BEST SERVICE: INDEPENDENT BROKER OR CAPTIVE BROKER?

« The customers’ interests come first! » announced brokerage companies and insurance companies. Who is right? Nobody? Everybody?

The link between insurance brokers (independent and captive) is of interest to all consumers because we all know the famous saying that « prudence is the mother of safety » in the field of life insurance.

Let’s ask ourselves a few questions to guide us:

• The remuneration of an agent will usually determine his level of interest in doing his job, isn’t it?
  • Unless a code of ethics or a desire for transparency compels these brokers to reveal their true colors to everyone.

• What actually happens behind the scenes?
  • Insurers regularly review their practices and their systems surrounding sales-related compensation for their products.
  • In an ideal world, the client should benefit from these changes without compromising the profits of the companies involved.
  • Is there an internal pressure to promote certain products?

• Do independent insurance brokers who serve their clients in a dedicated manner experience unfair competition from so-called captive insurance brokers?
  • Do these captive brokers only present to their clients insurance products of an insurer, to the detriment of their clients?
  • Since these captive brokers also benefit from higher compensation, will they also be better?

Life insurance through an independent broker or a captive broker?

In Quebec society, we constantly search for ways to improve our quality of life with financial services. Life insurance remains a must for most families in the province. Without it, many households would not be able to pass on important legacies or adequately protect their loved ones from debt (mortgage loan, personal loan, etc.) upon the death of a parent who provides most of the household income.

However, to get life insurance, everyone knows that an insurance broker will provide the best service.

• Who will best perform this task, the independent broker or the captive insurance broker?
• Between the independent broker and the captive broker, which one is likely to give you biased recommendations? These biases may not always be obvious.
• There is a rumor. Since these representatives do not have full access to all life insurance products in the market, they will necessarily tout theirs to get their commissions.

Is this true? Is this bad?

To analyze well, let us clarify the role of each of these two candidates.

THE DEFINITION OF AN INDEPENDENT BROKER IN LIFE INSURANCE

Before anything else, you should know that a general agent negotiates with life insurance companies to obtain permission to sell their products. Then, he turns to independent brokers and determines the amount of their commissions. Usually, these brokers do not benefit if they sell one product over another. The remuneration of an independent broker is always the same and he focuses on guiding his client toward the life insurance policy that will best meet their needs.

WHAT IS A CAPTIVE BROKER IN THE FIELD OF LIFE INSURANCE?

A captive broker represents one life insurance company such as Desjardins Insurance, Sunlife or Industrial Alliance. He has the ability to offer the products of other insurers, but he does not really benefit. The life insurance company with which he is identified rewards the best sellers. The annual output of the independent broker is very important to him. At the same time, his commission is higher if he sells a product of his insurer. It is therefore understandable that he has an interest in offering you life insurance policies of a specific insurer. If he comes to your home, he will tend to make recommendations that improve his image and brings him more money.

By reading these definitions, you realize that the independent broker will normally offer life insurance solutions focused on the needs of their clients by choosing from a multitude of insurers and insurance products.

Should you contact only independent life insurance brokers… See the answer below.

Is there a problem between these independent and captive representatives?

Not necessarily.

When a consumer knows what to expect, he is aware of his options. No matter which side, the important thing is the competence of the broker, and the product itself.

In fact, you simply want the advice of a professional in order to complete a transaction. In any case, insurers who establish this network of captive brokers know the importance of developing competitive products or risk losing their share of the market.

Note that there is still a possibility that some life insurance policies that are available only from brokers may benefit you. In this situation, be advised that in order to get the best price, you may need to shop around for your life insurance.

A quality « captive » broker can make excellent recommendations. He may have tips that would please you and his personality will play a vital role in obtaining your life insurance policy.

Balance between a good product and the reliability of a broker, it does exist.

If you are the « analytical » type, you will probably put more importance on the product itself rather than the approach of the representative. In this case, the range of life insurance products will certainly please you more.

On the other hand, if you prefer the personalized approach, most captive life insurance brokers are excellent communicators.