If you’re the type of person who reads personal finance advice, you know that you have to shop for your home and car insurance every year. This tip is one of the most effective for saving money. There is a way to avoid this rather unpleasant and time-consuming chore by entrusting it to a broker.
That’s what I did for a decade, which saved me from spending hours on the phone. But I realize today that I was not vigilant.
That’s how I ended up having to pay $2,573 this year for my home policy, compared to $1,374 in 2020.
Out of curiosity, I recently contacted a random direct insurer to see if there was a way to lower my bill a bit. Direct insurers sell their policies themselves, without going through brokers. I nearly fell off my chair when the agent told me her price: $1,036. Same deductible, same coverages, same riders. I asked her to repeat it, sure there was a mistake. But no.
Every insurer is free to set its own prices, and I may have just been very lucky that day to stumble upon the one looking for customers in my neighborhood. But the whole story opened my eyes to the practices of brokers.
First, my broker probably wasn’t shopping my policies around every year, as I expected and as any savvy consumer should do.
The Regroupement des cabinets de courtage d’assurance du Québec (RCCAQ), the customer service department of the Chambre de l’assurance de dommages (ChAD) and broker Louis Cyr all told me that the “best practice” is to shop around every three years, unless there is a major change to the file. The frequency is not listed in the Law on the distribution of financial products and services nor in the code of ethics which targets brokers and agents (employees of insurers).
This is far from ideal. As Johanne Leblanc of Option consommateurs insists, “insurers and telephone providers do not reward loyalty. So you have to shop around every year.” The CAA advises the same thing. The guide 99 tips for saving money without depriving yourself too much The Financial Markets Authority (AMF) and ÉducÉpargne also recommend annual shopping.
There is a way to have a professional compare prices for us more often, assures Lucie Fréchette, vice-president of the RCCAQ board. “If you want to call your broker every year, at your renewal, to have him recheck the market, he will do it with pleasure.” But why on earth would we end up with this burden? We don’t need to call our portfolio manager to have him think about rebalancing.
Unfortunately, shopping frequency isn’t the only problem.
Louis Cyr, owner of his own independent eponymous firm, laments that a large number of brokerage firms have been bought by insurance companies, which raises questions about their independence. “We have to stop disguising agencies as brokerage firms,” he argues. An agency sells insurance from a single company.
The AMF was already concerned about this situation in 2005. A report deplored the lack of independence of a “vast majority” of firms and the fact that brokers “concentrate their business with one or two main insurers”. As for exhaustive shopping, we’ll pass!
The AMF had then calculated that firms sell, on average, the products of their main insurer 60% of the time. The percentage increases to almost 80% when considering their two main insurers. Worse, 10% of firms concentrate 90% of their business volume with a single insurer.
This is without taking into account that insurers grant loans to firms that are often accompanied by conditions “that significantly restrict a firm’s latitude in its product offering to consumers,” according to the AMF. No update of its document has been made for 19 years, but monitoring work is being carried out, it is said.
The problem is that my former brokerage firm – I dumped it – does not indicate anywhere on its website its links with Intact… which was of course my insurer.
This information is, however, mandatory. “Your broker, on their website, it must be written,” Lucie Fréchette, from the RCCAQ, told me. When checking in the Registraire des entreprises du Québec, it is indeed written that the “ultimate beneficiary” of the firm is Intact. But what consumer does this kind of research?
Other firms are more transparent. PMT ROY Assurances, for example, clearly displays this statement on its home page: “Our firm has financial ties with the insurer Intact Assurance and we mainly do business with them.” Louis Cyr nevertheless believes that 100% independent firms “that shop around for real” are “difficult to identify.”
In his opinion, a consumer should contact an independent broker and two direct insurers to have a real comparison in their hands.
As for pricing, it seems to be pure luck that I stumbled upon a premium for less than half price. Everyone I spoke to told me that the way policies are sold – through your own employees or brokers – has no impact on pricing, because the staff has to be paid somehow. There doesn’t seem to be any research to prove this.
THE Insurance Journal revealed this week that the 20 largest brokerage insurers in Quebec account for 55% of the market. Since a majority of Quebecers do business with a broker, is it not essential that their practices be better known and understood?