How should I choose a business insurance broker?

Great news! When it comes to finding an insurance broker to help you insure your business, there’s plenty of choice out there! In Ontario alone, there are over 1,250 licensed insurance brokerages and across Canada that number increases to well over 5,000. Type the words “Business Insurance Broker Ontario” into Google and you’ll be met with over 11 million results to sift through!

We’re guessing you’d rather not sift through those 11 million results, so we’ve pulled together some insights into insurance brokers, and how to find the best fit for your business.

First and foremost, not all business insurance brokers are the same. In fact, there is a vast difference between insurance brokers in Canada, and they come in all shapes and sizes. On one extreme, there are thousands of small insurance brokerages serving businesses and individuals in their local communities. On the other extreme, there are giant, multi-billion-dollar global insurance brokers who have set up subsidiaries in Canada to support this marketplace.

So, perhaps it’s easier to start with what’s common rather than what’s different…

Firstly, business insurance brokers are all licensed provincially. Everyone you speak with should be individually licensed by their relevant provincial regulator (or in multiple provinces in some cases). In order to become licensed, an individual needs to be in good standing, e.g. free from bankruptcy, criminal convictions etc. Each broker also needs to demonstrate their expertise by passing a test of relevant insurance related questions. Further still, every individual insurance broker needs to take a certain amount of training each year to make sure they are current in relevant aspects of insurance and acting ethically and responsibly. It’s therefore important to know that when you are speaking with an insurance broker, you are speaking with a professional expert who is dedicated to his or her trade, rather than someone who is likely to be here today, gone tomorrow.

Secondly, insurance brokers are in business to represent your interests, not those of any particular insurance company. Of course, it’s very important for insurance brokers to maintain strong relationships with insurance companies in order to support their clients, but fundamentally, their salaries and commissions are not paid directly by insurers. This is different from direct insurers and insurance agents, where their employees will be paid by a single insurance company and are therefore acting primarily in that insurance company’s interests.

Thirdly, insurance brokers are able to offer you choice when purchasing business insurance. Think of insurance as a marketplace, with a number of different insurance companies being represented in that marketplace like different stores in a shopping mall. A business insurance broker is theoretically able to talk to a number of these different insurance companies to find the best fit for your business. In effect, they are shopping around the market for your business so that you don’t have to. Importantly, when conducting this process, they are also typically able to talk to insurance companies that you would not be able to approach directly. The majority of Canadian insurance companies will only sell business insurance products through an insurance broker.

Now that we’ve established these common foundations, it’s time to get into the detail around how business insurance brokers can be very different, and how you can decide what’s most important to you.

Vive la difference!

There are a number of areas where business insurance brokers are very different in terms of what they offer you. Let’s look at some of those differences:

I know we said earlier that insurance brokers are there to represent you, not the insurance company. That’s absolutely true, but when you dig into the detail, you will find that some insurance brokers are owned wholly or in part by insurance companies. One of the best examples of this is Canada BrokerLink, who are entirely owned by Intact Financial Services – Canada’s largest insurer. As another example, your friendly neighbourhood branch of Johnson Insurance is ultimately owned by Royal & Sun Alliance (RSA) – a global insurer based out of the UK with a large subsidiary in Canada.

In theory, they are still insurance brokers who are representing their clients in the market. However, you may ask yourself how independent they can truly be, when their only shareholder is an insurance company. The only way to guarantee independence is to work with an insurance broker who is not owned by an insurer. If you ask them, they should tell you about their ownership structure.

The other major point of difference between insurance brokers is around choice. It may surprise you to know that not all business insurance brokers can trade with all Canadian insurance companies. Insurers can be very picky about which brokers they work with and typically require a contract to be in place before they will accept business from any particular insurance broker.

If we go back to the analogy of a great big insurance shopping mall, then some brokers can only shop at a few stores on your behalf. Others can shop at dozens. As a guide, Mitch can work with over 40 insurers on your behalf.

This is extremely important because different insurers may have very different appetites when it comes to which Canadian businesses they want to insure. Some love to insure architects and engineers. Some love to insure artisans and contractors. Some insurers love commercial landlords and property owners. Very few, if any, insurers, are interested in insuring all 1.1 million businesses in Canada.

When it comes to business insurance, if a broker is only representing a small handful of insurance companies, say 5-10, then there’s a decent chance that only 1-3 of them might be interested in insuring your business. This really reduces your chances of finding the best deal for your business. On the other hand, if your broker works with a substantially higher number of insurers, say 20-40, then there’s a much better chance that they’ll be able to find you a solution that is competitive and a good fit for your business.

Another major area of difference amongst business insurance brokers relates to the service they are willing to provide you and your business. The best starting point here is around claims. Isn’t this, after all, why you are buying insurance in the first place? The general benefit of an insurance broker is that they can provide advice and support when you have a claim. Remember, they work for you, not the insurance company – so they can often bring an expert independent view to the table if and when you need to make a claim. So, the question is, are they willing to do that? Do they have people on staff who are able to get involved and have the technical proficiency to discuss your scenario with an insurance company?

Continuing with the service theme, many insurance brokers are different in the way that they interact with you. This is really about personal preference… do you want to manage your insurance entirely online, or would you prefer to discuss the specific needs of your business with a professional? Do you want to be able to do this face to face, or is the phone a better method for you? Are you able to manage your insurance during the working day, or do you need someone to be available for you outside of 9-5? Do you like to see everything on paper, or prefer for things to move faster and sign for things electronically? Everybody has their own preferences and that’s OK… the good news is that whatever your preference, there will be an insurance broker out there for you.

Business insurance is extremely diverse. Different businesses can have very different needs – and you will want to understand the level of expertise available in that insurance brokerage relevant to your type of business. If any insurance broker tells you that they can insure everything, then you should be worried because they will probably be extending themselves beyond the limits of their knowledge. Insurance for a contractor can be very different than insurance for a transportation and logistics company. If you’re talking to the wrong kind of expert, you may inadvertently get sub-optimal advice. Some insurance brokerages have a broad team of experts so that they can cover a number of different businesses. Others rely on a ‘jack of all trades’. Make sure you know who you are dealing with.

The fact is that some brokers are not interested in dealing with your business unless it is of a certain size. The amount of premium you pay for your business insurance can range from a few hundred dollars to a few hundred thousand – depending on the size of the business and what you do. Brokers get a commission whenever they sell a policy, and because that commission is a percentage of the total premium, some brokers only want to deal with large businesses that will bring them high commissions.

Larger businesses can also take up a lot of a broker’s time, some brokers are focused on these larger businesses, and may sell your smaller business a policy, but may not be able to give you the service you deserve. Other brokers are interested in supporting businesses that pay substantially less premium, but which will also be much less time consuming and straightforward to help. We’re not passing comment on which is right or wrong, but simply highlighting that these differences exist, and we’re sure you would prefer to be supported by a broker who is actively interested in helping you.

Some business insurance brokers are huge global businesses, insuring hundreds of thousands (if not millions) of individuals and businesses around the world. In these cases, unless your business is equally a global titan of industry, it is likely to be just a small rounding error to a multi-national insurance broker. Sure, they may be able to boast infinite resources due to their size, but will they wield them for your benefit, or reserve them for their largest clients? Think of it this way: Does McDonald’s care about your business as much as a local, family owned restaurant? The same can be said of business insurance brokers.

Finally, we all know the saying “where there’s smoke, there’s fire”. Well, if an insurance broker has been recognized with awards, is growing substantially, gets consistently positive reviews and is being consulted by the media as an expert on insurance, then there’s a decent chance that there’s a lot of great stuff going on at that brokerage, and it may be worth considering.

In full transparency, here’s our answers to these questions above:

At Mitch Insurance Brokers…

If this sounds like your thing, then we’d love to help. We’d love to say “operators are standing by”, but it might be 2 am when you’re reading this. If so, go to bed, and call us in the morning.