What does a life insurance broker do?

What is a life insurance broker?

A life insurance broker is a specialist who's qualified to give you expert advice and has access to numerous life insurance providers.

They can be helpful for people with complex life insurance needs, or for those who want help deciphering confusing terminology. Brokers can offer greater support during the application process and recommend products based on what you've told them.

Pros and cons of using a life insurance broker

Pros:

• A higher claim approval rate for your beneficiary.
• Life insurance brokers often have access to better rates via their provider partnerships.
• Using a broker gives you access to much more tailored advice.

Cons:

• Some brokers may have partnerships with only a few life insurance providers, limiting your policy options.
• Going through a broker can mean participating in a thorough underwriting process. The acceptance criteria for these applications is stricter than others and depending on the state of your health, may result in you being denied cover.
• It can take longer to be covered than if you went direct. This is because you have to do health checks and share reports.

What's the difference between using a broker vs going direct?

Key differences	Broker	Direct
Research	The broker will do this for you.	You do this yourself.
Application process	They'll send you forms to fill out and let you know what medical exams to arrange.	You'll apply online or over the phone. In some cases, you'll be asked to get a medical exam.
Time to apply / application approval time	Longer, can take weeks.	Shorter, can be done fast if no medical needed.
Average claims approval rate	96.9%	91.9%

Claims approval rates — using a broker vs going direct

There are two important things to understand about how going through a broker can impact your ability to; 1 - get your life insurance application accepted and 2 - have your claim approved in future.

Put simply, those who go through a broker tend to have their claims approved and paid out more often than those who don't go through a broker. This is because the initial application process via a broker is so thorough that it removes room for error that could give insurers grounds to deny a claim.

Less rigorous applications (like the ones from going direct) can see to a lower claims acceptance rate because the insurer knows less about you and therefore, it can give them more grounds to deny your claim.

Here are the latest figures from the Australian Prudential Regulation Authority (APRA) about this.

Industry average claims acceptance rate for those who purchased via a broker: 96.9%
Industry average claims acceptance rate for those who purchased directly from an insurer: 91.1%

These statistics are referencing the June 2024 report.

Is there a fee to use a life insurance broker?

Not usually. Life insurance brokers make their money from insurance companies by earning a commission on policies sold via the people they refer. This means you shouldn't pay a cent.

However, as with anything that comes free - it can be wise to consider the implications of this.

While you may not pay to use a broker, the trade off could be that you only have access to policies from a select few insurers, rather than the whole market.

Can a life insurance broker help if you have pre-existing conditions?

Yes, in fact, this is why many people opt to get life insurance cover via a broker. Their expertise and understanding of complex policy terms can be helpful for people who are trying to find life insurance with a pre-existing condition.

FAQs

• Does it cost more to use a broker?

  No, it shouldn't cost you more to use a broker. Typically, brokers are paid on a commission basis, meaning the insurer pays them for referring you. You shouldn't pay for anything other than your policy.

• Do you need a broker to get life insurance?

  It's not mandatory to use a broker to get life insurance. Policies are accessible via a range of channels; direct, through your super or through a broker. You may opt for a broker if you want a highly tailored policy, would value the support that comes with having expert advice, or if you have a pre-existing condition.

• Can I make changes to my life insurance policy later on if I purchase through a broker?

  Yes, you can change your policy at any time. All you have to do is get in touch with your broker and communicate that you'd like to make changes. They'll guide you through the rest.