Why buying direct online is not for everyone

In this day and age, the way best way to buy insurance is the same way you select a movie to watch on Netflix, right?

Elmira, Ont.-based broker Tim Waters doesn’t seem to think so.

“This isn’t a product that should be bought from a computer,” said Waters, executive vice president of Programmed Insurance Brokers Inc. He was commenting in general on insurers who sell directly to consumers over the Internet, and did not single out any specific insurers.

Waters questions whether clients who buy online fully understand what is covered – and more importantly, what is not.

Say a 25-year-old bought a house and is now shopping online for insurance. “He knows [home insurance] is going to cost $1,000 [a year] and will cost another $200 for overland water, but he doesn’t know what overland water is,” Waters said. “So he doesn’t buy that, and then he suffers a major loss. For $200 he could have gotten that coverage if it was explained to him properly.”

By contrast, a broker should explain to the consumer what overland water coverage is, without forcing the client to read through the insurer’s literature.

“Computer programs don’t make informed decisions,” said Waters.

So why are some carriers starting up their own direct writers?

“The way it’s been presented to us is that they are looking for the portion of the market that weren’t going to buy through brokers anyway,” Waters said. “I am being told a certain percentage of people will buy online no matter what.”

For clients who buy online, Waters said is concerned about whether the client has a good understanding of personal auto accident benefits. “It’s a very complex coverage,” he said of accident benefits. “If they get into an accident and they are injured, and they don’t have the right coverage, it’s a very painful thing for them to go through.”

Ontario has mandatory accident benefits coverage. That mandatory minimum was essentially cut in half in 2010, and reduced further in 2016. Clients have the option of topping up different coverages within accident benefits – for example, family protection coverage, extra medical and rehabilitation coverage, extra income replacement benefits, caregiver, housekeeping and home maintenance, dependent care benefit and indexation benefit, among others.

“We will take the time to discuss it with the client and then at the end, he can make an informed decision,” Waters said Wednesday in an interview. “I am being told a lot of Canadian millennials will go online, find out how much it will cost, then call a broker and will try to get it for the same price or close to it, and a lot of times will end up with a broker.”