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Insurance Business | 17 Sep 2014, 08:17 AM Agree 0
The ‘frictional cost’ involved in the insurance distribution chain – of which insurance broker remuneration is a large part – has been tabled by a panel of industry leaders as facing pressure from both customers and competition.
  • Ageing Broker | 18 Sep 2014, 07:59 AM Agree 0
    Not sure what these blokes are talking about but if they are suggesting that brokers need to move away from commission based remuneration in favour of a fee for service model, then why not say that?
  • David | 23 Sep 2014, 04:11 PM Agree 0
    Frictional Cost is the direct and indirect costs associated with the execution of financial transactions. Friction costs include commissions and fees. It is not the entire industry facing issues relating to these frictional costs but rather the brokers who’ve potentially developed alternate methods of extracting revenue from their insurance partners. Although it can be accepted practice for insurance brokers to receive commissions and profit sharing based on the amount of business they place with insurance companies, it is not legitimate for brokers to base their decisions about which insurer to deal with solely upon the amount of money that they will receive in commission. This is where the waters get a bit muddy and it might get very interesting for the big end of town should ASIC ever decide to cast a critical eye over certain areas of their operations.
  • Adam | 25 Sep 2014, 11:41 AM Agree 0
    20% of broker revenue is spent on wages. Clearly this is due to broker staff being required to key the same data multiple times. Anything which reduces this overhead will assist in freeing up broker organisations to focus on their customer's needs, justifying broker remuneration.
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