The Different Types Of Commercial Insurance Brokers

To the average man or woman on the street, the world in which commercial insurance brokers live and operate will be little more than a mystery. The field of insurance in general is still barely understood by laymen and women, and with commercial insurance being one of its most specialised branches, this effect is felt several-fold.

Few people seeking to take out this type of insurance will be aware, for instance, that there are several types of commercial insurance brokers on the market, each with its own specific ways to operate, strengths and limitations. At best, most of these men and women will be aware of the existence of the main, larger insurance companies, with the countless smaller operators being known to only a minuscule portion of the overall demographic, mostly through research or word of mouth. Yet, on occasion, these alternative types of commercial insurance brokers may actually be more suited for what an individual or business is after than the more ‘mainstream’ alternatives; it is with that in mind that the present article seeks to introduce prospective clients to the different types of commercial insurance companies available, so that they may assess which will best suit their specific situation.

Insurer-Owned Brokers

Insurer-owned companies are perhaps the most widespread and prolific sub-section of the commercial insurance market, and many of the most popular and best-known commercial insurance brokers fall under this category. As the name indicates, these outfits are owned by large insurance companies, who typically dictate their standards and practices. In certain countries, this model was considered the industry standard for commercial brokers for decades; it has, however, recently begun to lose ground, as the effectiveness of these types of outfits began to dwindle. Nowadays, many experts make a case for the model being outdated, and it is predicted that insurer-owned commercial insurance brokers will continue to lose market space in years to come.

Broker Networks

Broker networks comprise several small commercial insurance brokers, all of which share resources, assets and market opportunities between them. In its ideal form, this is considered to be a beneficial model for companies that choose to join one of these networks, with many of them advertising better commissions for individual brokers and service conditions for the companies as a whole; however, adhesion to this type of network remains uneven between countries.

Consolidated Brokers

Consolidated commercial insurance brokers result from one company assimilating, buying out or otherwise consolidating any number of smaller ones, in similar fashion to a corporate merger. At one point, these types of companies were the most common type of commercial insurance brokers in certain markets, with consolidations happening as frequently as once a week. The practice has significantly lost steam since then, however, mainly due to the fact that the exact benefits to be reaped from consolidation processes are not always clear. This has caused many brokers to sour on the practice, and much like insurer-owner brokers, it is thought that this type of brokerage firm may lose even more ground in years to come.

Independent Brokers

The fourth and final type of brokerage firm are independent brokers, that is, brokers which are not associated with either of the three types described earlier in this article. These tend to be smaller, often family or owner-run companies, with smaller and more personalised client bases, and frequently focused on more specialised or less explored areas of the field. Customers resorting to an independent broker can expect a more personalised service, with a higher rate of face-to-face interactions and more time devoted to each case. This type of company is less prevalent in the modern landscape than any of the previously listed ones, but there are still a few independent commercial insurance brokers left, and they tend to attract a small yet loyal customer base.

These are, in broad strokes, the main types of commercial insurance brokers available to customers. It is, therefore, up to each individual to work out which business configuration would be most suitable to their specific needs, in order to avoid disappointment down the road.

Commercial Mortgage Broker – Ally and Shark Wrangler

You finally found that commercial property you want to buy – fantastic! Now what? All you need is the money and where do you get that? A commercial lender, of course. You can go to the Internet and type Commercial Mortgage Lender into the search box and that will get you over 1.6 million options to look through. Doesn’t seem like a good way to spend your time.

Another option may be your local bank, the one that knows everything about you including your financial history, current holdings, and existing bank account. Negotiating a favorable rate with your local bank is like playing poker while showing everyone else at the table your hand. You lose the edge, the bargaining power to get the best deal. This is not saying that your bank will purposely strike you a bad deal, but unless you are borrowing millions of dollars and are a regular source of volume, they have no truly compelling reason to give you their best rates. Besides they already have your money and unless you are going to borrow $10 Million or so it is probably just not worth their time.

While there are many different ways to go about financing a commercial property there is only one right place to start and that is with an experienced commercial mortgage broker. Someone that has sailed the commercial finance seas many times and knows the locations of all the rocks, waves, shallows, and pirates that will surely sink your ship. Realize that a mistake in commercial mortgage financing can cost you thousands or millions of dollars. These pitfalls include lockout periods, balloon payments, prepayment penalties, and resource loan structure.

A commercial mortgage broker is one of your strongest allies. Their job is to become intimately familiar with your financing needs and find solutions to meet those needs. They utilize their voluminous lender relationships to bring you the best deal possible based on your property type, financial situation, strategy, and timing. A broker has access to wholesale rates that are rarely offered to you, the consumer. Even the “preferred rates” offered by longtime contacts at your bank rarely compare as favorably.

Working with a bank for a commercial mortgage is similar to feeding the fat goldfish in your aquarium. They have come to expect food regularly provided them and will get around to eating when they are ready. On the other hand, working the commercial mortgage market through a broker is like dangling live bait over a shark tank. Lenders will go after the deal like a hungry shark, but you certainly don’t want to be the one holding the bait. That’s the job of your mortgage broker. The result will be the right deal for your situation and you didn’t lose any fingers in the process (or your shirt for that matter). Notice I didn’t say lowest rate, I said best deal. Often one’s best financing option is not the lowest rate – more on that in another article.

Brokers are matchmakers – intermediaries. They bring together those who have with those who need. It is all about relationships. It is paramount for you to trust your broker. If you find it hard to have a relationship with your broker it is likely that others will have a hard time as well. If a broker can’t understand you and your needs, they will not be of service to you or your needs. A broker must maintain relationships with you and with lenders. If they have a hard time establishing a relationship with you then what about their relationships with lenders? As with any business relationship, go in with your eyes open.

Bottom line is this. Give a broker a shot. On your next commercial loan take a little extra time and compare what a commercial broker can do with what the local bank can do. My bet is that you will find that the broker is the best bet and you may be on your way to developing a wonderfully profitable relationship with a mortgage industry professional.