Brokers want commission disclosure
Insurance brokers are calling for greater transparency in the industry as the Canterbury earthquakes push up some local operators' earnings.
The Press reported last month on industry resistance to brokers having to disclose to clients how much money they make on commission.
Brokers earn their keep finding insurance coverage for clients but, if they work on commission, are not required to say what they get paid.
Insurance Brokers Association of New Zealand chief executive Gary Young said members should divulge what they earned if clients asked, but there was no need for compulsory disclosure.
Some insurance industry leaders, including the Insurance Council, had pushed for legislation requiring brokers to do this.
Rene Swindley, director of Hamilton-based brokerage firm Hutchison Rodway, said the rules needed to change.
‘The broker is supposed to be acting for their client, not the insurance company. The client should be well aware of what they're actually paying."
A "tell if asked" policy was not good enough, he said.
"Brokers should be on the front foot with it. They should be telling their clients up front. There should always be a situation where the brokers are putting [clients] with the best insurer who's got the best policy for their business needs. Not that one that's paying the most commission."
A Wellington broker, who did not want to be named, said disclosure obligations around commission were too confusing.
"Even if [the broker is] not charging the customer a fee, there's a conflict because his duty is to the insurer [who pays the broker], whereas the client thinks he's acting for him."
All commercial brokering should be transparent and fee-based, he said.
Avon Insurance Broker managing director Allan Daly said the status quo was working but he backed an "open playing field".
"I would like to see it. I think it's an open playing field. People can see what they're paying for. It happens in Australia."
He rejected a claim by Swindley that extra commission-based revenue Christchurch brokers earned through soaring post-earthquake premiums was easy money.
"The hours and the additional work that's required just to renew a policy for insurance companies in Christchurch is just incredible," he said.
"I can't think of a case where we just basically renew [a policy]."
Rothbury Insurance Brokers managing director Roger Abel said extra revenue did not equal extra profit.
"It isn't like it's a boom time. However, we are being rewarded for more work."
Compulsory disclosure "did not add any value" to the industry, he said.
Grant Milne, New Zealand chief executive of broker giant Marsh, said hidden fees were a bigger issue than commission disclosure.