Insurance Broker vs Buying Direct

Insurance Broker vs Buying Direct

Most New Zealanders buy insurance the same way they buy everything else now — straight from the insurer’s website, in about ten minutes, without talking to anyone. That works fine for a single car or a standard house. It quietly stops working the moment your situation stops being standard.

Here is the part that surprises people. Insurance brokers are not just for big businesses. They can access insurers and policy wordings never sold to the public, and they can argue a claim on your behalf when it gets difficult. But commissions are still allowed in New Zealand, which means the person recommending your policy is often paid by the company whose policy they recommend.

So the real question is not “broker or direct”. It is whether the advice you are getting is worth what it costs you in price, and whether your risk is simple enough that you do not need it at all.

How We Researched This Guide

We built this from primary sources rather than from anyone’s summary of them. The regulatory detail comes from the Financial Markets Conduct Act 2013 as amended by the Financial Services Legislation Amendment Act 2019, with the duties and disclosure rules applying since 15 March 2021 — set out in full on legislation.govt.nz. The Financial Markets Authority’s own framing of the conflict rule is blunt: recommend the most suitable product regardless of the commission you receive.

What surprised us was how much of the market’s own material contradicts the tidy Version of this debate. Insurers publish their policy documents openly, so we read the actual definitions — the sub-limits, the waiting periods, the exclusions — instead of the marketing summaries. The FMA has also signalled that through 2026 and 2027 it is specifically targeting unmanaged upfront and ongoing commission conflicts and unsuitable replacement business. That tells you where the pressure points are.

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The Quick Summary (60-Second Version)

If you only read one part of this, read this bit.

• A broker can place risks and access wordings not sold directly to the public — that is the real value, not the shopping around.
• Buying direct is usually cheaper for simple, standard risks because there is no commission or fee built into the price.
• Commissions are still permitted here, so the safeguard is disclosure, not prohibition.
• Any adviser must work through a Financial Advice Provider licensed by the FMA and follow the Code of Professional Conduct.
• Where a conflict exists, the adviser must prioritise your interests — ask whether their advice would change without the commission.
• A broker earns their place on complex risks, commercial cover, and claims that turn difficult.

What A Broker Actually Does That A Website Cannot

A direct insurer sells you its own product. That is not a criticism — it is just the structure. You see one set of wordings, one excess structure, one claims process. For a standard house or a single car, that is genuinely enough, and you will usually pay less because no commission is built into the price.

A broker sits on the other side of that table. They hold accreditations with multiple insurers, which means they can place harder risks — a home with a claims history, a rural property, a business with unusual exposure — that a direct insurer’s online form will decline or price badly. They can also argue a claim on your behalf when it gets disputed, which is the moment most people wish they had someone in their corner.

The catch is the conflict. Commissions remain permitted in New Zealand. Under the FMA’s own test, you should recommend only the product most suitable for your client, regardless of the level of commission — and a useful question to ask is whether the advice would be the same in the absence of that conflict. The duty also extends to conflicts involving your associates and the provider you advise for.

What has to be disclosed, and when

Disclosure is not optional, and it is not a favour. Advisers must tell you the licence they hold and the duties attached to it, the advice services they offer and any limitations on the range of products, the fees and costs that apply, and the commissions, incentives and other conflicts that could impact the advice. They must also cover complaints handling and dispute resolution, any previous disciplinary history, and certain criminal convictions or civil proceedings.

It must be clear, concise, and effective, given prominence if it sits alongside other information, and free of charge. Timing matters too: it must come when the nature and scope of the advice becomes apparent, so you can decide whether to deal with that person at all, and again when the advice is given, so you can decide whether to act on it.

Where Each Route Wins

The honest split isn’t by product type, but by how unusual your risk is. Simple and standard goes direct. Complex, unusual, or commercially exposed goes to a broker. Nothing stops you from doing both — plenty of people buy car cover direct and use a broker for the house and the business.

One warning that applies to both routes: the sum insured is where underinsurance quietly happens. A business pack, a home policy, a contents schedule — the number you write down is the number you get, and it is the single most common place people get it wrong.

How Brokers Get Paid, And What To Ask

Brokers earn in two ways. The insurer pays them a percentage of your premium, which you never see as a separate line but which sits inside the price. Some also charge a fee on top for arranging the policy. Both must be disclosed, and you should ask about them in writing before you commit.

The questions that actually reveal something are these: which insurers do you hold accreditations with, and does that mean you cannot show me others? How are you paid on this policy? Is there a fee in addition to a commission? What is your complaints and dispute resolution process? And will you review the cover at renewal, or is that on me?

That last one matters more than people expect. Cover that was right three years ago is often wrong now — a renovation, a new business, a child, a paid-off mortgage all change what you actually need.

Questions You Might Have

Is a broker always more expensive?

No, and it is worth testing rather than assuming. On simple, standard risks, you will usually pay less going direct because no commission is built into the price. But on bundled or unusual cover, a broker who knows the market can sometimes place it cheaper than a direct quote — and the wording may be better even when the price is similar.

How do I check a broker is legitimate?

Anyone giving regulated financial advice to a retail client must do it through a Financial Advice Provider licensed by the FMA, or on behalf of a licensed provider. Ask which FAP they operate under, then confirm it. All advisers must also follow the Code of Professional Conduct, which requires them to treat clients fairly and give useful advice.

Do I lose anything by buying direct?

You lose the advocacy, not the cover. If a claim is declined or disputed, you deal with the insurer alone, using their process and timeline. That is fine for a straightforward windscreen claim. It is much less fine when the disputed amount is large, or the wording is genuinely ambiguous.

Can I use a broker for just one policy?

Yes, and it is common. Plenty of households buy car cover direct and use a broker for the house, the rentals, and the business. No rule requires you to consolidate, and mixing the two is often the most sensible arrangement.

What if my broker’s advice seems wrong?

Start with their internal complaints process, which they must disclose to you. If that does not resolve it, the dispute resolution scheme they belong to is the next step. Keep your disclosure records — what you told them, when, and what they recommended in response.

What Matters Most

The route matters far less than the wording. A cheap direct policy with an exclusion that catches your actual risk is worse than an expensive one that pays. Read the definitions, the sub-limits and the exclusions before you compare a single premium figure — price alone tells you very little about an insurance policy.

Use a broker when your risk is unusual, when a lease or client contract imposes requirements, or when you do not want to fight a claim alone. Buy direct when your needs are standard, and you are comfortable managing it yourself. Both are legitimate. Neither is automatically better.

And whatever you choose, ask the conflict question out loud: would this advice be the same if you were not being paid this way? A good adviser will answer it without flinching.