How Do Direct-to-Market Insurers Offer Lower Premiums?

And What You Should Know Before Choosing the Cheapest Option

We’ve all seen the ads: “Insure online in 2 minutes!”, “Save 30% on your policy!”, or “No middleman – just great prices.”

Direct insurers have become more common in both personal and business insurance markets, offering seemingly lower-priced policies without the need for a broker. But… how do they actually offer lower premiums?

And more importantly — do those savings come at a cost? Let’s unpack it.

Who Are Direct Insurers?

Direct insurers are companies that sell insurance straight to customers, without using brokers or intermediaries. They generally operate online or through call centres and offer standardised, off-the-shelf policies.

Examples include well-known brands that offer home, car, or small business cover via online quotes and purchase platforms.

1. Lower Distribution Costs

Because direct insurers don’t use brokers, they save money on:

• Broker commissions

• Fees for tailored advice

• Relationship management and claims support

These cost savings are passed on to the customer through lower base premiums, especially for standard personal cover — like car or landlord insurance. But remember: lower distribution cost doesn’t always mean better value.

2. Simpler Policy Wording & Scope

To keep premiums low, direct insurers simplify their products and reduce how much risk they cover. These simplified policies:

• Focus on common, low-risk scenarios

• Exclude non-standard or complex losses

• May include lower limits and more hidden exclusions

• Offer minimal (or no) customisation

That means they may not suit customers with:

• Multiple business operations

• Unique property traits

• Specific or high-value assets

• Regulatory exposures

What you gain in simplicity, you may lose in protection.

3. Algorithm-Based Pricing & Automation

Most direct insurers price their products using automated systems or AI-driven quote engines. This reduces the cost of underwriting and speeds up the buying process.

However, it also assumes:

• Your situation fits their standard risk profile, and

• You understand what the policy does (or doesn’t) cover

• You're able to self-assess what cover you need (without advice)

If you don’t understand how to interpret exclusions or tailor coverage, you might buy the wrong policy or be underinsured — and not realise until it’s time to claim.

Cheaper Isn’t Always Better: The Risks to Watch

Here’s where things get tricky. While direct insurers offer a lower sticker price, you should always check:

• What’s not included? Are key risks excluded that you assumed were standard?

• Is the policy tailored to my industry or risks? Off-the-shelf cover may not suit your professional needs.

• Who helps me at claim time? Many direct insurers offer claims lodgement online or via a call centre — without a personal advocate or support team on your side.

• Can I adjust the cover as the business grows? Flexibility is often limited.

The Value of Broker Advice

An insurance broker helps you compare more than just price. We look at:

• Proper coverage that fits your unique needs

• Broader wordings and fewer exclusions

• Policy structure and limits

• Support at claim time to get fair outcomes

Yes, you may pay slightly more upfront — but you’ll gain confidence that your cover actually works when it matters most.

Final Thoughts

Direct insurers offer low-cost policies by reducing service, trimming cover, and standardising the product. For some simple situations, this may work well. But for anything more complex — whether it's your home, your business, or your future — price should never be your only consideration.

If you’re unsure about your current policy or looking for true peace of mind, we’re here to guide you through the fine print and make sure your insurance does what it’s supposed to: protect you.