Brokers lift lid on fee transparency debate
Brokers lift lid on fee transparency debate | Insurance Business Australia
Insurance News
Brokers lift lid on fee transparency debate
Diverse views on a hot topic
Insurance News
By
Daniel Wood
The three-yearly review of the Insurance Brokers Code of Practice is underway. Once again, fee transparency is a key issue. Oscar Shub, CEO of the Insurance Brokers Code Compliance Committee (IBCCC), has said this is a “live issue”.
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. However, insurance brokers are known to hold very different views on this topic.
Insurance Business is continuing to canvass the different opinions across the industry.
Transparency should reveal government charges
David Summers (pictured above) is managing director of Ausure Insurance Newcastle. He agreed to give his personal view.
“Our business has no objections to such a review,” he said. “However, transparency should encompass the entire insurance product.”
Summers’ firm is an authorized representative (AR) in the Ausure network. He was referring to the different cost components of a premium and advocating for transparency across the board.
“Nearly half the cost of insurances are due to government charges,” he said. “THIS [Summers’ capitals] needs to be the conversation.”
Summers said he agreed with fee transparency but, in his written answers to IB’s questions, he listed several issues he’d like the National Insurance Brokers Association (NIBA) to also look at more closely.
“Transparency if fine, however the question should be asked of NIBA, ‘what are you doing to reduce the impact of ever growing insurance premiums?’” he said. “‘Capping government charges? Lobbying to have taxes charged on the base premium only and not after ESL [Emergency services levy] and then GST and then stamp duty?’”
Summers said charging ESL through council rates could be a fairer method than adding it to insurance premiums.
IB sent the issues raised by Summers to NIBA and its CEO Richard Klipin has agreed to address them in an upcoming interview.
One of Summers’ main points is that the total amount of all these “tax-on-tax” government charges “far exceeds the small percentage of fees and commissions brokers receive.”
“I find it particularly concerning that brokers are under scrutiny when we collect far less than the government does on an insurance product, despite being the ones providing advice and service,” said Summers.
He said any transparency led breakdown of premium costs should highlight government charges, “including the hidden terrorism levy built into base premiums and the tax-on-tax impact.”
Summers also thought it was important to acknowledge that many brokers do not charge separate fees.
“Additionally, it’s important to note that brokers tirelessly support our clients,” he said. “While we may collect commissions on some policy types, we do not charge a separate fee for managing our clients’ claims, regardless of the hundreds of hours it may take to reach a resolution.”
Broker fee transparency: “I enthusiastically agree”
Lisa Carter (pictured directory below), CEO of Brisbane-headquartered Clear Insurance, said she fully supports full fee transparency.
“I enthusiastically agree with the IBCCC’s view on full fee transparency,” said Carter. “I would like to see full transparency of broker remuneration across the entire broking industry for all clients and for all insurance products.”
Her firm is a fee for service brokerage that does not accept insurer commissions.
“Our business has gone from strength to strength under this remuneration model,” said Carter.
The Clear Insurance CEO directly connected fee transparency with the broking profession’s obligations to their customer.
“Consumers can only properly determine value when they know the remuneration their broker is receiving for the professional services provided,” she said.
A “nuanced” view on fees
For similar reasons to Carter, Scott Cole (pictured immediately below), CEO of Centrewest Insurance Brokers, also said he supports the disclosure of insurance fees and commissions.
“If a business can confidently demonstrate that the value they provide aligns with the cost of their services, then mandated transparency should not be an issue,” said Perth-based Cole.
However, he said the fee the situation can be complicated.
“The situation becomes more nuanced with commercial and complex insurance programs where direct comparisons to the competition are not straightforward,” said Cole.
The West Australian CEO said, in these cases, the outcome should be the focus rather than the cost of the service alone.
“Nevertheless, providers should be able to demonstrate their value and consequently, be comfortable with transparency in their remuneration structure,” he said.
An updated version of the Code will be launched in January 2026.
Are you an insurance broker? How do you approach fee disclosure and what relevant changes would you like to see in the Insurance Brokers Code of Practice? Please tell us below.
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