shopping on the Internet where you have access to many different types of car, auto and motor insurance retail distribution products.
Whichever method you choose to purchase, it can still be difficult to determine from the onset, whether you are dealing with a direct insurance company or one of the many other intermediaries that exist.
The types of insurance intermediaries that exist within the UK insurance market these days are numerous but can broadly be defined as belonging to one the following groups:
Underwriters, Direct Companies, Insurance Companies, Scheme Providers, Brokers, Comparison websites, Agents, Introducers, Affiliates and Affinity Groups.
Those at the top of the group are those most likely to be considered direct suppliers of car insurance.
Those at the bottom of the list are those that are most likely to charge a commission, agents, or an introducer fee.
To understand and benefit from purchasing direct from an insurer we need to look at the goods and services supplied by each of these above groups and how they are components of the price you pay as a premium.
As with all insurance, the power of the pen, that is the ability to set a price for a risk , ultimately lies with the underwriters of the car insurance policy. These are the people who will suffer financially should you make a claim. Underwriters manage your risk and set the rates and charges. It obviously follows then, that the nearer to the source or base risk that you purchase your car insurance from, the more likely it is to be able to get the cover at the best possible price for the risk.
It is possible to directly negotiate a price for a policy with certain motor insurance underwriters. However this task is usually carried out by a specialist insurance broker, and in practice this negotiation is probably best left to a specialist broker who is skilled in communicating risks to underwriters or car insurance companies, and does so as part of his or her job on a daily basis.
Similarly the power of the underwriting pen is available to certain sales teams of Direct insurance companies. If you phone them up and talk to them direct, it is possible that even though they have to follow a script and set system screen procedures, that they have some system codes to discretionally discount your insurance premium down to a fixed minimum premium level. It’s often a question of don’t ask – don’t get!
Car insurance schemes are tailored bespoke policies for a certain type of driver or car such as Lady drivers insurance. Schemes may be offered direct from an issuing insurance company specialising in motor schemes, or more likely from a specialist car insurance company or broker. Because the schemes have been designed for a certain distribution channel the company offering these insurance schemes is often given the power of the pen and allowed to make underwriting and pricing decisions themselves, within certain pre-arranged limits of authority.
Often overlooked by the large part of the car insurance buying public, these schemes offer the best value for money if you are lucky enough to fit into one.
If you buy direct from a broker it is probable that they have an underwriting contact at an insurance company who can vary premiums and match quotes that you have obtained from another source. The advice that car insurance brokers offer can often be worth the small additional premium they might charge, as they will help you get the correct level of cover and more importantly communicate any claims or problems you might be having direct to the underwriters of your insurance policy, saving you time and money in what can be a minefield to the insurance world uninitiated.
The large Insurance comparison websites that you so often see advertising on TV, sell policies on behalf of insurance companies and brokers. The majority of these companies do not have access to the pen, and are not allowed to discount premiums. Many do however offer and present a wide choice of insurance policy to a prospect and through the ability to compare rates for mainstream car insurance, are usually able to offer policies which are cheaper than what a customer may currently be paying.
Beware when you are comparing policies online that you are comparing not just on the premium price quoted, but also take account of the variations in levels of cover, and only compare on a like for like basis. To fully understand the levels of cover it is essential that you always read the small print of these policies. Unfortunately in the case of Internet comparison sites that do not underwrite themselves, it is often the case that there are additional premium hikes when you come to complete, often made by the contract fulfilling underwriting insurance company, to the original quote offered. This practice known as ‘after loading’ occurs when you arrive at the underwriting company’s site to complete the transaction the price has risen considerably from that originally being quoted.
However you decide to purchase your car insurance, it should always be with what is right for your particular circumstances and your particular car, in mind.
You should always make comparative decisions on a like for like basis. If one policy being offered a few hundred cheaper than a competitor, you should check carefully the levels of cover in the small print, and compare the limits of indemnity.
Check also which covers are included in the basic cost of the motor insurance policy and which are included as extras. Windscreen damage cover is an example of this. Do you really need a courtesy car when you are a two car family? This extras can soon mount up.
If you need advice or help in deciding what covers you require, you should always call a broker or insurance company direct and they will be able to explain exactly what they are offering and allay any fears and misunderstandings you may have regarding the insurance that they are offering.
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