Go through an Agent? Or Go Direct?


May 2018

Regardless of whether we’re talking about insurance for your car, home or airplane, insurance companies sell their policies in one of two ways. They either sell their products through a third party (a broker or agent) or direct to the consumer. So what’s the difference?

Essentially the role of the broker or agent is limited primarily to selling you a policy and being the intermediary between you and the insurance company who then pays them commission should you purchase the policy.

The insurance company is responsible for everything else. They are the one that decides whether you are “an acceptable risk” meaning whether or not they will agree to insure you and how much that coverage will cost based on how much risk they believe you present. They’re the ones who pay the claim and who defends you in the event of a lawsuit.

In the case of Avemco®, the only direct aviation insurance company in the country, the people who make the decisions about whether or not you are an acceptable risk (underwriters) are also licensed agents. So, the insurance company sells you the policy directly while giving you the opportunity to talk to them directly should you have a question or concern about your policy. With a third-party insurance agency or broker, when there is a problem or question you must communicate with your agent who will relay the discussion to the company.

As pilots, we’re familiar with the phrase “read back correct.” There are only two people involved in this communication, the pilot and the controller. Now, think about how it would go if you talked to the controller, who then had to talk to someone else about what he or she thought you said. Then that third person responded back to the controller, who then gave you the answer they thought they heard from whomever they talk to in order to answer your question.

When you work with a direct insurance company, you speak directly with the decision maker, without a third party.

Granted, the advantage of dealing with an agency/agent is they typically work with more than one insurance company so if one company decides not to offer a quote the agency may be able to find another that will. The limitations and policy exclusions may or may not be clear to you but the agency did find you insurance. But remember: it’s vital that you clearly understand what you’re covered for and what you’re not. Better now than after you submit a claim that is rejected because of some fine print in the policy.

It stands to reason that if you are dealing directly with the insurance company where the underwriters are also licensed agents but are not paid a commission, the advice you receive will be objective. And that the insurance company will work with you to make sure there aren’t any unpleasant surprises should you have a claim.

When you deal directly with the insurance company, you will be offered the policy types the insurance company offers. While this could be seen as a limitation, the benefit to you is that the insurance company employee you are talking with has been trained by the company on that policy and is truly a specialist on the policy the company sells.

So, what’s the best way to purchase insurance? Direct from the company? Or through an agent? Both have their reasons to consider. You need to decide which works best for you.

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Mike Adams, Senior Vice President of Underwriting, is an instrument-rated pilot, and a former President of the Oregon Pilots Association. Mike holds a property/casualty insurance license in all 50 states. His more than 34 years of combined experience with general aviation and the aviation insurance industry helps pilots to understand why many of Avemco’s coverages and underwriting decisions are designed to help keep them safe.

Avemco® does not provide technical or legal advice, and is not affiliated with companies whose products and services are highlighted, advertised, or discussed in content contained herein. Content is for general information and discussion only, and is not a full analysis of the matters presented. The information provided may not be applicable in all situations, and readers should always seek specific advice from the FAA and/or appropriate technical and legal experts (including the most current applicable guidelines) before taking any action with respect to any matters discussed herein. In addition, columns and articles solely reflect the views of their respective authors, and should also not be regarded as technical or legal advice.