Recently the International Monetary Fund highlighted areas that need addressing in its report on New Zealand’s financial sector. One of those areas is excessive broker rates of commission, which it deems in need of more oversight.
Insurance Business spoke to many industry insiders, who disagree with this assessment.
According to
Jo Mason, CEO of NZbrokers, it should be kept in mind that insurance brokers provide specialised services and risk advice for insurance buyers.
“For brokers, insurance is not just a one-off transaction but a continuous service, starting with risk assessment and then securing the right cover to match this risk profile and assisting with claims,” she said.
She explained that when regional disasters occur, like storms and earthquakes, brokers step up for clients by handling claim submissions, arranging loss adjusters, answering questions and getting the best outcome for their clients.
“Sometimes this involves high value or complex claims that take determined negotiations with an insurer and months to resolve,” she said. “After the Christchurch and Kaikoura earthquakes, as well as the recent flooding in Edgecumbe, our partners worked tirelessly through some very complex and protracted claims issues for their clients. Clients do not have to pay extra for this service as brokers consider it part of the service they provide to ensure their clients are well looked after.
“Comments that broker fees are excessive are misinformed, and we feel that it’s important to provide the public with the right information.”
She elaborated that, generally, a broker is paid by commission from the insurance premium, not a fee by clients.
“The commission rate for property, motor, and liability insurance is less than the rate paid to life insurance agents,” she said. “For example, a broker will generally be paid less than $500 commission for typical house cover, including contents and two cars. Remember this is for a 12-month service period that might include the handling of large and complex claims.”
She added that when a client secures insurance through a broker, they are provided with customised advice and insurance solutions tailored to their particular needs.
“This specialised service, along with the broker’s distribution network, is something the insurer recognises when paying the broker’s commission,” she said. “Without brokers, insurers would need larger sales and claims teams, which would add to their expense line.
Frederick Chow, from Pulsar Insurance Agency, agreed that people should become aware of the sheer amount of work brokers are required to do.
“It starts with clients wanting a face-to-face interaction with brokers for ease of mind, wanting them to find policies that are the right fit, which is time consuming, and wanting brokers to assist and support them from start to finish,” he said.
He elaborated that the broker’s role also includes educating clients as to what is covered by their insurance policies. In aid of this, Pulsar even runs small seminars for clients and potential clients.
“Just negotiating with loss adjustors is a lot of work but, in addition, we have to do so much like attending to sites and adhering to all sorts of protocols, including claims that have to be managed, sometimes over a long period of time,” he said.
He added that the demands made on the broker are amplified when a claims dispute arises.
“The time and resources spent standing by our clients and being supportive really add up,” he underscored. “We really put a lot into clients and we don’t sell through renewal. Our commission is fully justified!”
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