To the average man or woman on the street, the world in which commercial insurance brokers live and operate will be little more than a mystery. The field of insurance in general is still barely understood by laymen and women, and with commercial insurance being one of its most specialised branches, this effect is felt several-fold.
Few people seeking to take out this type of insurance will be aware, for instance, that there are several types of commercial insurance brokers on the market, each with its own specific ways to operate, strengths and limitations. At best, most of these men and women will be aware of the existence of the main, larger insurance companies, with the countless smaller operators being known to only a minuscule portion of the overall demographic, mostly through research or word of mouth. Yet, on occasion, these alternative types of commercial insurance brokers may actually be more suited for what an individual or business is after than the more ‘mainstream’ alternatives; it is with that in mind that the present article seeks to introduce prospective clients to the different types of commercial insurance companies available, so that they may assess which will best suit their specific situation.
Insurer-owned companies are perhaps the most widespread and prolific sub-section of the commercial insurance market, and many of the most popular and best-known commercial insurance brokers fall under this category. As the name indicates, these outfits are owned by large insurance companies, who typically dictate their standards and practices. In certain countries, this model was considered the industry standard for commercial brokers for decades; it has, however, recently begun to lose ground, as the effectiveness of these types of outfits began to dwindle. Nowadays, many experts make a case for the model being outdated, and it is predicted that insurer-owned commercial insurance brokers will continue to lose market space in years to come.
Broker networks comprise several small commercial insurance brokers, all of which share resources, assets and market opportunities between them. In its ideal form, this is considered to be a beneficial model for companies that choose to join one of these networks, with many of them advertising better commissions for individual brokers and service conditions for the companies as a whole; however, adhesion to this type of network remains uneven between countries.
Consolidated commercial insurance brokers result from one company assimilating, buying out or otherwise consolidating any number of smaller ones, in similar fashion to a corporate merger. At one point, these types of companies were the most common type of commercial insurance brokers in certain markets, with consolidations happening as frequently as once a week. The practice has significantly lost steam since then, however, mainly due to the fact that the exact benefits to be reaped from consolidation processes are not always clear. This has caused many brokers to sour on the practice, and much like insurer-owner brokers, it is thought that this type of brokerage firm may lose even more ground in years to come.
The fourth and final type of brokerage firm are independent brokers, that is, brokers which are not associated with either of the three types described earlier in this article. These tend to be smaller, often family or owner-run companies, with smaller and more personalised client bases, and frequently focused on more specialised or less explored areas of the field. Customers resorting to an independent broker can expect a more personalised service, with a higher rate of face-to-face interactions and more time devoted to each case. This type of company is less prevalent in the modern landscape than any of the previously listed ones, but there are still a few independent commercial insurance brokers left, and they tend to attract a small yet loyal customer base.
These are, in broad strokes, the main types of commercial insurance brokers available to customers. It is, therefore, up to each individual to work out which business configuration would be most suitable to their specific needs, in order to avoid disappointment down the road.