Direct Insurance is an insurance company that does not work with insurance brokers or insurance agents. Typically direct insurers sell their products through contact centres (also called call centres) or online through a website.
There are more direct insurers in non-life insurance business (e.g. home, auto, travel insurance) than in life insurance (e.g. life, disability, critical illness, health insurance) due to the nature of the life insurance business that requires more attention to the assessment of each case (e.g. completing health questionnaires, medical exams etc.). Nevertheless there are direct insurers who also sell life insurance.
Often there is a perception that direct insurers have lower premiums due to the fact that they do not have to pay sales commissions (e.g. to insurance brokers). In reality, that is not always true since it also costs a lot of money to run a call centre with all call centre staff and technology infrastructure.
Direct Insurance: Expert Opinion
There are a few different ways you can buy a policy. One is through a broker, who is an independent broker that works with all the different companies. Then there is a captive agent, who works with just one company, generally speaking. The person looking to buy a policy can also buy direct from the insurer.
The direct offering generally doesn’t save the policy holder any money; and in fact, in many instances, it’s more expensive than using a broker.
The advantage of using a broker over a direct offering is that the broker can analyze your needs to determine if that is the type of policy you would need. A lot of times, with a direct offering, someone will go online looking for $500,000 of term life insurance coverage without really knowing what they need.
That is the advantage of working with an insurance broker. They can determine what you need and, generally speaking, they can find you a better deal than a direct offer as well.
Our Publications related to Life Insurance
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