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Insurance Business | 11 Dec 2013, 08:10 AM Agree 0
The outrage over one insurer cutting commissions has echoed around the insurance industry – but are brokers being overpaid?
  • Scott | 11 Dec 2013, 09:10 AM Agree 0
    All good points not too mention that these days submissions and claims are largely done on line. Whereas once upon a time you submitted a claim form, for example, to the insurer and they took it from there, these days in many cases you log on, enter the details (in full) appoint an assessor, upload the claim form and then pursue settlement. In other words - do the insurer's job for them. Far from reducing commissions, they should be increased to reflect a much greater input (time and therefore money) by brokers.
  • Jak | 11 Dec 2013, 09:14 AM Agree 0
    If I could attach images to this facility I could show you the 'professionalism' of broker-based business and claims evolving, which would confirm the broker neither got out of his/her seat, made any forensic or other professional inquiry about the information being provided by their client, and most certainly never ever conducted an on-site risk assessment of the property/business/farm...
    Curiously, when ever I hear that song which has a tag line'...cows with guns...' I always think of insurance brokers, but I suspect I am being unfair towards the cows...
  • Lynda Davies | 11 Dec 2013, 09:21 AM Agree 0
    Described beautifully Darren. Perhaps IB can do "a day in the life of an insurance broker" just to prove we earn our commissions!
  • Terry | 11 Dec 2013, 09:28 AM Agree 0
    Can Brokers "justify" the commissions they earn ?...well the answer is of course NO , otherwise they would have no objection in disclosing the commissions they earn + fee.
  • Damian Scantlebury | 11 Dec 2013, 09:45 AM Agree 0
    We are professionals who give advice about protecting clients assets. We as brokers have a lot at risk if we get it wrong. This occupation is a very stressful occupation for those who work at the coal face of this industry. If anything we are grossly under paid. Terry's comments are totally berefted of any knowledge of this industry. Disclosure of commissions?? well Terry how much do you earn and do you actually deserve what you get. Come on disclose this in the public arena so everyone knows. Doubt you have the fortitude or the justification.
  • Chris Dalton | 11 Dec 2013, 09:46 AM Agree 0
    all you say Darren is well said.
    From a broker's 'commercial' perspective...
    In recent discussions with many brokers since Suncorp/Vero's announcement [similar to Zurich, Lumley etc in past years] Vero must realise what they have done is to change the broker's product line into two lines.

    If I want to read a book I don't buy one that is lower in price because it is a smaller book. I make the call not the book seller.

    Vero have a good product, but so too do several other insurers and we'll always offer the best product suitable not the cheapest.

    I made the suggestion to Vero some 12 months ago to 'shift the paradigm' [not the premium] in such a way to be a market shaker, similar to a market overseas for brokers, and I have yet to hear a response.

    I wonder where insurers do their research?... in the market or in their rose coloured offices?

    PS: I am always available to discuss this further
  • Loyalty Program | 11 Dec 2013, 09:53 AM Agree 0
    What are you talking about Terry? Commissions and fees are always disclosed to clients. Every client is issued with an FSG that details all payments a broker receives. This is a legal requirement.
  • Steven | 11 Dec 2013, 10:04 AM Agree 0
    Conversely, brokers who are worth every cent ought to have no issue with working with net premiums and charging a fee for what they are worth. This ensures full disclosure, is a great discussion point with a client as to what a broker actually does for this fee and ensures the onerous taxes placed on insurance apply only to the net premium.

    Broking is a profession yet those practicing law, accountancy, architectural or engineering disciplines, charge their clients professional fees for the services they are provide.

    When doctors start accepting 'incentives' from drug companies there's an outcry regarding conflicts of interest and the "independence" of the medical advise. It's counter intuitive for this logic not to apply to brokers.

    With many brokers being remunerated (or "incentivised") based on the income they generate, and with the plethora of AR's out there who are remunerated almost solely on what they generate, it's little wonder conflicts of interest arise and dare I say, combined with the economic downturn and soft market, are increasing.

    I've overheard brokers telling UWs "there's no need to be that cheap, if I use those terms my income will take too much of a hit".

    How is it that brokers looking after the most complex and large corporate accounts work primarily on a net basis yet the broker looking after someones householders policy requires 22.5% commission?

    What specifically is the downside to the profession if all premiums were net (other than of course to those who can't justify what they earn and thus aren't entitled to it in the first place)?
  • Alex Damon | 11 Dec 2013, 10:29 AM Agree 0
    Terry has a point and I'd like to see an FSG which discloses actual income (or meet a client who's read an FSG!). Damian Scantlebury's comment is flippant and offensive - if we are professionals we must be the only ones who don't tell out clients what they are paying us much of the time. The brokerage basis is fundamentally flawed (e.g. does a $500,000 PI premium really take 10 times the handing of a $50,000 PI premium?) but there's no realistic way of changing it. If underwriters want to reduce brokerage rates they should also look at paying brokers an hourly rate for claims handling and negotiation, which commercial policies broadly allow for in the case of independent claims consultants these days.

    As an AR I spend around 50% of my time handling claims, a large chunk of it explaining their own wordings to insurance company claims officers.
  • Uberrima Fides | 11 Dec 2013, 10:36 AM Agree 0
    It is surprising that there is anyone left in the underwriter & non-broker ranks with the experience to make the judgement call you have Jak. I suspect that very few Brokers would have escaped the 'compensation' lawyers after a loss that was settled at less than the insured expected. The question to my mind is what is the cost & what is provided. A Broker is going to earn wages when he works & is successful in placing insurance. His total wage usually reflects what he brings into the business, less expenses. Insurer staff have to charge clients for wages incurred even when they are not working ( my GIO mate fell fowl of this comment many years ago as he loved playing golf). To my mind history shows that the cost of providing client services & product of equal quality, was less when provided by a broker. Perhaps a frank disclosure & analysis of 'admin costs' would prove this? If this is the case then the only way an insurer may make a profit via 'direct' marketing, is to provide a lesser cover or be bloody minded & deny any claim that is a bit grey. If 70% are underinsured, average may be a strange profit/claw back area for insurers?
  • Mark | 11 Dec 2013, 11:06 AM Agree 0
    Jak, the brokers advice is not for everyone, so dont use a broker, but when you stuff up your own insurance and you have the wrong or no cover, then dont go crying to the Ombudsman and have someone pay for your own mistakes!
  • Roger | 11 Dec 2013, 11:22 AM Agree 0
    There is no singular correct answer to this question. There are good brokers, there are lazy brokers, and there are brokers working to instructions from upstairs. Also important is the class of business they are placing which has an impact on whether the commissions are deserved.
    Sadly many brokers, particularly the internationals, simply demand higher brokerage form certain markets in return for little more than the option to see their business. This is hugely detrimental to the Insured because they only receive terms from those markets prepared to buy in the business. And no doubt there is wider cover available elsewhere but they will never get to see it.
    But those brokers who are actually led by breadth of cover and service, and not just brokerage, are the one's who most definitely deserve their commission. And these are the brokers who generally offer advice and recommendations as opposed to simply putting up the cheapest price.
    Enhanced commissions, preferential brokerage, over-riders.......
    Sadly we are so far away from full disclosure many Insureds would not believe it.
  • Ian J | 11 Dec 2013, 04:42 PM Agree 0
    Way too much rubbish and ill informed views from most of the comments thus far for me to even make comment. Some hypocritical, some just plain stupid and others from what ever end of the insurance spectrum, I can't fathom. Are these comments even from people within the insurance industry - not sure. Darren's got pretty well most of it correct and if you truly believe that replacing commission with fees will drastically change premiums for the better then you really need to do more research.
  • FutureThinker | 13 Dec 2013, 07:13 PM Agree 0
    Yes, No, Maybe...

    Do brokers deserve to be paid for their services = YES!
    Do brokers deserve a premium price for their services = YES (so long as they deliver a premium service)

    There will always be issues with income derived from commissions or brokerage for there is no direct link between the expertise of the broker, the price of the product and the requirements of the client AS IT RELATES TO the eventual earn to the broker...

    Further, one may question why would a broker get a premium price down if they inherently earn more when the premium is higher...?

    It’s easy for us brokers to answer but not as clear for clients....

    Though SME vs. Corporate where fees are prevalent is a different question all again.

    The reality is sometimes the earn is too much but quite often it is too little particularily where claims management and general advice comes into account.
  • Long Time Player | 17 Dec 2013, 07:57 AM Agree 0
    After many years of listening and watching "experts," a simple message.

    Look after your clients, or someone else will.
  • Mr Curious | 18 Dec 2013, 10:21 AM Agree 0
    I have read the comments and here is my two bobs worth - If the commission reduction on home & contents is a problem I have a solution....1. Don't write home & contents 2. Move the client to another underwriter 3. Charge a higher fee and explain to the client why (it's saving them money in FSL & GST from the previous year almost certainly). It is annoying to need to move clients because of an underwriters actions as it costs time and therefore money.
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