Insurance broker or direct insurer: which should an SME choose?

An insurance broker works for you: they compare several insurers, negotiate the cover and defend you when a claim arises, in exchange for a commission built into the premium, generally 10 to 25% depending on the line. A direct insurer (or its tied agent) only sells its own policies, often faster and sometimes cheaper on simple risks. For an SME whose risks go beyond a standard commercial package, the broker wins on quality of cover and claims handling; the direct insurer keeps the edge on speed for basic needs.

Broker, tied agent, direct insurer: who does what?

All three sell insurance, but not for the same person. An insurance broker is an independent intermediary, registered with ORIAS (the French register of intermediaries), bound by no exclusivity to any insurer: they act as the client's agent, searching for, negotiating and managing policies with several companies. A tied agent (agent général) is the opposite: the agent of one company, whose policies they distribute under exclusivity. A direct insurer sells its own products with no intermediary, by phone or online.

When a claim arises, the agent and the direct service defend their company's position first; the broker has a contractual obligation to defend yours. According to the Panorama du courtage published by Planète CSCA, France has around 11,300 insurance brokerage firms generating more than €7 billion in revenue, and three quarters of companies with over €1 million in turnover buy through a broker.

How is an insurance broker paid?

Through a commission paid by the insurer, calculated as a percentage of the premium you pay. In commercial property and liability insurance, that commission most often sits between 10 and 25% of the annual premium, with a first-year rate sometimes higher than on renewals. In group health it is lower (8 to 15%); in group protection, higher. Some brokers also charge fees, for instance for a portfolio audit.

Since the EU Insurance Distribution Directive (IDD), transposed into French law in 2018, the broker must tell you before you sign the nature of their remuneration (commission, fees, or both), under Articles L521-2 et seq. of the French Insurance Code. Ask for the exact amount.

Does a broker cost more than a direct insurer?

Not mechanically. The broker's commission replaces the distribution costs a direct insurer bears itself (branches, advertising, call centres): it is not a surcharge added to a "bare" price. On a simple, standardised risk, a €2,000 professional liability policy for a consultancy for example, the direct insurer will often show the lowest price, because its process is industrialised and it selects the easy files.

On a risk that falls outside the box, the logic reverses. A SaaS scale-up selling to US enterprise accounts, a manufacturer storing flammable materials, a health-data platform: online forms refuse or overprice these files. The broker builds an underwriting submission, sends it to several insurers and makes them compete. On our files, the spread between the best and the worst offer commonly reaches 20 to 40%. Our 10 levers to reduce a business insurance premium mostly work through negotiation, not by cutting cover.

The true price of insurance is not the premium: it is the premium plus whatever the insurer will not pay on the day of the claim.

What does the broker change on the day of the claim?

This is the most underestimated criterion. A business claim is decided by the quality of the notification, the reading of exclusions and the negotiation with the company's loss adjuster. A policyholder dealing direct is alone in front of a counterpart whose interest is to apply the policy as strictly as possible.

The broker assembles the file, checks that the right cover is triggered, challenges a misapplied deductible or average clause, and can propose a counter-appraisal. They also know your policies as a whole: a single event may fall under the property, liability and cyber policies, and how they fit together often makes the difference (see our piece on risky clauses in enterprise contracts).

How much time does it take, and who manages the life of the policy?

Buying direct takes an hour for a simple risk: that is its great advantage. But a policy's life does not stop at signature: annual turnover declaration, adding a site, a certificate demanded by a customer with specific limits, cancellation at renewal with the two months' notice under Article L113-12 of the Insurance Code. Every step handled direct ties up a founder or a CFO.

A broker takes over these operations and knows when an event must be declared to the insurer: a funding round, a new market, mass hiring change the risk, and a failure to declare can reduce the indemnity (premium average rule, Article L113-9). See our guide on insurance after a funding round.

How do you check that a broker is credible?

Three checks take five minutes. Their registration number on the ORIAS register, mandatory to operate, which also shows their category (broker, agent, mandatary). Then their regulatory obligations: according to the ACPR, the French supervisor, a broker must hold professional liability insurance of at least €1.5 million per claim and €2 million per year, a financial guarantee if they handle client funds, and, since 1 April 2022, belong to an approved professional association. Finally, their answers to two questions: how many insurers do you consult for my file, and how much do you earn on this policy?

The duty to advise under Article L521-4 of the Insurance Code requires the broker to set out in writing your demands and needs, and the reasons behind their recommendation. That advice statement is your protection if the cover proves unsuitable.

When does the direct insurer remain the right choice?

Let us be honest: for a three-person consultancy, with no hazardous premises and no enterprise customer, an online professional liability policy does the job, quickly and at a fair price. The same goes for a two-vehicle fleet. Intermediation adds little when the risk is simple and the policy standard.

The tipping point comes when one of these parameters changes: several policies to coordinate, a risk that forms cannot rate, or a customer imposing specific cover. At that point, it is no longer the price of the policy that matters, but the cost of the wrong cover.

Frequently asked questions

Is an insurance broker paid by the client or by the insurer?

In the vast majority of cases by the insurer, as a commission calculated on the premium, generally 10 to 25% in commercial insurance. They may also charge fees, and must inform you of the nature of their remuneration before you sign.

Can you change broker without changing policy?

Yes. A broker-of-record letter signed by the company transfers management of the policy to the new broker, without cancelling the policy or changing the premium.

Is the broker liable if the cover is insufficient?

They can be. The duty to advise under Article L521-4 of the Insurance Code obliges them to analyse your needs and justify their recommendations in writing. If they omitted an obvious cover for your activity, their professional liability may be engaged.

How do you know whether a broker really consults several insurers?

Ask for the number of companies approached for your file and the offers received, not just the one selected. An independent broker presents the comparison and explains the choice, including when the selected offer is not the cheapest.

At Lesto, we are a commercial insurance broker (ORIAS 26006055) specialising in SMEs and scale-ups: we audit your existing policies, consult nine insurers per file on average and tell you what we earn on each policy. Want to know whether your current cover is at the right price and the right level? Request an analysis of your insurance: results within 72 hours, no commitment.