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>Brenda presented me with one option: Company S. I said I was surprised at how high Company S's premium was. Brenda told me that Company S had by far the lowest

>Brenda presented me with one option: Company S. I said I was surprised at how high Company S's premium was. Brenda told me that Company S had by far the lowest premium. I asked if she had called the company that provided the insurance for my previous house. >The new guy was able to arrange new coverage for me with an insurance premium 15% lower than the one Brenda had gotten me. >Brenda had arranged too much insurance for me; I was paying to have the Company S agree to spend up to $X to rebuild my house, but rebuilding the house couldn't possibly cost more than $⅔X. I honestly don't understand the approach of blindly trusting someone with a clear incentive to extract the maximum amount of cash from you, and then be surprised that they did what they were incentivized to do. Also, the general rule of thumb is that middlemen tend to increase prices and reduce efficiency, so unless there's a legal requirement to conduct business through them (e.g. car dealerships), it's always better to go directly to the vendor. There's also a particular type of middlemen with asymmetric incentives (i.e. rewarded if the deal goes though, but not penalized if it fails). This setup usually attracts the most lazy and useless kind of people that would just sit on their ass, reassuring you that everything is great, and would then act surprised and shrug once it all goes to hell. Because, well, they still get their commission from the other contracts that panned out (with no help from them). I don't know if it's specific to Canada, but when I needed to get house insurance, I just went directly to several insurance companies, answered the questionnaires and got estimates. I then got an appointment with the one I chose and was able to get a very itemized quote (fire/theft/flood/etc) and even tweak it (e.g. lower the rate by raising deductibles). No sit-on-their-ass middleman would do this for me. Also, on a side note, when you are buying a house, you usually start with a conditional offer that gives you about a week to do a house inspection and secure a mortgage, before committing to the purchase. Doing a thorough house inspection at that point would cost you about $500 and would find all the issues that bothered the insurance company BEFORE you make the final decision whether you want that house for that price.

mjd 5y ago
The approach in this case was: I was in the middle of buying a house and had a hundred other details to attend to. Investigating Brenda's brokering wasn't in the top fifty. I knew at the time that I could shop around for insurance once everything else was dealt with, so there was no reason to prioritize getting the best possible deal on the insurance. And in fact the amount by which I was being overcharged was relatively small.
dragonwriter 5y ago
> general rule of thumb is that middlemen tend to increase prices and reduce efficiency, so unless there's a legal requirement to conduct business through them (e.g. car dealerships), it's always better to go directly to the vendor. With “market search” middlemen, the reason people who are aware that middlemen add cost go with them anyway is the perception (which can be more or less accurate in different markets) that while there is an added cost compared to the best direct deal with the best vendor, it is worthwhile because there is a savings after considering value of time and the likely matrix of direct deals vs time invested in securing them. This may be more justified in the same market than it would be on its own when the item with the middleman is a necessary component of a larger transaction with other moving pieces that require attention, which can increase the opportunity cost of time focussed on that one piece.
- john_moscow 5y ago
  Except, they don't guarantee anything legally and hence don't give a flying fuck. They will hook you up with whoever pays the highest commission (or has a direct deal with them) using the least effort on their side, as the OP had just discovered. So all you get is a false sense of security.

mjd 5y ago

The approach in this case was: I was in the middle of buying a house and had a hundred other details to attend to. Investigating Brenda's brokering wasn't in the top fifty. I knew at the time that I could shop around for insurance once everything else was dealt with, so there was no reason to prioritize getting the best possible deal on the insurance. And in fact the amount by which I was being overcharged was relatively small.

dragonwriter 5y ago

> general rule of thumb is that middlemen tend to increase prices and reduce efficiency, so unless there's a legal requirement to conduct business through them (e.g. car dealerships), it's always better to go directly to the vendor. With “market search” middlemen, the reason people who are aware that middlemen add cost go with them anyway is the perception (which can be more or less accurate in different markets) that while there is an added cost compared to the best direct deal with the best vendor, it is worthwhile because there is a savings after considering value of time and the likely matrix of direct deals vs time invested in securing them. This may be more justified in the same market than it would be on its own when the item with the middleman is a necessary component of a larger transaction with other moving pieces that require attention, which can increase the opportunity cost of time focussed on that one piece.

john_moscow 5y ago
Except, they don't guarantee anything legally and hence don't give a flying fuck. They will hook you up with whoever pays the highest commission (or has a direct deal with them) using the least effort on their side, as the OP had just discovered. So all you get is a false sense of security.