Fee transparency is a key broker issue in Australia. The current Insurance Brokers Code of Practice only obliges brokers to disclose their commissions to some retail clients.
Many brokers - and Oscar Shub, CEO of the Insurance Brokers Code Compliance Committee (IBCCC) – would like to see much fee greater transparency.
The IBCCC wants the Code to oblige brokers to disclose commissions to all individual and small business clients regardless of whether the client is a retail or wholesale client.
Fee controversy involving commissions in the strata sector led the NSW government to announce reforms to the sector in June. However, reports suggest some brokers continue to charge exorbitant fees – sometimes amounting to as much as the premium.
What’s the situation for brokers in New Zealand?
IB asked local brokers how they approach fee disclosure and their transparency obligations.
Charlotte Deane (pictured above) said, from her perspective as an insurance broker, under the rules governing the industry that apply to brokers, disclosing fees to clients, including all retail clients, is not an option, it’s an obligation.
“Yes, we need to disclose all fees,” she said.
Deane is with Sherpa Insurance Brokers & Advocates in Christchurch. She said they also need to reveal any insurer commission to the client.
“We operate on the approach that we have no issue with clients knowing what we earn as they can see the value of our services,” she said. “I think it’s great, although some brokers do make it very hard to find out what fees are by hiding them in fine print.”
Mikaela Watts (pictured immediately below), senior broker with Business Insurance Limited, said her firm also discloses all fees to clients.
She said full transparency with clients and providing clarity around any fees is “standard procedure.”
“I feel comfortable fully disclosing,” said the Christchurch-based broker. She said that full disclosure includes any commissions from insurers.
“We have never been questioned as to what we earn from the insurer and the fees we charge over and above that,” she said.
At the recent New Zealand Underwriting Agencies Council (NZUAC) Expo in Auckland, IB suggested to Travis Atkinson (pictured below) that fee disclosure, particularly around commissions from insurers, can be a hot topic in Australia. How does that issue go down in the local industry?
Atkinson is general manager of operations for Insurance Advisernet New Zealand.
He said since new government regulations came into play several years ago obliging brokers to be more transparent about fees, “it’s been wonderful for clients.”
“We went ahead of Australia in regulation, straight to full disclosure, with certain wholesale clients being excluded,” said Atkinson.
However, he added that those excluded wholesale clients “were already ahead of the game” and would know what their broker charged.
Atkinson said full fee disclosure to retail clients hasn’t resulted in loss of business.
“We can say that that’s not driven any loss of clients or any concerns about earnings relative to other margins and other businesses,” he said.
Atkinson said there’s no doubt brokers in New Zealand are now disclosing commissions and earnings.
“Insurance brokers work really hard to give the right advice,” he said. “If a client knows the fee, knows the commission, knows the brokerage and is prepared to pay it, then they’re paying for the advice - so we needed to move to be more transparent.”
However, in New Zealand, much like in Australia, he said industry views on transparency can vary.
“There’s always different views but transparency of earnings is ultimately a client having the confidence to know that that’s what their brokers earn,” said Atkinson.
Australia-based brokers consulted by IB are supportive of more fee transparency.
Lisa Carter, CEO of Brisbane-headquartered Clear Insurance, said she fully supports full fee transparency.
“I would like to see full transparency of broker remuneration across the entire broking industry for all clients and for all insurance products,” said Carter.
David Summers, managing director of Ausure Insurance Newcastle, said his personal view is that all the components of an insurance premium need more clarity. Summers’ firm is an authorized representative (AR) in the Ausure network.
“Transparency should encompass the entire insurance product,” he said. “Nearly half the cost of insurances are due to government charges.”
IB has reached out to the Insurance Brokers Association of New Zealand (IBANZ) for more details on the rules around fee transparency obligations.
How do you approach fee disclosure to clients and what changes would you like to see in transparency obligations? Please tell us below.
